Account Receivable Purchase Agreement Template for the Philippines

An Account Receivable Purchase Agreement allows you to convert your outstanding customer invoices into immediate cash by selling them to financial institutions or factoring companies. This financial instrument provides crucial liquidity for your business while transferring collection responsibilities and credit risk to the purchaser. Under Philippine law, these agreements must comply with specific legal requirements to ensure the transfer is valid and enforceable.

When do you need this document?

You need an Account Receivable Purchase Agreement when your business faces cash flow challenges due to extended payment terms from customers. Manufacturing companies with 60-90 day payment cycles frequently use these agreements to maintain operations while waiting for customer payments. Export businesses dealing with international customers often require this arrangement to bridge the gap between shipment and payment receipt. Service providers with large corporate clients who pay quarterly or annually also benefit from receivables purchase arrangements. Small to medium enterprises experiencing rapid growth but lacking sufficient working capital find this solution particularly valuable for maintaining inventory levels and meeting operational expenses.

Key legal considerations

Your agreement must clearly establish a true sale rather than a secured loan to avoid complications with banking regulations and tax treatment. The document should specify the exact receivables being sold, including invoice numbers, amounts, and debtor details to ensure proper identification. You must include provisions for representations and warranties about the validity and collectibility of the receivables to protect the purchaser's interests. The agreement should address recourse versus non-recourse arrangements, determining whether you remain liable if customers fail to pay. Collection procedures must be clearly defined, including whether you or the purchaser will handle customer communications and payment processing. Notification requirements to your customers about the assignment should be addressed to ensure proper perfection of the transfer.

Legal requirements in Philippines

Under the Civil Code of the Philippines, specifically Articles 1624-1635, the assignment of credits must be perfected through proper notification to debtors or acceptance by them to be enforceable against third parties. Your agreement must comply with BSP Circular No. 1122 regulations if the purchaser is a financial institution, ensuring adherence to central bank guidelines on receivables purchase and factoring operations. Documentary stamp tax obligations under the National Internal Revenue Code must be considered and properly allocated between parties. The Securities Regulation Code may apply if the transaction involves securitization of receivables or issuance of security instruments. Corporate approvals and board resolutions are typically required for Philippine corporations entering into significant receivables purchase arrangements. The agreement should include governing law clauses specifying Philippine jurisdiction and compliance with local financial regulations to ensure enforceability in Philippine courts.