Essential Supplies, Insolvency & your Obligations

Posted By: Helen Friday 1st February 2019Tags: , , ,

Does your company provide essential supplies? Are you familiar with the services that fall within this bracket? Are you aware of the obligations attached to continue providing essential supplies should a customer be faced with insolvency? Today’s blog post at LaneSystems looks at what products and services are deemed as ‘essential supplies’ and where your responsibilities lay should the unfortunate arise.

Are you familiar with The Insolvency (Protection of Essential Supplies) Order 2015. Although this sounds pretty technical, when you delve into the meaning, the concept is pretty straight forward. We have provided you above with  link directly to the government website. Here you will find the order written exactly how it was passed. Please use this link to determine specific information on how the order affects your company. Our blog is written to offer a basic insight and prove informative to those currently unaware.

You’re probably wondering:

‘How do essential supplies relate to my company’? Let’s take a look at the products and services referred to as essential:

  • Water
  • Gas
  • Electricity
  • Point of sale Terminals
  • Computer Software / Hardware
  • Data Storage & Processing
  • Website Hosting
  • Wi-Fi

So here’s the deal:

If you supply any of the above, it is your responsibility to ensure continued provision, even if a customer is moving towards insolvency. Such legislation has stated for many years that water, gas and electric is treated this way. The order of 1st October 2015 however takes IT services provided to BUSINESSES ONLY into consideration.

But why has this happened?

It is now recognised that in order to function properly, businesses require the continued supply of certain IT related services and utilities. Without the likes of Wi-Fi for example, a company can not make the required effort to get their affairs in order.

Termination clauses still count though right?

Apparently not, no. Should a company be faced with insolvency, such clauses are likely to become invalid. These new rules apply to any contracts entered into on or after 1st October 2015 (when the order was enforced).

And that’s not all!

Customers are not required to pay for their services based on this position. However, should the company be reinstated, back pay will be owed.

How can IT suppliers protect their position?

  • As a service provider it is important to keep on top of any outstanding invoices. Engaging with customers prior to insolvency is important.
  • If you are aware that a customer has entered into the insolvency process, you should first confirm if supply is required to continue. There may be the option to terminate by mutual consent.
  • You need a payment guarantee o future charges. Speak to the office-holder immediately to determine this guarantee.
  • When entering into a new contract, ensure early termination rights activate before the onset of insolvency. The essential supplies order only applies once a customer enters a formal agreement.

Now you have the basic points attached to this legislation, your company can ensure it remains protected at all times.

Had any experience with the supply of essential services and insolvency? Please do let us know!