Accounts Receivable Assignment Agreement Template for England and Wales

An Accounts Receivable Assignment Agreement is a legal document that allows you to transfer your right to collect outstanding payments from customers to another party, typically a lender or financial institution. Under England and Wales law, this agreement enables businesses to access immediate financing by monetising their unpaid invoices and customer debts.

When do you need this document?

You need this agreement when your business requires immediate cash flow but has significant outstanding invoices from customers. It's commonly used in factoring arrangements where a finance company purchases your receivables at a discount, providing instant liquidity. Asset-based lenders also require this document as security for loans, using your customer debts as collateral. The agreement is essential for securitization transactions where receivables are bundled and sold to investors. You'll also need it when restructuring business operations or preparing for mergers and acquisitions where debt assignments are required.

Key legal considerations

The assignment must be absolute and in writing to qualify as a statutory assignment under Section 136 of the Law of Property Act 1925. You must provide written notice to your debtors for the assignment to be legally effective against them. The agreement should include comprehensive representations and warranties about the validity of the receivables, confirming they're genuine, undisputed, and legally enforceable. Consider whether the assignment is with or without recourse - this determines whether you remain liable if customers don't pay. The document must clearly specify which receivables are being assigned, including any exclusions or limitations. Include provisions for handling customer disputes, returns, and credit notes that could affect the assigned amounts.

Legal requirements in England and Wales

Under the Law of Property Act 1925, the assignment must be absolute, not by way of charge, and must be in writing signed by the assignor. Written notice must be given to the debtor for the assignment to be effective against them and to enable the assignee to sue in their own name. The Contracts (Rights of Third Parties) Act 1999 may affect third-party rights, so consider including appropriate exclusion clauses. For commercial transactions, the Late Payment of Commercial Debts (Interest) Act 1998 governs interest on overdue payments, which transfers with the debt. If the receivables arise from goods sales, the Sale of Goods Act 1979 provisions remain relevant. Financial institutions involved may need authorization under the Financial Services and Markets Act 2000. Ensure compliance with data protection laws when transferring customer information with the receivables.