New ipso facto clause reforms

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The federal government has introduced new insolvency legislation (Treasury Laws Amendment (2017 Enterprise Incentives No 2) Bill 2017) that prohibits the enforcement of ipso facto clauses. These clauses are often contained in leases and permit a landlord to terminate a lease if the tenant becomes insolvent. Under the new legislation, ipso facto clauses cannot be enforced against a tenant if the tenant enters into voluntary administration, if administrators or receivers are appointed, or if the tenant enters into a scheme to avoid being wound up in insolvency. These amendments will apply to contracts entered into after 1 July 2018.

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