Receivables meaning

Checklist This Checklist highlights the principal points and provisions to address when preparing and negotiating the novation of a contract to a third party. Precedents Novation agreement-long form Novation agreement-short form Deed of novation-long form Deed of novation-short form Short form letter of novation Information on novation Practice Note: How to novate a contract Practice Note: Novation-why and how to novate a contract Third parties, subcontracting and transfers-overview For sector-specific guidance in construction, see: Novation in construction projects-overview. Note that for contracts novated on or after 31 December 2018, the Business Contract Terms (Assignment of Receivables) Regulations 2018, SI 2018/1254 may render ineffective any restrictions on assigning receivables. For further detail, see the drafting notes and optional clauses in Precedent: Assignment clause, and News Analyses: Updated draft regulations on business contract terms and Back for good-new Business Contract Terms (Assignment of Receivables Regulations) 2018. The Regulations as made introduce...

Points to consider What is the most appropriate method of transfer? Consider: Think about whether you are transferring rights alone (eg drawn commitments) or also obligations (eg undrawn commitments). An assignment passes only rights, whereas a novation passes both rights and obligations. Novation is usually favoured for loan transfers because it conveys rights and duties together. If assignment is adopted, the obligations can be moved by novation. For more detail, see Practice Note: Transferring a loan by assignment. Whether consent can be obtained from the borrower? By law, an assignment does not require the counterparty’s consent. However, the facility agreement will often require borrower consent for an assignment, and for a novation as well. Sub-participation is sometimes used to transfer loans on syndicated transactions where borrower consent cannot be obtained. That said, some deals may still require borrower consent for sub-participation. Whether the intention is for the transfer to be kept confidential from...

EU financial services developments ECB fines Nordea subsidiary for breach of large exposures limit The European Central Bank (ECB) has levied an administrative fine of €2.26m on Nordea Finance Finland Ltd (Nordea Rahoitus Suomi Oy) for misreporting its largest exposures and breaching the large exposures threshold. Over 13 consecutive quarters between 2021 and 2024, the institution allocated guaranteed receivables to debtors rather than to guarantors when calculating large exposures, contrary to a regulatory amendment introduced in 2021. As a result, the bank exceeded the 25% cap laid down in EU law. The ECB judged the infringements to be the result of serious negligence, and weaknesses within the bank’s internal controls contributed to both the occurrence and the duration of the breach. The bank retains the right to challenge the ECB’s decision before the Court of Justice of the EU...

Kwik-Fit Group Ltd and others v HMRC [2024] EWCA Civ 434 Background The appellants participated in an intra-group debt reorganisation in which: loan receivables due from the appellants were transferred to an intermediate holding company, Speedy 1 Ltd (Speedy 1) (the Assigned Loans) new loan receivables were put in place in Speedy 1’s favour (the New Loans) the interest rates on the Assigned Loans, together with a loan already owed by one appellant to Speedy 1 (the Pre-existing Loan), were increased to match the arm’s length rate prevailing at that time At that time, Speedy 1 held around £48m of non-trading loan relationship deficits (NTLRDs) carried forward from earlier periods. Under the loss relief rules then in force, those NTLRDs were effectively trapped within Speedy 1 and could not be utilised by other members of the group...

What impact do the Business Contract Terms (Assignment of Receivables) Regulations 2018 have on rights of set-off (contractual and other)? The explanatory memorandum to the Business Contract Terms (Assignment of Receivables) Regulations 2018, SI 2018/1254 (the Regulations), states plainly that these provisions are introduced to render ineffective terms in specified contracts that restrict the assignment of receivables, with effect from 31 December 2018. As a result, many businesses that were previously prevented by contractual limitations will now be able to assign receivables and utilise products such as invoice financing in relation to sums owed to them. This may influence the right of set-off, as some businesses could opt for rapid liquidity by assigning receivables to a third party through arrangements like invoice finance, rather than exercising any right of set-off against invoices presented to them. The principle of set-off is firmly established in law and enables a debtor to reduce the amount of an invoice issued by a creditor by any sum the creditor owes to the debtor....

The use of invoice discounting and factoring of receivables as business finance has expanded markedly in the UK over the past 25 years. Introduction to receivables purchase transactions Invoice discounting and factoring fall within receivables purchase arrangements under which a supplier of goods and/or services (often called the seller or the supplier) transfers, typically by way of assignment, debts owed to it by the purchaser of those goods and/or services (commonly referred to as the buyer or the account debtor), usually together with all associated rights. These receivables purchases are frequently completed at a discounted purchase price. That said, receivables can also be acquired for an amount equal to their face value, with the supplier paying the purchaser a purchase fee. For a variety of reasons, suppliers may opt to sell receivables (on a no recourse or limited recourse basis) in preference to borrowing...

Practice Note This Practice Note provides a concise outline of the principal legal considerations and discussion themes typically faced in practice when financial institutions assess whether to offer receivables purchase or invoice discounting facilities, or instead to advance a loan secured against the value of receivables. There are several reasons why suppliers might opt to sell receivables (on a no recourse or limited recourse basis) rather than borrow...

This Practice Note outlines several frequently encountered assignment situations and the principal points to bear in mind when dealing with them, including intra-group transfers, the assignment of debts, and warranties. For insight into the requirements for a valid contractual assignment, see Practice Note: What constitutes a valid assignment of a contract? For practical and commercial factors relevant to assigning contractual rights, see Practice Note: How to assign rights under a contract. Intra-group assignment Companies within a group commonly wish to be able to transfer contractual rights between entities without obtaining consent, as a matter of internal flexibility. This can be particularly relevant where an assignee may later cease to belong to the assignor’s group. In such circumstances, the assignee might be required to assign the rights back to the assignor, or to another member of the assignor’s group, immediately on ceasing to be part of the relevant group. For analysis of issues that may arise in this context, see Practice Note: Common issues in an intra-group reorganisation...

This Assignment is dated [ insert day and month ] 20[ insert year ]. Parties 1 [ insert name of Assignor ], a company incorporated in England and Wales with registered number [ insert company number ], having its registered office at [ insert address ] (the Assignor); and 2 [ insert name of Lender ] of [ insert address ] (the Lender). Background The Lender has agreed to provide a loan facility to the Assignor on the terms and conditions contained in the Facility Agreement (as defined below). As a condition precedent to the loan facility being available, the Assignor must enter into this Assignment to create security in favour of the Lender for the Secured Obligations (as defined below)...

Definitions This Deed, between Lender and Borrower, defines key expressions used. Costs: all expenses on a full indemnity basis, including legal and professional fees. Event of Default: events in clauses 4.1.1–4.1.9. Financial Indebtedness: borrowing, bonds, finance leases, receivables financing, counter‑indemnities, and related guarantees. Insurance Policy: any current or future insurance benefiting the Borrower regarding the Real Property. Interest Rate: the stated annual rate or a closely comparable replacement if required. Legislation: UK laws and subordinate instruments, as amended, including approved codes of practice. Real Property: the assets in Schedule 1 together with buildings, fixtures and fixed plant. Receiver: any receiver (including a receiver and/or manager) appointed under this Deed or by law. Secured Obligations: all present and future liabilities to the Lender, including Costs and interest. Security Interest: any mortgage, charge, pledge, lien or similar arrangement conferring security. Security Period, VAT, Working Day: from today until full discharge; value added tax; any day except Saturday, Sunday...

End of month [ insert month ] Month actuals Month budget YTD actuals YTD budget Billable hours logged Work under way (£’000s) Fees invoiced (£’000s) Realisation % Receivables (£’000s) Cash collected (£’000s)...