Contributed By Winston & Strawn London LLP
Restrictions on assignment are common in a range of contracts, such as intellectual property licences, leases and ordinary book debts. Where these apply, third-party consents will be required to create some types of security over certain assets, which may be challenging to obtain. As in other jurisdictions, there are proposals to introduce legislation to override restrictions on assignment of debts to allow for factoring and receivables financing, but the complexity of these proposals has stalled proceedings in the UK for the moment.
The grant of a guarantee or security by an English obligor should be approved by the obligor’s board of directors. A shareholders’ resolution is usually required as well, in particular in connection with the grant of upstream or cross-stream guarantees or where the provision of the guarantee or security could otherwise breach the prohibition on financial assistance.