Business partners are not always able to timely and fully fulfill their financial obligations to each other. In such cases, it becomes necessary to find the best way out of a difficult situation. Among the options for resolving monetary difficulties, an important place is occupied by a financing agreement for the assignment of a monetary claim, which allows each participant in market relations to get out of the current situation without negative consequences.
What is this type of transaction
The concept of a financing contract for the assignment of a monetary claim has come to the Russian world of market relations relatively recently, but has already been firmly entrenched in it. Its definition is given in paragraph 1 of article 824 of the Civil Code. In accordance with this article, a financing contract for the assignment of a monetary claim establishes a transaction in which one of its participants transfers or plans to transfer funds to the second participant after a certain time, the demand for the return of which will subsequently be presented to a third party. It turns out that, despite the bilateral nature of this type of agreement, it binds the three parties with legal obligations, involving in them the one who did not put his signature in the agreement.
In practice, such agreements are also called factoring.
Parties to the agreement
The parties to the financing contract for the assignment of a monetary claim are:
- Factor (financial agent) - a company characterized by a commercial orientation and issuing monetary resources under the assignment of a financial claim (the condition of the need for an agent’s commercial basis is mandatory).
- Lender (client) - a person who has not received the due payment for the services and / or goods provided and has contacted a financial institution to conclude an agreement.
The person who did not pay for the goods / services received is the debtor. It is to him that the money claim will be applied, and he will be the third party involved in the legal relations of the parties to the transaction.
The financial claim is based on the goods provided by the client or the services / work rendered by him to the debtor, which were not paid by the latter at the time of the transaction. It can also be assigned by the client for other purposes (for example, if the client has financial debt to the bank, he can conclude a factoring agreement with him and thereby close his debt).
Characteristics of a financing contract for the assignment of a monetary claim, its features
A financing contract against the assignment of a monetary claim is:
- mutual - establishes bilateral rights and obligations of counterparties to each other;
- compensated - regulates the payment for the fulfillment of obligations incumbent to the counterparty.
Also, the agreement may be real or consensual. In the first case, the contract is considered valid only after the transfer of the thing that one participant must transfer to another (in this case, financial means), provided that the parties have come to an agreement and legally fixed it.
The consensual contract begins to act immediately from the moment of its signing by contractors. Which of these types will include a financing contract for the assignment of a monetary claim, its participants decide for themselves. Their decision should be reflected in the text of the agreement, establishing from what time the signed document comes into force.
A feature of such transactions is:
- a combination of the characteristics of two types of agreements: on the transfer of the right of claim (cession) and loan / credit;
- the ability to simultaneously be an agreement on the provision of other financial services to the client by the agent (such as maintaining his accounting records).
Agreement form
As with all standard transactions, the form of a financing contract for the assignment of a monetary claim is a simple written one. This means that in order to conclude an agreement, a document is drawn up which reflects all the terms of the transaction and which is considered valid after it is signed by counterparties. The document is executed in duplicate, each containing the signatures of the parties. Notarial or other certification in this case is not required, unless otherwise established by the parties.
In addition to the standard drafting of a document, the legislator allows you to conclude a financing agreement for the assignment of a monetary claim (factoring) through the exchange of telegrams, letters, and other documents, including electronic letters. The main condition is the ability to reliably establish the fact that the information is actually received from the counterparty. The main requirement governing the validity of an agreement is to receive an acceptance (consent) from another party to the transaction. Consent is considered to be obtained if the person who received the offer (offer) begins to perform the actions stipulated by the text of the contract (provision of services, shipment of goods, etc.) within the time period established by agreement of the counterparties.
At the request of the parties to the transaction, a financing agreement against the assignment of a monetary claim may be certified by a notary public or registered with the Rosreestr. If the parties want to carry out state registration of the transaction, the contract must be made in 3 copies in order to submit the original to the registration authority.
Content of the agreement
The content of the financing contract against the assignment of the monetary claim does not differ from other standard agreements, which are drawn up in a similar form. The text of the document consists of the following required items:
- preamble (this includes the title of the document, as well as the date and place of its preparation);
- information about the participants (name or full name of the organization, indicating the postal and legal address and passport data);
- subject matter of the agreement (this is an essential condition of the agreement reflecting the essence of the transaction);
- contract price (the amount of financial resources provided to the client is determined by agreement of the parties);
- term of agreement (determined by the parties);
- rights and obligations of counterparties;
- responsibility for failure to fulfill one’s obligations;
- the possibility of circumstances recognized as force majeure;
- other conditions (prescribed solely by agreement of the parties);
- details of the parties.
Sample financing contract for assignment of a monetary claim
The items listed above must be present in the agreement without fail. In addition, each of them should be spelled out in as much detail as possible. It should be borne in mind that if there is any disagreement between counterparties, the proceedings will be conducted on the basis of the text of the document. Therefore, for each participant it is important to write down as many details as possible in the agreement. However, it should be borne in mind that all the terms of the financing contract for the assignment of a monetary claim, the counterparties must coordinate with each other without fail, because the signature will confirm familiarization with the text and agreement with each paragraph.
A sample financing contract for the assignment of a monetary claim can be found below. It should be borne in mind that in addition to the mandatory clauses, the parties can add other details to the contract at their discretion, provided that they do not contradict the law and the requests of each participant.
Subject of Agreement
The subject of a financing contract against the assignment of a monetary claim is an essential condition that determines the essence of the transaction. Its role can be performed:
- the fact that the factor received a financial claim from the client, which is carried out in exchange for financing the latter in cash in the required amount;
- by the fact that the requirement for the factor is transferred to enable the client to fulfill the existing financial obligations to him (as a rule, this applies to lending transactions, and the financial claim in such a case can be transferred to the factor only if he does not fulfill his obligations to the commercial organization).
Regardless of what the subject of the agreement is, the agent, one way or another, lends to the client, receiving a guarantee of the return of his funds in the form of assignment of a monetary claim. This is what causes the combination in the contract of the above signs of lending and assignment.
It should be borne in mind that the subject is an essential condition of the agreement, without indicating which the transaction will not be considered concluded. Therefore, it is extremely important to paint the subject as detailed as possible, indicating all the characteristics that allow it to be identified.
Rights and obligations of counterparties
The responsibilities of the factor for this type of agreement include:
- financial subsidization of the counterparty through the transfer to him of the transaction price (financial resources) in the manner prescribed by this document;
- acceptance of a package of documents from the client that allows him to conduct bookkeeping in cases determined by the signed agreement;
- the provision of other financial services to the client as agreed by the parties;
- Preparation of a detailed financial report for the client;
- presenting to the debtor, upon his request, confirmation that the financial claim was really transferred to the factor.
Failure to fulfill the latter condition gives the debtor the right to transfer funds to the client, after which his obligations to him will be considered fulfilled.
Moreover, the factor’s right for this type of agreement is that it will receive money from the debtor after the document is signed.
The obligations of the client by agreement include:
- assignment or obligation of subsequent assignment to the factor of the financial claim against the debtor;
- transfer to the agent a package of documents that proves the right of a financial claim, as well as information that is required to implement this requirement;
- informing the debtor of the fact of the transfer of the claim in writing (preferably sending a notice by registered letter with keeping the receipt of dispatch);
- payment for factor services (financial agent).
The signing of a financing contract for the assignment of a monetary claim (factoring) also imposes obligations on the debtor who is not a party to the transaction. They are as follows:
- making a payment to the agent, provided that the debtor was notified of the transfer of the right of claim in writing (he can receive a notification both from the factor and from the client, and this should contain information about the factor (financial agent) to which transfer funds);
- making a payment for a given monetary claim to the client in case the agent has not provided him with evidence that the assignment was completed.
If the debtor's obligations are fulfilled to the factor, he is automatically exempted from a similar requirement to the client.
Contractual liability
In accordance with paragraph 1 of Art. 827 of the Civil Code of the Russian Federation, the client is required to provide a guarantee factor for the validity of the subject of the transaction (monetary claim). It will be such under the following conditions:
- the client has a legal right to assign his claim;
- at the time of signing the agreement, he does not know the circumstances that give the debtor the right not to repay his debt (clause 2 of article 827 of the Civil Code of the Russian Federation).
In this case, the client does not need to bear any responsibility if the debtor does not fulfill the demand that was presented to him by the factor or will fulfill it improperly (provided that the agreement does not specify otherwise). Also, the client is not obligated to bear responsibility if the debtor cannot fulfill the claim due to its insolvency (provided that the claim is valid).
Benefits of Concession Financing Agreements
Despite the relatively recent emergence of financing contracts for the assignment of claims in the Russian financial market, a large percentage of their conclusion is observed. This indicates the undoubted advantages of transactions of a similar nature, which include:
- lack of need for collateral;
- loyal customer solvency requirements;
- guarantee of uninterrupted and accelerated financial assets turnover;
- the possibility of full use of financial resources (when lending, it is necessary that the account always has a certain amount);
- the possibility of obtaining additional financial services of high quality;
- protection against non-payment of their services, as well as against currency risks in international transactions;
- a guarantee of the possibility of timely fulfillment of their tax obligations (there is no risk that they will occur before the client receives payment for his work).
You can see all the advantages of a financing contract for the assignment of a monetary claim by an example.
LLC Romashka (client) is engaged in the production of furniture for offices and on February 15 concludes a contract for the supply of goods in the amount of 250 thousand rubles with LLC Vector (debtor). In accordance with the agreement, the buyer must transfer the payment for the goods no later than March 2. Urgently in need of financial resources, on February 21, Romashka LLC signed a factoring agreement with the Sozvezdie Commercial Bank (financial agent / factor), according to which, it ceded its right of claim to LLC Vector. On February 22, the factor transfers 200 thousand rubles to the client’s account, which equals 80% of the amount of debt of Vector LLC. When the due date is due (February 26), the factor issues a monetary claim to the debtor. On February 27, Vektor LLC transfers 250 thousand rubles to its account, of which the design bureau withholds the amount that the client financed plus the service fee, the rest is transferred to Romashka LLC account. If we consider that the remuneration is 3%, then it equals 7500 rubles. Accordingly, the bank transfers 42,500 rubles to the client.
Thus, under a financing contract for the assignment of a monetary claim from an example, a client:
- receives the amount necessary at a particular moment without a pledge;
- has the ability to fulfill its tax obligations before the end of the reporting period (until March 1).
Disadvantages of Concession Financing Agreements
Despite the large number of advantages, such transactions have disadvantages. These include:
- high commission (it reaches 10% of debt or up to 30% per annum);
- the need to provide detailed information about the debtor;
- Applicability only to transactions paid by cashless payments.
But, despite the shortcomings, many businessmen prefer to conclude such agreements instead of bank loans.
Based on the above facts, we can conclude that factoring is a profitable and convenient type of transaction, which allows you to:
- the client to receive the necessary amount in a specific period of time;
- an agent to receive remuneration for the service provided to the client.
As for the debtor, he does not pay any additional factoring fees. Consequently, for him there is no significant difference where to transfer funds for the services rendered or goods received to the client or agent account.