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Debt Factoring Agreement for United Arab Emirates

Debt Factoring Agreement Template for United Arab Emirates

A comprehensive agreement governed by UAE law that establishes the terms and conditions under which a financial institution (Factor) purchases accounts receivable from a business (Client). The agreement details the purchase price calculation, credit risk allocation, collection procedures, and operational mechanisms for the factoring relationship. It incorporates specific provisions compliant with UAE Federal Laws, including the Commercial Transactions Law and Civil Code, and addresses requirements of UAE banking regulations where applicable. The document includes provisions for assignment of receivables, representations and warranties, operational procedures, and dispute resolution mechanisms within the UAE legal framework.

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What is a Debt Factoring Agreement?

The Debt Factoring Agreement is a crucial financial instrument used in the UAE market to facilitate working capital financing through the sale of receivables. This document is essential when businesses seek to improve their cash flow by monetizing their accounts receivable, particularly in sectors with longer payment cycles. The agreement, structured under UAE law, comprehensively addresses the rights and obligations of both the Factor and the Client, including detailed provisions for the assignment of receivables, pricing mechanisms, and operational procedures. It incorporates specific requirements of UAE Federal Laws, including the Commercial Transactions Law and Civil Code, while also considering UAE Central Bank regulations where applicable. The document is particularly relevant in the current UAE business environment where factoring has become an increasingly important financing tool for businesses seeking alternative funding sources.

What sections should be included in a Debt Factoring Agreement?

1. Parties: Identification of the Factor (financing party) and the Client (seller of receivables), including full legal names and addresses

2. Background: Context of the agreement, nature of the Client's business, and purpose of the factoring arrangement

3. Definitions: Definitions of key terms used throughout the agreement, including 'Receivables', 'Debtors', 'Purchase Price', 'Advance Rate', etc.

4. Assignment of Receivables: Core provisions regarding the assignment of receivables, including the mechanism and timing of assignments

5. Purchase Price and Payment Terms: Calculation of purchase price, advance rate, reserves, and payment mechanisms

6. Representations and Warranties: Client's representations regarding ownership of receivables, absence of encumbrances, and validity of underlying transactions

7. Covenants: Ongoing obligations of the Client, including maintenance of records and notification requirements

8. Collection and Management of Receivables: Procedures for collection, handling of payments, and management of assigned receivables

9. Events of Default: Circumstances constituting default and consequences thereof

10. Term and Termination: Duration of the agreement and termination provisions

11. Governing Law and Jurisdiction: Specification of UAE law as governing law and jurisdiction for disputes

What sections are optional to include in a Debt Factoring Agreement?

1. Security Provisions: Additional security arrangements such as personal guarantees or charges over assets, used when enhanced security is required

2. Credit Insurance: Provisions regarding credit insurance arrangements, included when receivables are to be insured

3. Electronic Trading Platform: Provisions for electronic submission and management of receivables, included when an electronic platform is used

4. Sharia Compliance: Additional provisions to ensure Sharia compliance, included when the factoring arrangement needs to be Sharia-compliant

5. Cross-Border Provisions: Additional provisions for international receivables, included when dealing with foreign debtors

6. Confidentiality and Data Protection: Detailed provisions on handling confidential information and data protection, included when dealing with sensitive information or specific regulatory requirements

What schedules should be included in a Debt Factoring Agreement?

1. Schedule 1 - Eligibility Criteria: Detailed criteria for receivables to be eligible for factoring

2. Schedule 2 - Fee Structure: Detailed breakdown of all fees, charges, and commission rates

3. Schedule 3 - Operational Procedures: Detailed procedures for submission, verification, and management of receivables

4. Schedule 4 - Form of Notice of Assignment: Template for notifying debtors of the assignment of receivables

5. Schedule 5 - Approved Debtors: List of approved debtors and their credit limits

6. Schedule 6 - Required Documents: List of documents required for verification of receivables

7. Appendix A - Reporting Requirements: Forms and templates for regular reporting by the Client

8. Appendix B - Power of Attorney: Form of power of attorney for collection and enforcement actions

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Publisher

Genie AI

Document Type

Financing Agreement

Cost

Free to use
Relevant legal definitions



































Clauses





























Relevant Industries

Financial Services

Manufacturing

Trading

Distribution

Logistics

Construction

Healthcare

Retail

Technology

Professional Services

Industrial

Import/Export

Relevant Teams

Legal

Finance

Treasury

Credit

Risk Management

Operations

Compliance

Commercial

Accounts Receivable

Trade Finance

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Credit Manager

Financial Controller

Legal Counsel

Commercial Director

Accounts Receivable Manager

Risk Manager

Operations Manager

Compliance Officer

Business Development Manager

Trade Finance Manager

Working Capital Manager

Industries







Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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