The Accounts Receivable Purchase Agreement is a critical financial instrument used in India when a company wishes to monetize its accounts receivable for immediate working capital. This document is essential for businesses seeking to improve cash flow through factoring or receivables financing arrangements. It must comply with Indian regulations, particularly the Factoring Regulation Act, 2011, and related financial services legislation. The agreement details the terms of purchase, pricing mechanisms, representations and warranties, and operational procedures for transferring receivables. It's commonly used across various industries where businesses have significant receivables from creditworthy customers and need to optimize their working capital cycle. The document includes provisions for regulatory compliance, tax implications, and specific Indian legal requirements regarding the assignment of receivables.
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1. Parties: Identifies and defines the Seller (original creditor) and Purchaser (factor/buyer) with complete legal details
2. Background: Explains the context of the agreement, the Seller's business, and the intention to sell receivables
3. Definitions and Interpretation: Defines key terms including Eligible Receivables, Purchase Price, Cut-off Date, etc., and rules of interpretation
4. Sale and Purchase of Receivables: Core provisions detailing the sale mechanism, pricing, and transfer of receivables
5. Eligibility Criteria: Specifies the criteria that receivables must meet to be eligible for purchase
6. Purchase Price and Payment Terms: Details the calculation of purchase price, discount rate, and payment mechanics
7. Representations and Warranties: Standard and specific warranties regarding the receivables and the parties' authority
8. Covenants: Ongoing obligations of the parties, particularly the Seller's obligations regarding receivables management
9. Administration and Collection: Procedures for managing and collecting the receivables post-purchase
10. Events of Default: Defines circumstances constituting default and consequences
11. Indemnification: Mutual indemnification provisions and procedures
12. Confidentiality: Provisions protecting confidential information of both parties
13. Governing Law and Jurisdiction: Specifies Indian law as governing law and jurisdiction for disputes
14. Miscellaneous: Standard boilerplate provisions including notices, amendments, and severability
1. Recourse Provisions: Include when the agreement is with recourse, specifying circumstances where Seller must repurchase receivables
2. Security Interest: Include when additional security is required beyond the receivables assignment
3. Electronic Processing: Include when parties will use electronic platforms for receivables submission and processing
4. Credit Insurance: Include when credit insurance is required or provided
5. Foreign Currency Provisions: Include for cross-border transactions or foreign currency receivables
6. True Sale Opinion: Include when bankruptcy remoteness is crucial and legal opinion is required
7. Services: Include when Seller provides additional services beyond basic receivables administration
1. Schedule 1 - Eligibility Criteria: Detailed list of criteria for acceptable receivables
2. Schedule 2 - Form of Purchase Request: Template for submitting receivables for purchase
3. Schedule 3 - Pricing and Fees: Detailed pricing mechanism, fees, and calculations
4. Schedule 4 - Operational Procedures: Detailed procedures for submission, verification, and payment
5. Schedule 5 - Form of Notice to Debtors: Template for notifying debtors of the assignment
6. Schedule 6 - Required Documents: List of documents required for each receivable purchase
7. Schedule 7 - Excluded Debtors: List of debtors whose receivables are not eligible for purchase
8. Appendix A - Compliance Requirements: Specific Indian regulatory compliance requirements
9. Appendix B - Reporting Ƶ: Standard reports required under the agreement
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking
Financial Services
Manufacturing
Technology
Retail
Healthcare
Construction
Logistics
Energy
Telecommunications
Professional Services
Agriculture
Automotive
Export-Import
Relevant Teams
Finance
Legal
Treasury
Accounts Receivable
Credit Control
Risk Management
Compliance
Operations
Commercial
Trade Finance
Working Capital Management
Transaction Management
Relevant Roles
Chief Financial Officer
Finance Director
Treasury Manager
Financial Controller
Credit Manager
Accounts Receivable Manager
Legal Counsel
Compliance Officer
Risk Manager
Commercial Director
Working Capital Manager
Operations Manager
Business Development Manager
Relationship Manager (Banking)
Chief Risk Officer
Transaction Manager
Portfolio Manager
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