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Assignment of Accounts Receivable: Meaning, Considerations
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.
Investopedia / Jiaqi Zhou
What Is Assignment of Accounts Receivable?
Assignment of accounts receivable is a lending agreement whereby the borrower assigns accounts receivable to the lending institution. In exchange for this assignment of accounts receivable, the borrower receives a loan for a percentage, which could be as high as 100%, of the accounts receivable.
The borrower pays interest, a service charge on the loan, and the assigned receivables serve as collateral. If the borrower fails to repay the loan, the agreement allows the lender to collect the assigned receivables.
- Assignment of accounts receivable is a method of debt financing whereby the lender takes over the borrowing company's receivables.
- This form of alternative financing is often seen as less desirable, as it can be quite costly to the borrower, with APRs as high as 100% annualized.
- Usually, new and rapidly growing firms or those that cannot find traditional financing elsewhere will seek this method.
- Accounts receivable are considered to be liquid assets.
- If a borrower doesn't repay their loan, the assignment of accounts agreement protects the lender.
Understanding Assignment of Accounts Receivable
With an assignment of accounts receivable, the borrower retains ownership of the assigned receivables and therefore retains the risk that some accounts receivable will not be repaid. In this case, the lending institution may demand payment directly from the borrower. This arrangement is called an "assignment of accounts receivable with recourse." Assignment of accounts receivable should not be confused with pledging or with accounts receivable financing .
An assignment of accounts receivable has been typically more expensive than other forms of borrowing. Often, companies that use it are unable to obtain less costly options. Sometimes it is used by companies that are growing rapidly or otherwise have too little cash on hand to fund their operations.
New startups in Fintech, like C2FO, are addressing this segment of the supply chain finance by creating marketplaces for account receivables. Liduidx is another Fintech company providing solutions through digitization of this process and connecting funding providers.
Financiers may be willing to structure accounts receivable financing agreements in different ways with various potential provisions.
Accounts receivable (AR, or simply "receivables") refer to a firm's outstanding balances of invoices billed to customers that haven't been paid yet. Accounts receivables are reported on a company’s balance sheet as an asset, usually a current asset with invoice payments due within one year.
Accounts receivable are considered to be a relatively liquid asset . As such, these funds due are of potential value for lenders and financiers. Some companies may see their accounts receivable as a burden since they are expected to be paid but require collections and cannot be converted to cash immediately. As such, accounts receivable assignment may be attractive to certain firms.
The process of assignment of accounts receivable, along with other forms of financing, is often known as factoring, and the companies that focus on it may be called factoring companies. Factoring companies will usually focus substantially on the business of accounts receivable financing, but factoring, in general, a product of any financier.
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Non-assignment clauses: what they do (and don’t) restrict
A warranty in a receivables financing contract that BP was not prohibited from disposing of the receivable was not breached by a clause in the underlying oil sale contract prohibiting assignment without the other party’s consent. The decision usefully interprets common clauses found in commercial agreements and receivables financing contracts – namely non-assignment clauses and warranties concerning ability to dispose of a receivable. Non-assignment clauses are the subject of proposed law reform that would nullify their effect in business contracts. Allen & Overy’s Global Intelligence Unit report on the proposed regulations can be read here : First Abu Dhabi Bank PJSC (formerly National Bank of Abu Dhabi PJSC) v BP Oil International Ltd  EWCA Civ 14, 18 January 2018
BP contracted to supply oil to the Société Anonyme Marocaine de L’Industrie de Raffinage ( SAMIR ). First Abu Dhabi Bank ( FAB ) guaranteed payment for up to 95% of the sums due from SAMIR to BP, in exchange for a commission fee (the guarantee ). This was cancelled and replaced a month later by a purchase letter ( purchase letter ), under which FAB agreed to purchase BP’s economic interest in the contract with SAMIR (the Contract ) at 95% of its value. FAB advanced payment to BP, and BP was to pay to FAB all sums it received from SAMIR under the Contract. Restrictions on assignment The Contract expressly incorporated BP’s general terms and conditions for sales and purchases of crude oil, including a non-assignment provision (s34) which stated that “Neither of the parties to the Agreement shall without the previous consent in writing of the other party (which shall not be unreasonably withheld or delayed) assign the Agreement or any rights or obligations hereunder. […] Any assignment not made in accordance with the terms of this Section shall be void.” However, the purchase letter provided that:
- BP would assign its rights under the Contract to FAB “if legally possible under applicable laws and the Contract”;
- in the event that any assignment was not able to take place or was invalid or unenforceable, FAB would be subrogated to BP’s rights under the Contract and would be entitled to a funded sub-participation in BP’s rights to receive payment from SAMIR; - any amounts paid by SAMIR to BP would be held on trust for FAB; and - BP represented and warranted that it was “not prohibited by any security, loan or other agreement, to which it is a party, from disposing of the Receivable evidenced by the Invoice as contemplated herein”. The Receivable was defined as the invoice issued by BP to SAMIR under the Contract. No consent to assignment BP had neither requested nor obtained SAMIR’s consent to the assignment to FAB as at the date of the purchase letter. SAMIR subsequently filed for insolvency in Morocco, and FAB asked BP for an assignment of its rights under the Contract. BP then informed FAB that it needed SAMIR’s consent to an assignment. FAB did not request that BP seek SAMIR’s consent, but instead commenced proceedings for damages for breach of the representation and warranty in the purchase letter. At first instance – warranty breached At first instance, Carr J found for FAB, holding that the inclusion of s34 of BP’s general terms in the Contract meant that the representation and warranty in the purchase letter was false. Court of Appeal – no breach The Court of Appeal found that there had been no breach of the representation and warranty by BP. Giving the leading judgment, Lady Justice Gloster analysed the question in three stages. What was BP prohibited from doing under s34 of its general terms and conditions? Clauses such as s34 of BP’s general terms and conditions prohibit parties from legally or equitably assigning their existing or future rights under contracts (without their counterparty’s consent). BP was therefore contractually prohibited from effecting a legal or equitable assignment of its rights under the Contract to FAB.
However, BP was not prohibited from taking the other steps contemplated by the purchase letter, including paying sums received from SAMIR to FAB, holding such sums on trust for FAB or granting FAB subrogated rights or a funded sub-participation. What was the effect of such a restriction on BP’s ability to dispose of the Receivable? Following Linden Gardens Trusts Ltd v Lenesta Sludge Disposals Ltd  1 AC 85, it was common ground between the parties that the effect of s34 was that any purported legal or equitable assignment by BP of its rights under the Contract to FAB (without SAMIR’s consent) would be ineffective. Did BP breach the warranty? – No The representation and warranty had to be interpreted against the commercial context and overall scheme of the purchase letter. Assignment was not the primary method of transferring to FAB sums received by BP under the Contract; that was payment of the amounts received by BP to FAB and the imposition of a trust over those sums. Assignment was a secondary method of FAB receiving the relevant sums. Further, the clause in the purchase letter which required assignment expressly contemplated that assignment may not be possible, and provided FAB with alternative remedies such as subrogated rights or a sub-participation if assignment were impossible for any reason. The payment guarantee agreement which preceded the purchase letter also expressly provided for alternative means of transferring the economic benefit of the Contract if assignment were not possible. That it might not be possible to assign the contract therefore formed part of the factual matrix in which the purchase letter was to be construed. Against this background and in light of the other terms of the purchase letter, the phrase “from disposing of the Receivable evidenced by the Invoice as contemplated herein” in the representation and warranty did not refer exclusively to an assignment, but envisaged a wider restriction preventing the disposal by BP of its economic interest in the Contract. Section 34 of BP’s general terms and conditions did not prohibit BP from disposing of its economic interest in the Contract by all the means contemplated in the purchase letter, it only prohibited legal or equitable assignment, which the relevant terms of the purchase letter expressly contemplated may not be possible in any event. Therefore, on the proper construction of the purchase letter, BP had not breached the representation and warranty. COMMENT This case is a useful clarification of the meaning of terms, iterations of which are commonly found in receivables financing contracts. It is also interesting for what was not decided. Gloster LJ’s judgment analyses whether clauses prohibiting assignment are capable of rendering ineffective a subsequent equitable (as opposed to legal) assignment, and whether the Linden Gardens case can in fact be distinguished on this point. No finding was made as “with a considerable degree of intellectual disappointment” the question was not before the Court of Appeal. However, the space Gloster LJ devoted in her judgment to this question indicates that it is one considered ripe for review by the Supreme Court should an appropriate case arise. The commercial rationale of Linden Gardens is that it preserves the legitimate commercial purpose of non- assignment clauses by ensuring that contracting parties do not have to deal with third parties that they have not consented to deal with. Gloster LJ’s analysis argues that non-assignment clauses only need to render ineffective legal assignments to satisfy this commercial purpose, and to go further and render equitable assignments ineffective is an illegitimate constraint on the freedom of commercial parties to alienate their property. Similarly, although BP accepted in the Court of Appeal that the effect of s34 of its general terms and conditions was to prohibit it from effecting a legal or equitable assignment (accepting that the Court of Appeal was bound by two of its previous decisions on this point), it reserved its position as to the correctness of those prior decisions should the case proceed to the Supreme Court.
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The Difference Between Assignment of Receivables & Factoring of Receivables
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You can raise cash fast by assigning your business accounts receivables or factoring your receivables. Assigning and factoring accounts receivables are popular because they provide off-balance sheet financing. The transaction normally does not appear in your financial statements and your customers may never know their accounts were assigned or factored. However, the differences between assigning and factoring receivables can impact your future cash flows and profits.
How Receivables Assignment Works
Assigning your accounts receivables means that you use them as collateral for a secured loan. The financial institution, such as a bank or loan company, analyzes the accounts receivable aging report. For each invoice that qualifies, you will likely receive 70 to 90 percent of the outstanding balance in cash, according to All Business . Depending on the lender, you may have to assign all your receivables or specific receivables to secure the loan. Once you have repaid the loan, you can use the accounts as collateral for a new loan.
Assignment Strengths and Weaknesses
Using your receivables as collateral lets you retain ownership of the accounts as long as you make your payments on time, says Accounting Coach. Since the lender deals directly with you, your customers never know that you have borrowed against their outstanding accounts. However, lenders charge high fees and interest on an assignment of accounts receivable loan. A loan made with recourse means that you still are responsible for repaying the loan if your customer defaults on their payments. You will lose ownership of your accounts if you do not repay the loan per the agreement terms.
How Factoring Receivables Works
When you factor your accounts receivable, you sell them to a financial institution or a company that specializes in purchasing accounts receivables. The factor analyzes your accounts receivable aging report to see which accounts meet their purchase criteria. Some factors will not purchase receivables that are delinquent 45 days or longer. Factors pay anywhere from 65 percent to 90 percent of an invoice’s value. Once you factor an account, the factor takes ownership of the invoices.
Factoring Strengths and Weaknesses
Factoring your accounts receivables gives you instant cash and puts the burden of collecting payment from slow or non-paying customers on the factor. If you sell the accounts without recourse, the factor cannot look to you for payment should your former customers default on the payments. On the other hand, factoring your receivables could result in your losing customers if they assume you sold their accounts because of financial problems. In addition, factoring receivables is expensive. Factors charge high fees and may retain recourse rights while paying you a fraction of your receivables' full value.
- All Business: The Difference Between Factoring and Accounts Receivable Financing
The advantages of selling accounts receivable, buying accounts receivable, difference between payables and receivables in accounting, the role of factoring in modern business finance, the prevention of dilution of ownership, how to remove an empty mailbox in outlook, the importance of factoring in business, how to factor inventory, setting up webmail on mail for the imac, most popular.
- 1 The Advantages of Selling Accounts Receivable
- 2 Buying Accounts Receivable
- 3 Difference Between Payables and Receivables in Accounting
- 4 The Role of Factoring in Modern Business Finance
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Receivables Finance And The Assignment Of Receivables
Tfg legal trade finance hub, receivables finance and the assignment of receivables.
A receivable is a debt, an incoming money that is owed to a company in the future. Receivables finance or also called accounts-receivable financing is a type of asset-financing whereby a company uses its receivables as collateral in receiving financing such as secured short-term loans. In case of default, the lender has a right to collect associated receivables from the company’s debtors. In brief, it is the process by which a company raises cash against its own book’s debts. The company actually receives an amount equal to a reduced value of the pledged receivables, the age of the receivables impacting the amount of financing received. The company can get up to 90% of the amount of its receivables advanced.
This type of finance helps companies in unlocking funds as such funds will not be paid immediately and are thus stuck in the book’s debts.
FIG. 1: account receivable financing works through the use by a company of its receivables in order to receive financing. Source: https://fhcadvisory.com/images/account-receivable-financing.jpg
Restrictions on the assignment of receivables – New legislation
Invoice discounting products under which a company assigns its receivables have been used by small and medium enterprises (SMEs) to raise capital. However, such products depend on the related receivables to be assignable at first. Businesses have faced provisions that ban or restrict, by imposing a condition or other restrictions, the assignment of receivables in commercial contracts, preventing them from being able to use their receivables to raise funds.
In 2015, the UK Government enacted the Small Business, Enterprise and Employment Act (SBEEA) by which raising finance on receivables is facilitated. Pursuant to this Act, regulations can be made to invalidate restrictions on the assignment of receivables in certain types of contract. In other words, in certain circumstances, clauses which prevent assignment of a receivable in a contract between businesses is unenforceable. Especially, in its section 1(1), the Act provides that the authorized authority can, by regulations “make provision for the purpose of securing that any non-assignment of receivables term of a relevant contract:
- has no effect;
- has no effect in relation to persons of a prescribed description;
- has effect in relation to persons of a prescribed description only for such purposes as may be prescribed.”
The underlying aim is to enable SMEs to use their receivables as financing to raise capital, through the possibility of assigning such receivable to another entity.
The aforementioned regulations, which allow invalidations of such restrictions on the assignment of receivables, are contained in the Business Contract Terms (Assignment of Receivables) Regulations 2018, which will apply to any term in a contract entered into force on or after 31 December 2018. By virtue of its section 2(1) “ Subject to regulations 3 and 4, a term in a contract has no effect to the extent that it prohibits or imposes a condition, or other restriction, on the assignment of a receivable arising under that contract or any other contract between the same parties.”
Such regulations apply to contracts for the supply of goods, services or intangible assets under which the supplier is entitled to be paid money. However, there are several exclusions to this rule. In section 3, an exception exists where the supplier is a large enterprise or a special purpose vehicle (SPV). In section 4, are listed exclusions for various contracts such as contracts “for, or entered into in connection with, prescribed financial services”, contracts “where one or more of the parties to the contract is acting for purposes which are outside a trade, business or profession” or contracts “where none of the parties to the contract has entered into it in the course of carrying on a business in the United Kingdom”. Also, specific exclusions relate to contracts in energy, land, share purchase and business purchase.
Effects of the 2018 Regulations
As mentioned above, these regulations will make terms in a contract which prohibits or imposes a condition or other restriction on the assignment of a receivable arising under that contract, void and unenforceable.
In light of this, the assignment of the right to be paid under a contract for the supply of goods (receivables) cannot be restricted or prohibited. However, parties are not prevented from restricting other contracts rights. Non-assignment clauses can have varying forms. Such clauses will be covered by the regulations when terms prevent the assignee from determining the validity or value of the receivable or their ability to enforce it.
Overall, these legislations will have an important impact for businesses involved in the financing of receivables, by facilitating such process for SMEs.
https://www.tradefinanceglobal.com/finance-products/accounts-receivables-finance/ – 28/10/2018
https://www.legislation.gov.uk/ukpga/2015/26/section/1/enacted – 28/10/2018
https://www.legislation.gov.uk/ukdsi/2018/9780111171080 – 28/10/2018
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Assignment of Accounts Receivable – Trap for the Unwary
By Steven A. Jacobson
Most businesses are familiar with the mechanics of an assignment of accounts receivable. A party seeking capital assigns its accounts receivable to a financing or factoring company that advances that party a stipulated percentage of the face amount of the receivables.
The factoring company, in turn, sends a notice of assignment of accounts receivable to the party obligated to pay the factoring company’s assignee, i.e. the account debtor. While fairly straightforward, this three-party arrangement has one potential trap for account debtors.
Most account debtors know that once they receive a notice of assignment of accounts receivable, they are obligated to commence payments to the factoring company. Continued payments to the assignee do not relieve the account debtor from its obligation to pay the factoring company.
It is not uncommon for a notice of assignment of accounts receivable to contain seemingly innocuous and boilerplate language along the following lines:
Please make the proper notations on your ledger and acknowledge this letter and that invoices are not subject to any claims or defenses you may have against the assignee.
Typically, the notice of assignment of accounts receivable is directed to an accounting department and is signed, acknowledged and returned to the factoring company without consideration of the waiver of defenses languages.
Even though a party may have a valid defense to payment to its assignee, it still must pay the face amount of the receivable to the factoring company if it has signed a waiver. In many cases, this will result in a party paying twice – once to the factoring company and once to have, for example, shoddy workmanship repaired or defective goods replaced. Despite the harsh result caused by an oftentimes inadvertent waiver agreement, the Uniform Commercial Code validates these provisions with limited exceptions. Accordingly, some procedures should be put in place to require a review of any notice of assignment of accounts receivable to make sure that an account debtor preserves its rights and defenses.
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True sale of receivables
In this note we examine the legal characteristics of a true sale, the risk of recharacterisation and explain why true sale is an important concept.
Factoring and invoice discounting are both examples of financing techniques that involve the sale of receivables (often at a discount) by a seller to a financier, rather than the provision of a loan secured against the receivables.
Where the financing is structured as a sale, the parties will want the monies advanced by the financier to be characterised as a purchase price and the assignment of the receivables by the seller to be characterised as a sale.
Where a purported sale of receivables fails the “true sale” test, there is a risk that the payment of the purchase price will be recharacterised by the courts on the insolvency of the seller as a loan and the purported sale will be recharacterised as a security assignment. If the seller is incorporated in a jurisdiction where security assignments must be registered, that recharacterisation may lead to the security being void against the seller’s liquidator as a security for want of registration. The financier would then be left as an unsecured creditor of the seller.
Unfortunately, there is no one legal test by which it is possible to determine conclusively whether a transaction amounts to a true sale of receivables, rather than a secured loan.
In the case of Re George Inglefield Ltd  Ch. 1, the Court of Appeal identified the following essential differences between a sale and a secured loan:
- In a sale transaction, the seller is not entitled to get back the asset it has sold by returning the purchase price to the purchaser. A loan secured by a mortgage or charge of the asset would include this right.
- If a mortgagee sells the secured property for an amount in excess of the outstanding balance of the loan (together with interest and costs), he has to account to the mortgagor for any surplus. In a sale transaction, however, if the purchaser subsequently sells the asset for a profit, he does not have to account to the seller for the profit.
- If a mortgagee sells the secured property for an amount that is insufficient to discharge the outstanding loan amount, the mortgagee is entitled to recover the balance from the mortgagor. In a sale transaction, however, the purchaser has no right to recover any such loss from the seller.
Broadly speaking, the courts will look for evidence that the risks and rewards of ownership of the receivables have transferred from the seller to the financier.
For a receivables purchase transaction, the main risk of ownership is non-payment of the receivables by the debtor. In determining to what extent the risks and rewards of ownership have transferred from the seller to the financier, the economic substance of a transaction will usually be an important factor considered by the courts.
Where the financier has a right to recourse (ie sell back) the receivable to the seller in the event of non-payment by the debtor, the courts may take the view that the seller has retained the risks of ownership, such that the economic substance of the transaction is that of a secured loan, rather than a true sale.
The natural tendency of banks is to include as many repurchase events as possible in the receivables purchase agreement (RPA), as this increases recourse to the seller and is perceived to be less risky for the financier. However, from a true sale perspective, this approach should be resisted, because the more extensive the list of recourse events the greater the risk is of recharacterisation.
This does not mean that the financier cannot set any limits on its exposure to a debtor and it is common to see financiers requiring a right of recourse where, for example, non-payment of a receivable is due to a dispute arising between the buyer and the seller, or due to an alleged breach by the seller of its obligations under the underlying sales contract. The financier is providing working capital finance to the seller, but this does not oblige the financier to take on wider risks associated with the business relationship between the buyer and the seller.
As a general rule, a transaction is more likely to be characterised as a true sale if the financier has no, or limited, rights of recourse to the seller. This is especially true if recourse is limited to matters other than a payment default and those which are within the seller’s control.
On the basis of the principles set out in Re George Inglefield, Ltd , as considered and applied by the Court of Appeal in Welsh Development Agency v. Export Finance Co., Ltd  BCLC 148, the threshold for recharacterisation is a high one and a transaction structured as a sale of receivables will generally be upheld as such unless the transaction is in substance a mortgage or charge of receivables and not a sale, or a sham.
If one or more provisions of the RPA are inconsistent with a sale, then the court will look to the provisions of the RPA as a whole to determine the substance of the transaction and the nature of the legal relationship created between the parties.
The courts will only find a transaction to be a sham where the terms of the RPA do not represent the true intentions of the seller and the financier.
Off-balance sheet financing
True sale is not only a legal issue, but will have important implications for determining whether or not a transaction can be classified as “off-balance sheet” financing under applicable accounting rules.
“Off-balance sheet” in this context means that the seller is able to remove the receivables it has sold from its balance sheet and can show the payment it receives from the financier as cash. The attraction for the seller of this is an improvement in its liquidity while avoiding the need to report additional liabilities on its balance sheet.
The correct presentation in the seller’s accounts of such a transaction is made by the seller’s accountant, rather than the financier or its lawyers. However, accountants will often require a legal opinion confirming that a true sale of the receivables has been achieved from a legal perspective before a transaction can be classified as off-balance sheet.
This note is intended for general information only and provides a simplified overview of English law. It should not be used as a substitute for taking legal advice. The law is summarised as of 19 April 2016.
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- Texts and Status
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United Nations Convention on the Assignment of Receivables in International Trade (New York, 2001)
Date of adoption: 12 December 2001
The purpose of the Convention is to promote the movement of goods and services across national borders by facilitating increased access to lower-cost credit.
Why is it relevant?
The transactions covered by the Convention (e.g. asset-based lending, factoring, forfaiting, securitization, project financing) are fundamental for the financing of international trade. Yet uncertainty as to the content and choice of legal regime applicable to the assignment of receivables constitutes an obstacle to international trade. As a result, an assignment of future receivables or a bulk assignment of receivables that are not identified individually may be ineffective. In addition, an assignment that is effective according to the law under which it was concluded, may not be enforceable as against the debtor in another country or be subordinated to the rights of competing claimants in another country. Moreover, the law applicable to conflicts of priority among competing claimants may be difficult to determine. This means that either credit is not available on the basis of receivables (e.g. the claim for the payment of the purchase price in a contract for the sale of goods) or credit is available but only to those that may be able to afford its cost; and lack of sufficient access to credit or high cost of credit is a disadvantage in particular for small- and medium-size enterprises.
The Convention removes legal obstacles to receivables financing transactions, inter alia, by: (a) validating assignments of future receivables and bulk assignments, and by partially invalidating contractual limitations to the assignment of receivables); (b) enhancing certainty with respect to a number of issues, such as the effectiveness of an assignment as between the assignor and the assignee and as against the debtor; (c) clarifying the law applicable to key issues, such as the priority between competing claims; and (d) providing a substantive law regime governing priority between competing claims that States may adopt on an optional basis.
Relation to private international law and existing domestic law
The Convention applies only to international assignments of receivables and to the assignment of international receivables (with the exception of "financial" receivables). However, the Convention may affect a domestic assignment of a domestic receivable if: (a) it is in conflict with an international assignment of the same receivable; or (b) if it is one in a series of subsequent assignments, one of which, falls within the scope of the Convention. For the debtor, related provisions of the Convention to apply, at the time of the conclusion of the contract from which the assigned receivables arise, the debtor has to be located in a Contracting State or the law governing the assigned receivables has to be the law of a Contracting State.
The Convention contains an optional part with applicable law rules and another optional part with substantive rules dealing with the third-party effectiveness and priority of an assignment of receivables.
The Convention is accompanied by an explanatory note. There is also an-article-by-article commentary on the draft Convention that was before the Commission at its 34 th session in 2001.
- Text - Explanatory note
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The business contract terms (assignment of receivables) regulations 2018, you are here:.
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This is a draft item of legislation. This draft has since been made as a UK Statutory Instrument: The Business Contract Terms (Assignment of Receivables) Regulations 2018 No. 1254
Draft Regulations laid before Parliament under section 161(4) of the Small Business, Enterprise and Employment Act 2015, for approval by resolution of each House of Parliament.
Draft Statutory Instruments
Coming into force in accordance with regulation 1
The Secretary of State, in exercise of the powers conferred by sections 1 and 161(2) of the Small Business, Enterprise and Employment Act 2015( 1 ), makes the following Regulations:
In accordance with section 161(4) of the Small Business, Enterprise and Employment Act 2015, a draft of this instrument was laid before Parliament and approved by resolution of each House of Parliament.
Citation, commencement, interpretation and application
1. —(1) These Regulations may be cited as the Business Contract Terms (Assignment of Receivables) Regulations 2018 and shall come into force on the day after the day on which they are made.
(2) These Regulations apply to any term in a contract entered into on or after 31 December 2018.
(3) In these Regulations—
“firm” has the same meaning as in the Companies Act 2006( 2 );
“intangible assets” includes electricity and data which are produced and supplied in digital form;
“licensee”, in relation to a petroleum licence, means the person to whom a petroleum licence is granted, their personal representatives and any person to whom the rights conferred by that licence may lawfully be assigned;
“large group” means a group that is not a small group or a medium-sized group (within the meanings given by the Companies Act 2006( 3 ) or by that Act as applied with modifications by the Limited Liability Partnerships (Accounts and Audit) (Application of the Companies Act 2006) Regulations 2008( 4 ));
“LLP” means a limited liability partnership formed under the Limited Liability Partnerships Act 2000( 5 );
“petroleum licence” means a licence granted under section 2 of the Petroleum (Production) Act 1934( 6 ) or under section 3 of the Petroleum Act 1998( 7 );
“prescribed financial services” means a regulated agreement within the meaning of the Consumer Credit Act 1974( 8 ) or any financial service within the meaning of section 2 of the Small Business, Enterprise and Employment Act 2015; and
“receivable” is a right (whether or not earned by performance) to be paid any amount under a contract (other than a contract mentioned in regulation 4) for the supply of goods, services or intangible assets (and in relation to a receivable, “supplier” means the supplier of those goods, services or intangible assets to whom that amount is payable and “debtor” means the person liable to pay that amount).
(4) These Regulations have effect notwithstanding any contract term which applies or purports to apply the law of Scotland or some country outside the United Kingdom, where the term appears to the court or arbitrator or arbiter to have been imposed wholly or mainly for the purpose of enabling the party imposing it to evade the operation of these Regulations.
Effect of a non-assignment of receivables term
2. —(1) Subject to regulations 3 and 4, a term in a contract has no effect to the extent that it prohibits or imposes a condition, or other restriction, on the assignment of a receivable arising under that contract or any other contract between the same parties.
(2) A term in a contract which imposes a condition or other restriction on the assignment of a receivable includes a term which prevents a person to whom a receivable is assigned from determining the validity or value of the receivable or their ability to enforce the receivable.
(3) For the purposes of paragraph (2), a term prevents a person to whom a receivable is assigned from determining the validity or value of the receivable or their ability to enforce the receivable if the condition or other restriction prevents that person from obtaining—
(a) the names and addresses of the parties to the contract;
(b) the name and address of the person who on behalf of the debtor can confirm the validity and amount of the receivable;
(c) the VAT registration number of the debtor and of the supplier;
(d) the date on which the goods, services or intangible assets that give rise to the receivable are supplied;
(e) a description sufficient to identify the goods, services or intangible assets that give rise to the receivable (including the quantity of goods or intangible assets, or the extent of services, the unit price, the rate of VAT and the amount payable, excluding VAT);
(f) the date and number of the invoice for the goods, services or intangible assets that give rise to the receivable and any credit note related to the invoice (and the reason for issuing the credit note);
(g) the amount, basis or rate of any applicable discount;
(h) the total amount of VAT chargeable;
(i) the reason for any VAT zero-rating or VAT exemption;
(j) details of any term in the contract to which regulation 2(1) applies;
(k) the credit period for paying the receivable;
(l) evidence of the performance of that part of the contract (or other contract between the parties) which gives rise to the receivable; or
(m) particulars and evidence of any potential defence or set-off by a party to the contract.
Exception for suppliers who are large enterprises or special purpose vehicles
3. —(1) Regulation 2 does not apply and accordingly a term mentioned in that regulation does have effect in relation to the assignment of a receivable if at the time of the assignment the supplier is a large enterprise or a special purpose vehicle.
(2) A supplier is a large enterprise unless it satisfies one of the conditions in paragraph (3) and in paragraph (3) “relevant financial year” means the last financial year (before the date on which the receivable is assigned) in respect of which the supplier has filed accounts.
(3) The conditions in this paragraph are—
(a) the supplier is an individual, a partnership (other than an LLP or a limited partnership) or an unincorporated association;
(b) the supplier is a company to which the small companies regime (within the meaning given by sections 381 to 384 of the Companies Act 2006) applied in the relevant financial year and which was not a member of a large group in the relevant financial year;
(c) the supplier is a company which qualified as medium-sized (within the meaning given by sections 465 to 467 of the Companies Act 2006) in respect of the relevant financial year and which was not a member of a large group in the relevant financial year;
(d) the supplier is a company (other than an unlimited company exempt under section 448 of the Companies Act 2006 from the obligation to file accounts) that has not filed accounts since its incorporation and whose accounts are not overdue and which is not a member of a large group;
(e) the supplier is an unlimited company exempt under section 448 of the Companies Act 2006 from the obligation to file accounts, that has not filed accounts since its incorporation and whose accounts would not be overdue if the exemption under that section did not apply and which is not a member of a large group;
(f) the supplier is an LLP to which the small LLPs regime (within the meaning given by the Companies Act 2006, as applied with modifications by regulation 5 of the Limited Liability Partnerships (Accounts and Audit) (Application of the Companies Act 2006) Regulations 2008), applied in the relevant financial year and which was not a member of a large group in the relevant financial year;
(g) the supplier is an LLP which qualified as medium-sized (within the meaning given by the Companies Act 2006, as applied with modifications by regulation 26 of the Limited Liability Partnerships (Accounts and Audit) (Application of the Companies Act 2006) Regulations 2008) in respect of the relevant financial year and which was not a member of a large group in the relevant financial year;
(h) the supplier is an LLP that has not filed accounts since its incorporation and whose accounts are not overdue and which is not a member of a large group;
(i) the supplier is a body corporate incorporated outside the United Kingdom which, if it were a company formed and registered under the Companies Act 2006, would have been a company to which the small companies regime (within the meaning given by that Act) would have applied in the relevant financial year and which would not have been a member of a large group in the relevant financial year;
(j) the supplier is a body corporate incorporated outside the United Kingdom which, if it were a company formed and registered under the Companies Act 2006, would have qualified as medium-sized (within the meaning given by that Act) in respect of the relevant financial year and which would not have been a member of a large group in the relevant financial year; and
(k) the supplier is a body corporate incorporated outside the United Kingdom that has not filed accounts since its incorporation and whose accounts would not be overdue, and which would not be a member of a large group if it were a company formed and registered under the Companies Act 2006.
(4) A special purpose vehicle is a firm, wherever it is incorporated or established, that carries out a primary purpose in relation to—
(a) the holding of assets (other than trading stock within the meaning of the Income Tax (Trading and Other Income) Act 2005( 9 )); or
(b) the financing of commercial transactions,
which in either case involves it incurring a liability under an agreement of £10 million or more.
(5) For the purposes of paragraph (4)—
(a) where a liability is a contingent liability under or by virtue of a guarantee or an indemnity or security provided on behalf of another person, the amount of that liability is the full amount of the liability in relation to which the guarantee, indemnity or security is provided;
(b) where the amount of a liability is reduced or recourse in respect of it is limited by reference to the value of the special purpose vehicle’s assets at the time the liability is due, the amount of that liability is the full amount of the liability, ignoring that reduction or limit;
(c) the reference to a liability includes—
(i) a present or future liability whether, in either case, it is certain or contingent,
(ii) a reference to a liability to be paid wholly or partly in foreign currency (in which case the sterling equivalent shall be calculated as at the time when the liability was incurred).
4. Regulation 2 does not apply to a term in a contract which is—
(a) a contract for, or entered into in connection with, prescribed financial services;
(b) a contract which concerns any interest in land;
(c) a contract where one or more of the parties to the contract is acting for purposes which are outside a trade, business or profession;
(d) a contract where none of the parties to the contract has entered into it in the course of carrying on a business in the United Kingdom;
(e) a contract which concerns national security interests (and a certificate provided by the Secretary of State to the effect that a contract concerns national security interests shall be conclusive evidence of that fact);
(f) a contract where one or more parties to the contract is a person designated as a counterparty for a contract for difference under section 7 of the Energy Act 2013( 10 ) and who has entered into the contract by virtue of that Act;
(g) a petroleum licence;
(h) a contract where one or more parties to the contract is the licensee in respect of a petroleum licence whose terms would prohibit or restrict the assignment of receivables under that contract;
(i) a contract which is entered into for the purposes of, or in connection with, the acquisition, disposal or transfer of an ownership interest in a firm, wherever it is incorporated or established, or of a business or undertaking or part of a business or undertaking, and which includes a statement to that effect;
(j) an option, future, swap, forward, contract for differences or other derivatives contract, not falling within paragraph (a), which may be settled physically or in cash, relating to commodities, energy, emission allowances, climactic variables, freight rates or inflation rates or other official economic statistics that is either—
(i) traded on a regulated market, multilateral trading facility or organised trading facility, or
(ii) is not traded on a regulated market, multilateral trading facility or organised trading facility, but is entered into under a market agreement providing for close-out netting,
and “regulated market”, “multilateral trading facility” and “organised trading facility” have the same meaning as in Article 4(1) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on Markets in Financial Instruments (recast)( 11 );
(k) a contract entered into by the project company of a project which is—
(i) a public-private partnership project;
(ii) a utility project;
(iii) a financed project; or
(iv) designed wholly or mainly to develop land which at the commencement of the project is wholly or partly in a designated disadvantaged area outside Northern Ireland,
and expressions used in this sub-paragraph which are also used in Chapter 4 of Part 3 of the Insolvency Act 1986( 12 ) have the meaning given in that Chapter, except that “company” includes a firm, wherever it is incorporated or established;
(l) a contract entered into by a trust, fund or other entity, or an arrangement entered, created by or on behalf of a site operator (within the meaning in the Energy Act 2008( 13 )) to hold and accumulate assets under the terms of a funding arrangements plan that is part of a funded decommissioning programme submitted to the Secretary of State for approval under section 45 of that Act; or
(m) a contract, not falling within paragraph (a), entered into wholly or mainly for the purpose of granting by one person of a right to possession or control of an object to another person in return for a rental or other payment.
Parliamentary Under Secretary of State
Department for Business, Energy and Industrial Strategy
(This note is not part of the Regulations)
These Regulations deal with terms in contracts to which the law of England and Wales or the law of Northern Ireland applies which prohibit or restrict the assignment of receivables. A receivable is a right to be paid under a contract for the supply of goods, services or intangible assets. Various types of contract are excluded from the scope of the Regulations.
The Regulations, which are made under section 1 of the Small Business, Enterprise and Employment Act 2015 do not cover financial services contracts: see section 1(3) and (4) of that Act. ‘Financial services’ are defined in section 2 of the Act. Some similar contracts that do not fall under this definition, such as operating leases and derivative contracts, are also excluded from the Regulations.
Regulation 2(1) provides that a term has no effect to the extent that it prohibits or imposes a condition, or other restriction, on the assignment of a receivable. Regulation 2(2) specifies a particular category of contractual terms which, by their impact on an assignee, would have the effect of imposing a condition or other restriction on the assignment. Regulation 2(3) sets out the information that the assignee must be able to obtain in order to determine the validity or value of the receivable or their ability to enforce it.
A contractual right of set-off which the debtor could have exercised against the assignor prior to the assignment or but for the assignment is not a term that imposes a condition or other restriction on the assignment of a receivable for the purposes of these Regulations.
The Regulations do not apply if the person to whom the receivable is owed is a large enterprise or a special purpose vehicle. These terms are both defined in regulation 3. For these purposes a large enterprise is an enterprise which is not a sole trader, partnership or unincorporated association or a company or LLP qualifying as small or medium-sized under the relevant legislation (including bodies incorporated overseas which would so qualify if incorporated in the U.K.).
Regulation 4 excludes various types of contract from the scope of the Regulations, such as where none of the parties has entered into the contract in the course of carrying on a business in the United Kingdom. A contract is also excluded if it has been entered into in connection with or for the purpose of the transfer of all or part of a business (including transitional services agreements, which are contracts to provide services in order to facilitate the transition). For the latter exclusion to apply, the contract must include a statement to that effect.
A full regulatory impact assessment of the effect of these Regulations on the costs of business and the voluntary sector is available from the Department for Business, Energy and Industrial Strategy, 1 Victoria Street, London, SW1H 0ET or from www.gov.uk/beis .
2015 c. 26 .
2006 c. 46 . See section 1173(1).
See sections 383 and 466 of that Act.
S.I. 2008/1911 , as amended by S.I. 2016/575 . See regulations 5 and 26.
2000 c. 12 .
1934 c. 36 .
1998 c. 17 .
1974 c. 39 . “Regulated agreement” is defined in section 189(1).
2005 c. 5 . “Trading stock” is defined in section 174.
2013 c. 32 .
OJ No. L173 12.06.2014, p. 349. The Directive was amended by Regulation (EU) No. 909/2014 of the European Parliament and of the Council of 23 July 2014 (OJ No. L257, 28.08.2014, p.1) and Directive 2016/1034/EU of the European Parliament and of the Council of 23 June 2016 (OJ No. L175 30.06.2016, p. 8).
1986 c. 45 . Chapter 4 of Part 3 was inserted by the Enterprise Act 2002 (c. 40) , section 250.
2008 c. 32 . See section 68.
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The Government restricts bans on assignment
United Kingdom | Publication | November 2018
Legislation now in force preventing parties from prohibiting the assignment of receivables under certain contracts.
At the moment, a contract can prohibit or restrict the parties’ ability to assign or transfer rights created under the contract. The extent of the restriction is a matter of interpretation of the clause concerned. If one of the parties to the contract attempts to assign the benefit of the contract in breach of the restriction, the purported assignment is ineffective.
One of the key assets of any business is its receivables, and restrictions on assignment can prevent the parties from factoring receivables or otherwise raising finance on them. The Government has decided that it should be easier for businesses to raise finance on their receivables. Accordingly the Small Business, Enterprise and Employment Act 2015 allows regulations to be made to invalidate restrictions on the assignment of receivables in particular types of contract. The regulations have now been made. They are contained in The Business Contract Terms (Assignment of Receivables) Regulations 2018. Draft regulations published in July, have been approved by both Houses of Parliament and are now in force.
What types of contracts do the Regulations apply to?
The Regulations apply to contracts for the supply of goods, services or intangible assets under which the supplier is entitled to be paid money. But there are a number of important exclusions from their application, including the following:
- They only apply to contracts entered into on or after 31 December 2018.
- They only apply where the person who supplies the goods, services or intangible assets concerned, and is therefore entitled to the receivable, is a small or medium-sized enterprise which is not a special purpose vehicle. Whether or not an entity qualifies in any particular case requires a detailed examination of the precise wording of the
- Regulations. Counter-intuitively, the test is not applied at the time the contract is entered into, but at the time the assignment takes place.
- There is a specific exemption for contracts “for, or entered into in connection with, prescribed financial services”: These are widely defined to include “any service of a financial nature”.
- There are specific exclusions for particular types of contract, including certain commodities, project finance, energy, land, share purchase and business purchase contracts and operating leases.
- As a general rule, it would seem that the Regulations only apply to contracts governed by English law or the law of Northern Ireland, but they prevent the parties from choosing a foreign law if it can be established that the purpose of doing so was to evade the Regulations.
- The Regulations do not apply if none of the parties to the contract has entered into it in the course of carrying on a business in the United Kingdom.
What is the effect of the Regulations?
The Regulations provide that “a term in a contract has no effect to the extent that it prohibits or imposes a condition, or other restriction , on the assignment of a receivable arising under that contract or any other contract between the same parties.”
A receivable is the right to be paid any amount under a contract for the supply of goods, services, or intangible assets. The Regulations do not prevent the parties from restricting the assignment of other contract rights.
More difficult is to establish what is meant by assignment. Receivables are transferred in various ways in practice. Sometimes the transfer is outright (for instance by way of sale); and sometimes it is by way of security (for instance to secure a loan). The transfer may be effected by a statutory assignment, an equitable assignment, a charge or a trust. “Assignment” is not defined in the Regulations, and so there is some doubt as to which of these transactions are covered.
Although charges are not expressly referred to, they might be covered by the expression “assignment” if it is given a broad interpretation. But because of the uncertainty, the best course is to take an assignment by way of security over a receivable where there is, or might be, a restriction. That way, it is clear that the Regulations do apply.
Non-assignment clauses come in a variety of forms. They will be covered by the Regulations if they prohibit or impose a condition , or other restriction on the assignment of a receivable. The Regulations expressly invalidate terms which prevent the assignee from determining the validity or value of the receivable or their ability to enforce it. Whether or not the Regulations apply in any particular case will require an analysis of the precise terms of the restriction.
The Regulations will be of particular importance to businesses involved in the financing of receivables. And they will also be of concern to buyers because they will override their contractual protections.
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- Factoring of Accounts Receivable
Factoring of accounts receivable is the practice of transferring the ownership of accounts receivable to a company specialized in receivable collection, in exchange for immediate cash. In other words, the company that originally owns the receivables, sells them to another company called “factor” and receives immediate cash.
Factoring helps a business improve its cash flow by converting its receivables immediately into cash instead of waiting for the due dates of payments by customers. A drawback of factoring is that it is done at a discount, which means that the cash received on factoring of receivables is less than the value of the receivables transferred. This is because the factor expects a certain margin and it faces risks such as time value of money , and depending on the agreement, the risk of default by the debtors.
The parties to the factoring agreement assess the recoverability of the accounts receivable, decide whether or not the factoring agreement will be with recourse or without recourse, and then agree on a suitable discount factor to calculate the amount of fee to be charged by the factor i.e. the discount. After deducting such a fee from the value of the accounts receivable, the factor pays in cash to the originating company. The factor may also withhold an additional amount as a refundable security against any bad debts that may arise.
As a result of the above transaction, the factor gains ownership of the accounts receivable and has access to the detailed records of those receivables . The factor is specialized in receivable collection and it may actually be cost effective for businesses to factor their receivables because doing so will save costs such as wages paid to staff for following up with customers.
The factor collects cash from the debtors as the due dates approach. The procedure to be followed in a situation where a debt becomes irrecoverable, depends on whether or not the factoring agreement is with recourse.
Recourse vs non-recourse factoring
Under non-recourse factoring, the factor may set-off the sum retained as a security, if any, against any bad debts that may arise but the factor is not entitled to be reimbursed by the originating company if the total of bad debts exceed the amount of security. In other words, the additional loss on bad debts under non-recourse factoring is borne by the factor.
Under a factoring agreement with recourse, the company factoring its receivables agrees to pay bad debts in full to the factor. So if the security falls short of the total bad debts, the factor is entitled to be reimbursed for bad debts in full.
Non-recourse factoring is riskier than factoring with recourse for the factor, generally resulting in higher discount rates over factoring with recourse.
Factoring vs assignment of receivables
Factoring is different from a financing agreement involving assignment of receivables because the later uses receivables as a collateral security for a loan, but the actual ownership of the receivables and the right to collect them is not transferred as long as the loan and any related interest payments are paid in time.
The following example illustrates the journal entries to record transactions related to factoring with and without recourse:
On January 1, 20X5, Impatient Inc. factored its accounts receivable of $100,000 at a fee of 8%. Under the terms of the agreement, the company received $82,000 in cash and the rest of the amount was retained by the factor as a security for any bad debts that may arise. Any excess of this security sum over the total bad debts was agreed to be returned by the factor at the end of the accounting period i.e. December 31, 20X5.
On December 31, 20X5 the full amount of security sum was withheld by the factor because the actual bad debts totaled $11,000 exceeding the security sum.
Impatient Inc. had already provided allowance for doubtful debts in the factored accounts receivable and a bad debts expense was recognized in the income statement of year ended December 31, 20X4.
Required: Pass journal entries to record the above transactions for Impatient Inc. both under factoring with recourse and factoring without recourse.
January 1, 20X5: Here, the journal entry will be identical under both factoring with recourse and factoring without recourse.
December 31, 20X5: The journal entries will differ under the two types of factoring. Since the actual bad debts exceed the amount initially retained by the factor, Impatient Inc must pay the factor, an additional amount of $1,000 under factoring with recourse but there is no such remedy if the factoring is without recourse.
Under factoring with recourse:
Under factoring without recourse:
It is important to note that the type of factoring influences the amount of fee charged and the amount of security held by the factor and the scenario in this example is only for the purpose of comparing the two types. The amount of security retained may be zero under factoring with recourse because the agreement guarantees the factor that any debts that may turn out to be irrecoverable will be reimbursed.
by Irfanullah Jan, ACCA and last modified on Oct 29, 2020
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8 December 2020
Lending focus – December 2020 – 6 of 8 Insights
Non-assignment clauses in Dutch law: the end of the road?
On 2 June 2020, an act to abolish the practice of contractually agreeing prohibitions/restrictions on the transfer or pledging of receivables – insofar as they have been obtained in the exercise of a profession or business – was submitted to the House of Representatives (the Act).
If the Act is passed by the Dutch Parliament and enters into force, any such contractual clauses will be null and void.
What are the policy objectives?
The Act aims to stimulate the growth and development of smaller businesses.
Smaller businesses commonly assigned or pledged their receivables to a lender, who might then lend them up to 80% of the value of such receivables. This assisted them with raising capital for growth. However, other parties contracting with SMEs have begun to insist on barring such assignments or pledges, making invoice financing a near-impossibility for smaller traders.
The Act will counter this recent practice, making it easier once more for SMEs to raise capital.
In principle, under Dutch law, the ownership of receivables is transferable, unless the law or the nature of the receivable prevents a transfer. Contracting parties are therefore free to determine the parameters and limitations of such receivables.
Exclusively for receivables, s3:83 paragraph 2 of the Dutch Civil Code (DCC) determines that their transferability can be prohibited contractually. If a contract prohibits the transfer of receivables, then they can neither be transferred nor pledged.
A transfer contrary to such clause will, depending on the exact wording of the clause and its interpretation, result in a default (under contract law) or the non-transferability of the receivable, and thus the invalidity of any attempted transfer or pledge (under property law).
To stimulate the provision of loans to SMEs, the Dutch legislator intends to amend s3:83 of the DCC.
The Act states that the transferability or pledging of a business’s receivables can no longer be contractually excluded. Any such clause will be null and void. The expectation is that this will increase the credit potential of borrowers, enabling them to use these receivables as security for their borrowings.
Any transfer or pledge of receivables arising from a business or profession must be in writing. Furthermore, notification of transfer or pledge to the third party (debtor of the receivable) must also be in writing. These latter requirements are not particularly onerous, since written agreements are the norm in international financing practice.
The amended s3:83 of the DCC will not only apply to new agreements but also to existing ones, as from three months after the Act comes into force.
The legislator intends to include several exceptions to the new rule. The following receivables are excluded and may therefore still be subject to transferability and pledging restrictions:
- receivables arising from a current or savings account
- receivables arising from syndicated loans
- receivables from or on a clearing institution, centralised counterparty, settlement agent, clearing institution, or central bank, and
- pecuniary claims which are to be paid on the basis of an agreement as referred to in s34(3), s35(5) or s35a(4) of the Collection of State Taxes Act 1990 into a bank account held for the payment of wage tax, turnover tax and social insurance contributions.
As noted above, receivables arising in the context of syndicated loans concluded on standard LMA documentation will not fall within the scope of the new rule.
The ability to provide collateral for credit facilities should boost lending sources for SMEs and provide a much-needed stimulus for growth.
Find out more
To discuss any of the issues raised in this article in more detail, please contact a member of our Banking & Finance team.
In this series
Retirement living q&a: ground-breaking real estate investment by royal london, new dutch restructuring legislation: the best of both worlds.
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Dovetailing loan and hedging arrangements: English courts hold the line
Directors in the spotlight: wrongful trading.
by Kate Bowden
Pathway Finance: construction or rectification?
Taking security over a domain name, appointing administrators: victory for secured lender.
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The Brewers' starting pitching depth was already thin. Now they just lost another arm to injury.
After months of searching for answers on the mound, Milwaukee Brewers starter Eric Lauer believes he has located the issue. The downside, though, is it landed him on the injured list.
Lauer, who hasn’t felt like himself while pitching going back to spring training and has a 5.46 ERA through nine outings, was placed on the 15-day IL with an impingement in his right shoulder – his non-throwing arm.
“It's just kind of continuously gotten worse and worse,” Lauer said before the Brewers faced the Houston Astros on Monday at American Family Field. “And it's gotten to a point where all the mechanical things are right, everything that we've been searching through and trying to make right is right, and I'm still not feeling like I’m throwing like myself. So we started looking at other things, other possibilities, and the only glaring thing that I could think of was my glove shoulder doesn't feel right. It doesn't feel like I can get out there and I can rip it back through.”
Lauer explained that, mechanically, front shoulder pain keeps him from bringing his glove through with the force needed to generate the extra zip he needs on his pitches. Instead of torquing through with his shoulder, he has been using his elbow, which throws all his mechanics out of whack. Lauer’s fastball velocity was down nearly 3 mph from last season and many of his misses were middle-middle, playing a large role in him allowing 13 home runs already this year.
“It gets out there and it has this dead feeling to it,” Lauer said.
Lauer was scheduled to get imaging done on his shoulder Monday evening, and that will determine the length of his IL stay. Barring anything major, the lefty expects to be able to keep throwing while on the shelf.
Lauer and the Brewers have seeked answers for what maligning Lauer since the outset of the season, including even sending him to the bullpen for a brief period earlier this month, but nothing seemed to work. The hope is this will be the fix that allows Lauer to hit the reset button and return healthy.
“I feel like if this blockage goes away, there should be zero blockages,” he said “Because there was something blocking me the whole time, but I thought it was my legs. It wasn't my legs. I thought it was my arm – I thought it was my left arm. It wasn't my left arm.
“If this doesn't do it, if this doesn't give me the full-on clarity, then I don't know. Then it's going to be keep searching. … It's the last piece of the puzzle that I'm not sure about.”
The injury, though, leaves an already paper-thin starting pitching group even more in question. Colin Rea was called up to start on Tuesday, filling injured Wade Miley’s spot, but the Brewers will need someone to take the ball Thursday.
Milwaukee will likely need some length from that outing as it is comes in the middle of a stretch of 10 games in 10 days, meaning a traditional starter will probably be utilized. Janson Junk is one option already on the 40-man roster, while Robert Gasser, one of the team’s top prospects, is another but would need to be added to the roster.
More: Milwaukee Brewers players injury updates for the 2023 season
Injured infielder Luis Urias is nearing a return to Milwaukee
There was good news on the injury front for the Brewers: Infielder Luis Urías, who has been out since opening day, should be back soon.
Urías was scheduled to begin a rehab assignment with Class AAA Nashville either Tuesday or Wednesday as he returns from a strained hamstring suffered March 30 at Wrigley Field. Urías has been rehabbing the injury at the Brewers’ Phoenix complex and began playing in extended spring training games in recent days.
A Brewers offense that has struggled in May – posting just a 90 wRC+ – could sure utilize Urías’ bat, but they will have to wait until at least May 30 for him to be eligible to come off the 60-day IL.
Brewers still waiting on Jesse Winker’s power stroke
There is no one reason why the Brewers offense has slowed down this month, but it is hard to ignore the zero in the home run column next to one of their expected big bats.
Jesse Winker, who showed the Brewers firsthand how capable he is of doing damage on offense over his years with the Reds, has yet to go deep with only three doubles to his name, as well, through 33 games and 107 plate appearances.
Winker hit 66 homers in 413 games over the previous four seasons with Cincinnati and Seattle, good for a rate of 25 over a 162-game season, before the Brewers traded for him this winter.
That type of power hasn’t shown itself in 2023, but the Brewers will remain patient with Winker in hopes he can find it in the near term.
“This is a player that was coming off some major injuries,” Brewers manager Counsell said. “We knew that he was behind when we got him. He was behind in spring training. He wasn’t able to pick up a bat until he got to spring training, essentially. Then he got the sickness in the middle of April that zapped him pretty good, too.
"I think the ingredients of what makes Jesse Winker, Jesse Winker are still there. The rest is gonna come. I think he’s in a good spot. He’s been swinging the bat much better here the last 10 days. His at-bats have been very good the last 10 days. And just go from there.”
Assignment of accounts receivable is a lending agreement, often long term , between a borrowing company and a lending institution whereby the borrower assigns specific customer accounts that owe ...
The decision usefully interprets common clauses found in commercial agreements and receivables financing contracts - namely non-assignment clauses and warranties concerning ability to dispose of a receivable. Non-assignment clauses are the subject of proposed law reform that would nullify their effect in business contracts.
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Dealing with US federal government accounts receivable involve more complicated legal considerations than non-government receivables. Risks and benefits of compliance or non-compliance with FACA should be discussed with your lawyers. ... ¹ Compliance with FACA, as is the case with the provision of notice of assignment to non-government ...
Related to Non Assignment of Receivables. Notification of Assignment of Receivables At any time following the occurrence of an Event of Default or a Default, Agent shall have the right to send notice of the assignment of, and Agent's security interest in, the Receivables to any and all Customers or any third party holding or otherwise concerned with any of the Collateral.
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A receivable is a debt, an incoming money that is owed to a company in the future. Receivables finance or also called accounts-receivable financing is a type of asset-financing whereby a company uses its receivables as collateral in receiving financing such as secured short-term loans. In case of default, the lender has a right to collect ...
By Steven A. Jacobson. Most businesses are familiar with the mechanics of an assignment of accounts receivable. A party seeking capital assigns its accounts receivable to a financing or factoring company that advances that party a stipulated percentage of the face amount of the receivables. The factoring company, in turn, sends a notice of ...
An objection against that non-assignment clauses in respect of receivables should be valid against thord parties, is that the factoring business and trading with receivables would suffer.
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Related to Non-Assignable Receivables. Non-Assignable Contract means any agreement, contract or license to which any Grantor is a party that by its terms purports to restrict or prevent the assignment or granting of a security interest therein (either by its terms or by any federal or state statutory prohibition or otherwise irrespective of whether such prohibition or restriction is ...
Where a purported sale of receivables fails the "true sale" test, there is a risk that the payment of the purchase price will be recharacterised by the courts on the insolvency of the seller as a loan and the purported sale will be recharacterised as a security assignment. If the seller is incorporated in a jurisdiction where security ...
from a financier's perspective between a fixed charge and an assignment by way of security, this is a useful workaround. In the case of a RP facility, a financier will seek to obtain a charge over any receivables affected by a ban on assignment or trust (commonly called a non-vesting receivable). WHAT IF ASSIGNMENTS, CHARGES AND TRUSTS ARE
Commercial contracts, however, often include a non-assignment of receivables clause and the concern is that smaller suppliers are unable to negotiate changes to such provisions. The Regulations came into effect on 24 November 2018. They will apply to all contracts entered into on or after 31 December 2018. Essentially, the Regulations will ...
The Convention removes legal obstacles to receivables financing transactions, inter alia, by: (a) validating assignments of future receivables and bulk assignments, and by partially invalidating contractual limitations to the assignment of receivables); (b) enhancing certainty with respect to a number of issues, such as the effectiveness of an ...
Effect of a non-assignment of receivables term. 2. —(1) Subject to regulations 3 and 4, a term in a contract has no effect to the extent that it prohibits or imposes a condition, or other restriction, on the assignment of a receivable arising under that contract or any other contract between the same parties.
Non-assignment clauses come in a variety of forms. They will be covered by the Regulations if they prohibit or impose a condition , or other restriction on the assignment of a receivable. The Regulations expressly invalidate terms which prevent the assignee from determining the validity or value of the receivable or their ability to enforce it.
The following example illustrates the journal entries to record transactions related to factoring with and without recourse: On January 1, 20X5, Impatient Inc. factored its accounts receivable of $100,000 at a fee of 8%. Under the terms of the agreement, the company received $82,000 in cash and the rest of the amount was retained by the factor ...
receivables from or on a clearing institution, centralised counterparty, settlement agent, clearing institution, or central bank, and pecuniary claims which are to be paid on the basis of an agreement as referred to in s34(3), s35(5) or s35a(4) of the Collection of State Taxes Act 1990 into a bank account held for the payment of wage tax ...
The Brewers placed starter Eric Lauer on the injured list with an injury to his non-throwing shoulder ... Urías was scheduled to begin a rehab assignment with Class AAA Nashville either Tuesday ...