Greater protection to essential supplies of insolvent businesses

United Kingdom

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

The Insolvency (Protection of Essential Supplies) Order 2015 (the "Order") came into effect on 1 October 2015 and applies to supply contracts entered into on or after that date.

The Order amends the Insolvency Act 1986 (the "1986 Act") to give greater protection to certain essential supplies to insolvent businesses. This briefing note deals with the Order's impact on corporate insolvency.

The 1986 Act previously prohibited a supplier of basic utilities (gas, electricity, water and communication services 2) from compelling an insolvent company to pay charges incurred before the commencement of insolvency by threatening to cut off supplies unless those outstanding charges are paid. It entitled the utility supplier to make it a condition of the continued supply that the office holder provided a personal guarantee for the payment of any charges in respect of the supply during the insolvency. The provisions were confined to statutory undertakers and similar bodies (i.e. private utility suppliers were not affected).

To read the full briefing note, click here.