1. The use of anti-assignment clauses
Sarah Paterson
London School of Economics and Political Science

2. The wider picture Issues in other areas of finance: Loan agreements
Secondary trading: distressed debt and loan-to-own investors
Increased costs and tax provisions
Derivatives eg ISDA Master Agreement 2002
Prohibits transfer, except in limited circumstances, to preserve mutuality for close-out and netting
Permits transfer of an early termination payment resulting from the close-out
Regulatory capital
Securitisation
Reliance placed on promises by the originator and the SPV not to enter into any assignment that might compete with the transaction in question

3. A definitional problem?
Is the problem more significant than a definitional issue?
ensure ban on prohibition on assignments for the purposes of receivables financing does not have consequences for other finance arrangements

4. The debtor’s concerns
Avoiding risk of payment by mistake to the assignor after receipt of notice
Argument in favour of ban on prohibition on assignment often made in the context of small companies
May not have sophisticated finance function

5. Preserving rights of set off
Debtor may be concerned to preserve rights of set off against contracting party
Contractual and equitable set off
Insolvency set off

6. Right to deal only with contracting party
Guards against having to deal with someone debtor would not have contracted with directly
May impact the debtor who needs short term accommodation in time to pay
Contracting party may be more sympathetic to requests for extension/variation in payment terms
Different attitudes from different financiers

7. Current state of the law
Prohibition solely for the benefit of the debtor and should not affect transfer of property as between assignor and assignee
Issues:
Claim against assignor if assignor is insolvent
Trust and charge
Validity against debtor
If expressly prohibited
If prohibition only refers to assignment
Even if invalid against debtor, valid as between assignee and assignor?
Claim against debtor if assignor is insolvent
Appoint “friendly” administrator
Claim against debtor if assignor is solvent but reluctant to proceed
Contractual obligation on assignor to bring proceedings for the benefit of the assignee
Power of attorney for assignee to bring proceedings in the name of the assignor
Vandepitte procedure (terminate trust and join trustee as defendant)
Attitude of Courts (i) to drafting of the provision (ii) to the right of the beneficiary to be paid (iii) to respect for protection debtor has secured

8. Effect of ban on assignment
Prohibition on assignment
Not binding on assignee
But potential damages claim against assignor for breach?
Notice and collection on insolvency of assignor
Notice delivered to debtor and direct collection; or
Assignee continues to appoint administrator to insolvent assignor to pursue collection of receivables

9. A question of balance Balancing competing objectives
Current state of English law
Requirement for
Reform; or
Clarification?
Survey