Assignment prohibition clauses and transfer restrictions
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In legal due diligence for an M&A deal, contracts get opened one by one specifically to check for assignment prohibition and change-of-control clauses, and the resulting list can turn into exactly the set of counterparties whose consent has to be obtained before closing. A single contract where consent cannot be secured can force a change in deal structure or a delay in timing. The clause gets little attention at signing and a great deal of attention once M&A, a business transfer or financing is on the table.
What the clause actually restricts
An assignment prohibition clause restricts a party from transferring its contractual status, or the rights and obligations arising under the contract, to a third party without the other party's consent. It typically covers transfer of contractual status itself, assignment of receivables, and transfers that occur through a business transfer or corporate split. The clause exists because a contract is signed on the strength of who the counterparty is, but drawn too broadly it can constrain a company's own financing, group reorganization or M&A, so the real work in review is deciding what falls inside the restriction and what should be carved out, along with what happens if an assignment occurs without consent, since some contracts tie an unauthorized assignment directly to a termination right.
Contractual status versus receivables
Transfer of contractual status moves the entire bundle of rights and obligations to a third party. A service provider replacing itself with another company is the clearest example, and the counterparty's actual contracting party changes. Assignment of a receivable, by contrast, transfers a monetary claim such as an account receivable (selling it to a bank or a factoring company is typical), while the entity actually performing the service may not change at all. Because the practical effect on the counterparty differs, the contract should treat the two differently rather than lumping them under one prohibition.
For monetary claims specifically, the Civil Code adds a layer worth keeping separate from the contract language: under Article 466(2) and (3) of the Civil Code, an assignment of a claim remains valid even where the contract restricts assignment, though the obligor may refuse to perform toward an assignee who acted in bad faith or with gross negligence. A prohibition clause in the contract text does not, by itself, settle whether an actual assignment is effective. That question runs through the statute as well. Companies that rely on receivables financing should note that a blanket ban on assignment or on granting security over receivables can narrow their funding options, since early monetization of receivables and factoring both depend on assignment being effective.
How the clause plays out in a deal
The clause behaves differently by transaction structure: a share sale usually leaves the contracting party unchanged, so the assignment clause rarely applies directly, though a change-of-control clause can still be triggered; a business transfer or corporate split, by contrast, squarely triggers the assignment clause because contractual status itself moves. The same question arises in ordinary operational changes, such as moving a function to a group company or outsourcing a task to a new vendor, where the assignment clause and any subcontracting restriction should be checked together.
Preparing before the deal, not during it
Building a habit of recording, in the contract register, whether each material contract carries an assignment or change-of-control clause, and negotiating consent procedures or carve-outs for group transfers and reorganizations while signing, avoids discovering the problem for the first time in the middle of a due diligence process, when the only options left are asking the counterparty for consent or abandoning the change altogether.