Accounts Receivable Assignment Agreement Template for the United Arab Emirates

An Accounts Receivable Assignment Agreement allows you to legally transfer your right to collect payment from customers to another party, typically a financial institution or factoring company. This transaction enables you to convert outstanding invoices into immediate cash, improving your working capital and cash flow position while transferring collection responsibilities to the assignee.

When do you need this document?

You need this agreement when your business requires immediate cash flow from outstanding receivables rather than waiting for customer payments. Manufacturing companies often use these agreements to finance inventory purchases or meet payroll obligations while waiting for large customer payments. Export businesses frequently assign receivables to banks or trade finance companies to access funds for new orders or to manage foreign exchange risks. Small and medium enterprises commonly enter these arrangements with factoring companies to outsource their entire receivables management function. Additionally, companies experiencing rapid growth may use receivables assignment to fund expansion without taking on traditional debt financing.

Key legal considerations

The assignment must clearly identify all parties, including the assignor, assignee, and underlying obligors who owe the receivables. You must provide comprehensive representations and warranties about the validity, collectibility, and legal status of the assigned receivables. The agreement should specify whether the assignment is with or without recourse, determining your liability if customers fail to pay. Purchase price calculations must be detailed, including any advance percentages, reserve amounts, and fee structures. The document should address notification requirements to obligors and establish procedures for handling disputes or set-offs. Confidentiality provisions protect sensitive customer information during the assignment process.

Legal requirements in United Arab Emirates

Under UAE law, the assignment must comply with Federal Law No. 5 of 1985 (UAE Civil Code) and Federal Law No. 18 of 1993 (Commercial Transactions Law), which govern the transfer of rights and commercial obligations. The agreement must be in writing and clearly demonstrate the assignor's intention to transfer specific receivables to the assignee. You must ensure proper notification to obligors as required under UAE law to perfect the assignment and establish the assignee's right to collect. For assignments involving financial institutions, compliance with UAE Central Bank regulations may be required. The document should address potential bankruptcy implications under Federal Law No. 9 of 2016, including provisions for protecting assigned receivables in insolvency proceedings. If your company is incorporated under UAE law, ensure compliance with Federal Law No. 2 of 2015 (Commercial Companies Law) regarding corporate authority and board approvals for significant asset transfers.