Accounts Receivable Assignment Agreement Template for the Philippines

An Accounts Receivable Assignment Agreement allows you to legally transfer your right to collect outstanding customer payments to another party, typically a financial institution or factoring company. Under Philippine law, this contract must comply with specific Civil Code requirements to ensure the assignment is valid and enforceable. You'll use this document when you need immediate cash flow by selling your receivables rather than waiting for customers to pay.

When do you need this document?

You need an Accounts Receivable Assignment Agreement when your business requires immediate capital and you have outstanding invoices from creditworthy customers. Manufacturing companies often use these agreements to finance inventory purchases while waiting for payment from distributors. Export businesses frequently assign their receivables to banks to secure letters of credit for international transactions. Growing companies may assign receivables to factoring companies to maintain steady cash flow during expansion periods. The agreement is also essential when restructuring debt, as you can assign specific receivables as security for loans or to satisfy creditor obligations.

Key legal considerations

Your agreement must clearly identify all receivables being assigned, including debtor names, amounts, and due dates to avoid disputes over scope. The consideration clause should specify the purchase price or financing terms to establish a valid contract under Civil Code Article 1318. You must include proper notice provisions to debtors as required by Article 1625, which states that assignment takes effect against debtors only after notice. The agreement should address collection procedures, including whether the assignee or assignor will handle collections and customer relationships. Risk allocation clauses are crucial, specifying which party bears losses from uncollectible accounts or debtor disputes. Include representations and warranties about the validity of receivables, absence of prior assignments, and your authority to assign these rights.

Legal requirements in Philippines

Philippine Civil Code Articles 1624-1635 govern assignment of credits and incorporeal rights, requiring written documentation for assignments over a certain value. Your agreement must comply with documentary stamp tax requirements under the National Internal Revenue Code, with taxes typically paid on the assigned amount. If you're a corporation, ensure board authorization for the assignment as required by the Corporation Code. The Securities Regulation Code may apply if receivables are considered securities, particularly in large commercial transactions. Banking regulations may impose additional requirements if the assignee is a regulated financial institution. For enforceability, the agreement must be notarized and comply with Rules of Court notice requirements. Consider filing notice of assignment with appropriate government agencies to protect against competing claims and ensure priority rights.