Treaty of withdrawal: practical aspects

An assignment agreement, or an assignment agreement, is one of the key tools in business that allows the transfer of rights from one person to another. This mechanism is actively used in various fields, such as financial services, real estate and commercial activities. However, in order for the withdrawal to be legally justified and not to cause disputes, it is important to understand its goals and follow the rules of business turnover.

What is a contract of assignment of the right of claim?

An assignment agreement is an agreement under which one party (the assignor) transfers its rights and claims to the debtor to another party (the assignee). The main purpose of such a transaction is redistribution of obligations or settlement of relations between the parties.

Example: company A provided services to company B, but instead of receiving payment, directly assigned the right to claim the debt to company B, while the company is ready to immediately settle with company A (with or without a discount), and the company itself is ready to take all measures, including h forced collection of funds from the debtor of company B. This can be advantageous if Company A wants to receive funds faster and Company B is interested in purchasing debt.

Acceptable business purpose of retreat

The business purpose is an important criterion in assessing the legality and reasonableness of the concession. Judicial practice shows that agreements without economic justification can be recognized as fictitious or aimed at circumventing the law.

Possible purposes of retreat (cession):

1. Optimization of calculations . For example, in the presence of complex mutual settlements between several companies, a concession can simplify the process of debt settlement.
2. Reduction of non-payment risks . The assignor can transfer the default risk to a larger player with extensive debt management experience.
3. Financial flexibility . Assignment allows the assignor to receive funds immediately, which is especially important for small and medium-sized businesses.
4. Attracting investors . The retreat may be part of an asset securitization scheme or financial planning.

Limitations and risks

Despite the advantages, the assignment of claim rights must comply with the law and the terms of the main contract. The main limitations include:

• Consent of the debtor . If the contract initially stipulates that withdrawal is possible only with the consent of the debtor, it is necessary to obtain his permission. The limitation may also be stipulated by legislation.
• Inadmissibility of violation of the interests of third parties . The withdrawal must not violate the interests of other creditors.
• Compliance with public order . The agreement should not be a tool to hide assets or avoid liabilities.

Practical recommendations

1. Legal examination of the contract . Before concluding the agreement, it is important to check whether there is a possibility of withdrawal and what conditions it includes. For example, joint and several liability of the debtor and the new creditor is possible, but it is better to consult with experienced lawyers on a number of points. Or if the assignment is issued with a discount, then there is a possibility of turning it into a factoring contract, which is already a licensed financial activity.
2. Documentation . The contract is drawn up in writing (in paper form, scans, electronic signature or electronic digital signature), it is important to transfer the documentation to the New creditor, as well as the debtor's proper and timely notification of withdrawal.
3. Tax consequences . Withdrawal may affect tax liability, so you should consult with an accountant or tax lawyer. For example, with the new Creditor, the payment in favor of the Old creditor may not belong to expenses, but the payment of the debt by the Debtor in favor of the New creditor has ceased to be income.
4. Assessment of the debtor's creditworthiness . Cessonarius must assess how realistic it is to receive the debt after the retreat.

A subrogation agreement is an effective tool that allows companies to adapt to changing business conditions. However, it is important that each agreement has a reasonable business purpose, is properly executed and complies with the law. If you are planning to conclude a contract of withdrawal, the Instadoc team will help you prepare a legally competent template that takes into account all the nuances.

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Useful templates

Loan agreement with collateral security + Agreement on the pledge of a share + Agreement on the assignment of a share (Ukraine, Ukraine))

Agreement on the assignment of the right of claim (with a discount, universal parties) (Ukrainian), Ukraine

Agreement on the assignment of the right of claim (nominal, universal parties) (Ukrainian), Ukraine

Agreement on the assignment of the right of claim (resident-non-resident) and Act of enrollment, (Ukrainian-English), universal

Agreement on the assignment of the right of claim with DISCOUNT, enrollment act (English), universal

Agreement on the assignment of the right of claim, enrollment act (English), universal

Agreement on the assignment of the right of claim, act of enrollment (English), universal WITH THE DEBTOR'S SIGNATURE

Factoring contract with applications, yuo factor, universal client (Ukraine), Ukraine

Articles on the topic

How to transfer the future right of claim under a contract with a price with a formula and not create the risk of recognizing the contract as having signs of factoring?

Settlements for goods of non-critical import (+ template agreement on the assignment of the right of claim)