Companies Act 2014 section 558P

Repudiation, affirmation and variation of certain contracts

Section 558P sets out the rules governing how a process adviser in a small or micro company rescue process may repudiate (cancel), affirm (continue), or vary contracts to which the company is a party, where both sides still have obligations to perform.

• When a process adviser is appointed to an eligible company that is party to a contract where both sides still have outstanding obligations, the adviser must assess whether cancelling that contract is necessary for the company's survival as a going concern.
• The adviser must consider whether cancellation would be more advantageous for the other party than a winding up or receivership, whether the contract is burdensome and surplus to requirements, and whether a rescue plan could be prepared without cancelling it.
• If the adviser decides to cancel a contract, they may do so either with court approval or through a formal notice-and-negotiation process directly with the other contracting party, and in either case the other party becomes an unsecured creditor for any resulting loss or damage.
• Any compensation owed to the other party for loss or damage arising from a contract cancellation — whether determined by the court or included in the rescue plan — is treated as a judgment debt owed by the company, and the adviser has full authority to cancel, affirm, or vary contracts on the company's behalf.

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