Proposed Insolvency Act changes for IT and telecoms providers

The government launched a consultation on 9 July seeking views on implementing enhanced powers to ensure the continuity of the supply of essential services — notably gas, electricity, water, communication services and IT goods and services — to insolvent businesses and individuals. The idea is that suppliers of these goods and services will be unable to withdraw their services by reason of their customer’s insolvency or seek to impose preferential terms as a condition of continued supply.

Perhaps the striking aspect of the announcement is the inclusion of IT suppliers within the scope of the essential suppliers and the range of suppliers likely to be affected (including server providers, cloud storage, payment systems, website hosting and data storage). Logically, this is hard to argue with. In the modern world, there are very few businesses that could survive for long without their IT systems, and if the supplier of essential IT services withdraws supplies or imposes new onerous terms it may render a business rescue impossible.

The proposals will also cover ‘on-sellers’, which is where the supply is made through an intermediary. The consultation gives as examples of on-sellers the common scenario in the retail sector where a number of different IT and telecoms services may be used to run store and till equipment and to accept credit card payments. Another example given is those landlords who charge tenants for the supply of electricity or other services…

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