Assignment Of Receivables Agreement Template for Canada
Generate a bespoke document
What is a Assignment Of Receivables Agreement?
The Assignment Of Receivables Agreement is a crucial document used in Canadian business transactions where a company wishes to transfer its accounts receivable to another party, typically for financing purposes or cash flow management. This agreement is commonly used in factoring arrangements, securitization transactions, or as collateral for financing. The document must comply with Canadian federal laws and provincial regulations, particularly the Personal Property Security Act (PPSA) of the relevant province, which governs the creation and perfection of security interests. The agreement includes detailed provisions for the identification of receivables, purchase price calculations, representations about the quality and ownership of receivables, collection procedures, and notice requirements to debtors. Special considerations are needed for assignments involving Quebec assets or parties due to Quebec's Civil Code requirements.
Frequently Asked Questions
Is an Assignment of Receivables Agreement legally binding in Canada?
Yes, an Assignment of Receivables Agreement is legally binding in Canada when properly executed and complies with provincial Personal Property Security Act (PPSA) requirements. The agreement must be in writing, signed by the assignor, and contain adequate description of the receivables being assigned. To be enforceable against third parties, it typically must be registered under the applicable provincial PPSA.
Can I enforce receivables collection without a proper Assignment of Receivables Agreement?
No, attempting to collect assigned receivables without a proper agreement can lead to legal disputes and invalid claims. Without a valid assignment agreement, you may lack legal standing to collect from debtors, face priority disputes with other creditors, and encounter issues with PPSA registration. The assignee's rights depend entirely on having a properly executed assignment agreement.
Does an Assignment of Receivables Agreement need to be registered under Canadian PPSA?
Yes, to perfect your security interest and establish priority against other creditors, the assignment must be registered under the applicable provincial Personal Property Security Act. Registration provides public notice of your interest and protects against subsequent assignments or security interests. Each province has specific PPSA registration requirements and timeframes that must be followed.
How is an Assignment of Receivables Agreement different from a factoring agreement in Canada?
An Assignment of Receivables Agreement is the underlying legal document that transfers ownership of receivables, while factoring is the commercial arrangement where the factor purchases receivables. Factoring agreements typically include the assignment document plus additional terms covering discount rates, collection procedures, and recourse provisions. The assignment component must still comply with PPSA requirements.
How long does it take to prepare an Assignment of Receivables Agreement in Canada?
A basic Assignment of Receivables Agreement can typically be prepared within 1-3 business days by an experienced lawyer. However, complex transactions involving multiple jurisdictions, sophisticated security structures, or banking regulatory considerations may take 1-2 weeks. PPSA registration adds another 1-2 business days depending on the provincial registry.
Can I assign receivables that don't exist yet under Canadian law?
Yes, Canadian law allows assignment of future receivables, but the agreement must contain adequate description of the future receivables and comply with PPSA requirements for after-acquired property. The assignment automatically attaches when the receivables come into existence. However, some contracts may contain anti-assignment clauses that could complicate future receivables assignments.
Which mistakes should I avoid when drafting an Assignment of Receivables Agreement in Canada?
Common mistakes include failing to properly describe the receivables, not registering under PPSA within required timeframes, ignoring existing security interests, and not addressing debtor notification requirements. Also avoid using generic templates that don't account for provincial PPSA variations or specific industry regulations that may apply to your receivables.
About the Assignment Of Receivables Agreement
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.
GOVERNING LAW
Applicable law
This Assignment Of Receivables Agreement is drafted to comply with Canada law. Key legislation includes:
Bank Act (Canada): Federal legislation governing banking transactions and security interests taken by banks, including provisions related to assignments involving financial institutions.
Provincial Sale of Goods Act: Governs the sale of goods transactions that may give rise to the receivables being assigned, affecting the validity and enforceability of the underlying debt.
Income Tax Act (Canada): Federal tax legislation relevant for tax treatment of assigned receivables and potential withholding tax obligations.
Bankruptcy and Insolvency Act (Canada): Federal legislation affecting the validity and enforcement of assignments in case of bankruptcy or insolvency of the assignor or debtor.
Provincial Assignment of Book Debts Act: Where applicable in certain provinces, governs the formal requirements for assignments of book debts and registration requirements.
Civil Code of Quebec: For assignments involving Quebec parties or assets, special consideration of Quebec's civil law system and its rules on assignment of claims is necessary.
Explore 208,390+ legal templates
Explore 208,390+ legal templates
Genie's Security Promise
Genie is the safest place to draft. Here's how we prioritise your privacy and security.
Your data is private:
We do not train on your data; Genie's AI improves independently
All data stored on Genie is private to your organisation
Your documents are protected:
Your documents are protected by ultra-secure 256-bit encryption
We are ISO27001 certified, so your data is secure
Organizational security:
You retain IP ownership of your documents and their information
You have full control over your data and who gets to see it