Companies Act 2014 section 525

Repudiation by examiner of contracts made before period of protection and of negative pledge clauses whenever made: prohibitions and restrictions

Section 525 restricts an examiner from repudiating pre-protection contracts but allows the examiner to set aside negative pledge clauses where their enforcement would threaten the company's survival as a going concern.

• An examiner cannot repudiate any contract that the company entered into before the period of court protection began.
• An exception exists for "negative pledge" clauses — provisions that restrict the company from borrowing elsewhere or creating security over its assets.
• A negative pledge clause can be set aside if the examiner believes enforcing it would likely prejudice the survival of the company or its undertaking as a going concern, and the examiner serves notice of that opinion on the other party or parties.
• The setting aside of a negative pledge clause only lasts from the date the notice is served until the end of the court protection period.

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