Assignment Of Receivables Agreement Template for Canada

An Assignment Of Receivables Agreement allows you to legally transfer your accounts receivable to another party, typically a financial institution or factoring company. This document is crucial when you need immediate cash flow by selling future payments owed to your business, or when using receivables as collateral for financing arrangements.

When do you need this document?

You need this agreement when your business requires immediate cash flow and you have outstanding invoices or accounts receivable. Manufacturing companies often use these agreements to convert slow-paying customer accounts into immediate working capital. Service businesses may assign receivables to factoring companies to maintain steady cash flow during seasonal fluctuations. Construction companies frequently use assignment agreements to secure financing for large projects by pledging future progress payments. Technology startups may assign subscription receivables to investors as part of revenue-based financing arrangements.

Key legal considerations

The assignment must clearly identify all receivables being transferred, including specific customer accounts, invoice numbers, and amounts. You need to provide detailed representations about the quality and collectibility of the receivables, including any disputes or collection issues. The agreement should specify whether the assignment is with or without recourse, determining your liability if customers fail to pay. Collection procedures must be clearly outlined, including who handles customer communications and payment processing. Notice provisions are critical, as you may need to inform customers about the assignment depending on the arrangement type. The purchase price calculation method and payment terms require careful attention, especially regarding reserves and discount rates.

Legal requirements in Canada

Under the Personal Property Security Act (PPSA) in each province, the assignment must be properly registered to perfect the assignee's security interest and establish priority over other creditors. The agreement must comply with federal Bank Act provisions when financial institutions are involved as assignees. For Quebec transactions, Civil Code requirements apply instead of common law principles, requiring different documentation approaches. You must consider Income Tax Act implications, particularly regarding potential withholding tax obligations on assigned receivables. The agreement should address Bankruptcy and Insolvency Act considerations, including the assignee's rights if your business enters insolvency proceedings. Provincial Sale of Goods Act provisions may affect the validity of underlying contracts that created the receivables being assigned.