The Factoring Receivables Agreement is a critical financial instrument used when businesses seek to improve their working capital position by selling their accounts receivable to a specialized financial institution or factoring company. This agreement, governed by Australian law, is particularly valuable for companies experiencing growth, seasonal fluctuations, or requiring accelerated cash flow. The document comprehensively addresses the sale mechanism, purchase price calculations, eligible receivables criteria, collection procedures, and risk allocation between parties. It incorporates compliance requirements with Australian financial services regulations, including the Personal Property Securities Act 2009 (Cth) for proper registration of interests, privacy laws for handling customer information, and anti-money laundering regulations. The agreement is structured to provide clarity on operational procedures while protecting both the factor's investment and the client's business relationships with their customers.
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1. Parties: Identifies the factor (purchaser) and the client (seller) of the receivables
2. Background: Sets out the context of the agreement, including the client's business nature and desire to factor receivables
3. Definitions and Interpretation: Defines key terms and establishes interpretation principles for the agreement
4. Sale and Purchase of Receivables: Core provisions regarding the sale and assignment of receivables, including true sale provisions
5. Purchase Price and Payment Terms: Details the calculation of purchase price, advance rate, reserves, and payment mechanics
6. Eligibility Criteria: Specifies the criteria for receivables to qualify for purchase under the agreement
7. Representations and Warranties: Standard and receivables-specific warranties from the client regarding the business and receivables
8. Client Undertakings: Ongoing obligations of the client regarding operation of the business and management of receivables
9. Servicing and Collection: Provisions regarding collection of receivables, including notification to debtors and collection procedures
10. Fees and Expenses: Details all fees payable including factoring fees, processing fees, and expense reimbursement
11. Events of Default: Lists circumstances constituting default and corresponding remedies
12. Termination: Provisions for termination of the agreement and post-termination obligations
13. Indemnification: Client's obligations to indemnify the factor for various losses or claims
14. Confidentiality: Provisions protecting confidential information of both parties
15. General Provisions: Standard boilerplate clauses including notices, amendments, governing law, etc.
1. Credit Insurance: Required when receivables are covered by credit insurance, specifying rights and obligations regarding the insurance
2. Cross-Border Provisions: Necessary when factoring involves international receivables, addressing currency conversion and country-specific requirements
3. Electronic Trading Platform: Required when the parties use an electronic platform for receivables trading and communication
4. Reserve Account Mechanics: Detailed provisions for when a reserve account structure is used for risk management
5. Debtor Credit Limits: Specific provisions regarding credit limits for individual debtors when the factor provides credit protection
6. Parent Company Guarantee: Required when additional security is needed through a parent company guarantee
7. Special Industry Provisions: Industry-specific provisions required for particular sectors (e.g., construction, healthcare)
1. Schedule 1 - Eligibility Criteria: Detailed list of criteria for eligible receivables
2. Schedule 2 - Fee Schedule: Detailed breakdown of all applicable fees and charges
3. Schedule 3 - Form of Purchase Request: Standard form for requesting purchase of receivables
4. Schedule 4 - Operational Procedures: Detailed procedures for daily operations, reporting, and communications
5. Schedule 5 - Form of Debtor Notification: Standard form for notifying debtors of the assignment
6. Schedule 6 - Excluded Debtors: List of debtors whose receivables are excluded from the facility
7. Appendix A - Required Reports: Templates and specifications for required regular reporting
8. Appendix B - Power of Attorney: Form of power of attorney for collection and enforcement
9. Appendix C - Compliance Certificate: Form of periodic compliance certification
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