Notice Of Assignment Of Accounts Receivable Template for Canada

When you need to transfer payment rights for outstanding invoices or accounts receivable in Canada, a Notice of Assignment of Accounts Receivable provides the legal framework to formalize this transaction. This document serves as official notification to debtors that their payment obligations have been transferred from the original creditor to a new party, ensuring compliance with Canadian provincial and federal legislation.

When do you need this document?

You'll require this notice in several business scenarios. Factoring companies use it when purchasing receivables from businesses needing immediate cash flow. Banks and financial institutions issue these notices when taking security interests in accounts receivable as loan collateral. During business acquisitions or mergers, companies transfer receivable portfolios to new entities. Asset-based lenders rely on these notices to perfect their security interests in assigned receivables. Additionally, businesses undergoing restructuring or insolvency proceedings use them to transfer payment rights to creditors or trustees.

Key legal considerations

The assignment must clearly identify all parties involved, including the assignor, assignee, and affected debtors. You need to provide detailed descriptions of the assigned receivables, including invoice numbers, amounts, and payment terms. The notice must contain explicit instructions directing debtors to make future payments to the assignee rather than the original creditor. Consider including acknowledgment provisions requiring debtor signatures to confirm receipt and understanding. Be aware that certain types of receivables, particularly those involving government contracts or specific industries, may have restrictions on assignment that could affect the validity of your transfer.

Legal requirements in Canada

In common law provinces, the Personal Property Security Act (PPSA) governs the perfection and priority of security interests in accounts receivable. You must register your assignment in the appropriate provincial PPSA registry to protect against competing claims. Quebec operates under the Civil Code, specifically Articles 1637-1650, which regulate assignments of claims and require specific notice procedures. Federal legislation, including the Bank Act, may apply when banks are involved in the assignment. The Bankruptcy and Insolvency Act affects assignment rights if any party becomes insolvent. Timing is crucial – you must provide notice promptly to preserve your priority rights and ensure debtors cannot discharge their obligations by paying the wrong party. Some provinces require specific language or formatting in notices, so verify local requirements before finalizing your document.