Customer contract novation after buying out of administration
Revenue does not transfer with the assets. Customer contracts must be actively novated with three-way deeds. Here's the playbook that keeps the top 20 customers attached through completion.
Old counterparty + new counterparty + customer all sign. No signature = no novation.
Rights assign by notice; obligations only transfer via novation.
Read every top-20 contract for termination triggers before offer.
30-day novation plan
- Day -14: pull the top-20 customer contracts and change-of-control map.
- Day -7: administrator-brokered introduction calls with top 3.
- Day 0: completion. Bulk novation deed issued day 1.
- Day 7: chase calls — no-response list.
- Day 14: signed rate report to board.
- Day 21: escalate refusals — offer discount or service continuity clause.
- Day 30: final tally; forecast revised revenue.
Related
Frequently asked questions
What's the difference between novation and assignment?
Assignment transfers benefits (the right to be paid, to receive services). Novation transfers both benefits and burdens (obligations, ongoing duties). Assignment is one-way notice; novation needs the counterparty to actively sign a three-way deed.
When does a contract need novation?
Any time the buyer inherits obligations, not just receivables. Ongoing services, SaaS agreements, maintenance contracts, franchise deals — all need novation. A one-off invoice for a shipped product may only need assignment.
Does the customer have to agree?
Yes. Without their signature, no novation. Change-of-control clauses (usually in the 'termination' section) give customers the right to walk away on transfer — read these first.
What if the customer refuses to novate?
The contract stays with the old company (which will be dissolved). You have no rights to enforce it, and the customer has no obligation to you. Sensible drafting has the administrator declare a trust of benefit for the buyer, but this doesn't defeat a change-of-control termination.
How do you novate 100 customer contracts fast?
Bulk novation deed with a schedule of counterparties. Send with a 'sign or your service stops' commercial reality. Response rate typically 70–90% within 30 days. The 10–30% that don't respond get manual follow-up or are treated as churned.
What about supplier contracts?
Same mechanics, but suppliers have leverage — they were probably an unsecured creditor of the old company. Expect: (a) demand for arrears clearance, (b) new terms (payment in advance for 3 months), (c) price uplift, (d) fresh credit checks. Budget a supplier stabilisation fund of £50–200k depending on scale.
What is a 'change of control' clause?
A contract clause that either terminates automatically or gives the counterparty a termination right when the ownership of one party changes. In an asset sale, technically ownership doesn't change (the customer's counterparty was the old company; now it's you) — this is a NEW contract, not a change of control. Novation itself is the trigger, if any.
Can I use a 'deemed novation' clause?
Some frameworks (e.g. some professional services agreements) allow deemed novation if no objection is received within X days. Rare, and risky — if the counterparty later disputes, you have no signed evidence. Prefer active signature.
What about the top 3 customers who make up 40% of revenue?
These are pre-completion negotiations, not post. The administrator involves you in customer calls before the SPA signs. Offer service continuity guarantees, discount pass-through for 6 months, or a dedicated account manager. Don't lose these in the transition.
Do public sector contracts novate the same way?
Harder. Public sector framework agreements (CCS, Crown Commercial Service) often prohibit novation without re-competition. If the target has a G-Cloud, DPS or framework contract, expect to lose it — the successor entity typically has to re-bid.