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Defence Reform Act 2014

Section 10 and Schedule 3: Transfer schemes

39.Subsection (1) gives the Secretary of State the power to make a scheme to transfer property, rights and liabilities (a “transfer scheme”) in two circumstances. First, where a contractor is in breach of a services contract (defined in subsection (6) as a contract for the provision of defence procurement services by virtue of the section 1 arrangements) where the breach occurs in certain circumstances or is of a certain specified kind. Or second, where the contract has come to an end e.g. where the term has expired.

40.Subsection (2) provides that property, rights and liabilities may be transferred to the Crown, the Secretary of State, or another contractor providing defence procurement services.

41.Subsection (3) provides that the property, rights and liabilities which may be included in a transfer scheme are property, rights and liabilities of a contractor, securities in a contractor and any property, or rights of a third party acquired from a contractor and any liabilities of third parties relating to such property or rights.

42.Subsection (4) provides that the Secretary of State may agree in the terms of the contract with a contractor that certain property, rights and liabilities are not to be included in a transfer scheme.

43.Subsection (5) gives effect to Schedule 3, which contains supplementary provisions relating to transfer schemes. Paragraph 1 makes further provision for the effect of a transfer scheme and for what the things that may be transferred under a transfer scheme may include. Paragraph 2 provides that a transfer scheme may make certain kinds of provisions. Paragraph 3 provides that a transfer scheme may contain provision for payment of compensation by the Secretary of State to any person whose interests are adversely affected by it. Paragraph 4 makes provision to address the situation where a transfer scheme transfers foreign property or a foreign right or liability. Paragraph 5 provides that a transfer scheme may make incidental, supplementary and consequential provisions. Paragraph 6 provides that the Secretary of State may modify a transfer scheme but if a transfer under the scheme has taken effect, any modification requires the agreement of the person affected by the modification.

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