The Future Receivables Factoring Agreement is a specialized financial instrument used in India when businesses seek to monetize their expected future receivables for immediate working capital. This agreement type, governed by Indian law and regulated under the Factoring Regulation Act, 2011, enables businesses to sell their anticipated receivables to a financial institution at a discount. It's particularly useful for companies with predictable revenue streams but longer payment cycles, helping them maintain steady cash flow. The document comprehensively covers the mechanics of selling future receivables, risk allocation, operational procedures, and compliance requirements under Indian banking regulations. It includes specific provisions for eligibility criteria, purchase price calculations, representations about the future receivables, and detailed operational procedures for both parties.
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1. Parties: Identification of the Factor and the Client (including registration details and addresses)
2. Background: Context of the agreement, nature of the Client's business, and purpose of the factoring arrangement
3. Definitions and Interpretation: Definitions of key terms including Future Receivables, Eligible Receivables, Purchase Price, etc., and rules of interpretation
4. Purchase and Sale of Receivables: Core provisions regarding the sale and purchase of future receivables, including assignment mechanism
5. Purchase Price and Payment Terms: Calculation of purchase price, advance rate, discount rate, and payment mechanics
6. Conditions Precedent: Conditions that must be satisfied before the agreement becomes effective
7. Client Representations and Warranties: Standard and specific representations regarding business, receivables, and capacity
8. Factor's Representations and Warranties: Basic representations regarding capacity and authority
9. Client Covenants: Ongoing obligations of the Client including operational and financial covenants
10. Servicing and Collection: Provisions regarding collection of receivables and servicing arrangements
11. Events of Default: Circumstances constituting default and consequences thereof
12. Remedies: Rights and remedies available to parties upon default
13. Term and Termination: Duration of agreement and termination provisions
14. Confidentiality: Protection of confidential information and trade secrets
15. Notices: Method and addresses for formal communications
16. Governing Law and Jurisdiction: Choice of law and jurisdiction for dispute resolution
17. Miscellaneous: Standard boilerplate provisions including amendments, waivers, severability
1. Credit Insurance: Include when credit insurance is part of the arrangement to protect against non-payment
2. Electronic Platform Services: Include when the factor provides an electronic platform for managing receivables
3. Additional Services: Include when factor provides additional services like accounting or collections support
4. Cross-Border Provisions: Include for international receivables requiring specific currency or jurisdiction provisions
5. Parent Company Guarantee: Include when additional security through parent company guarantee is required
6. Dispute Resolution: Include detailed arbitration or mediation procedures if preferred over court litigation
7. Data Protection: Include detailed provisions when handling sensitive customer data across borders
1. Eligibility Criteria: Detailed criteria for acceptable future receivables
2. Pricing Schedule: Detailed breakdown of fees, charges, and calculation methodologies
3. Form of Purchase Request: Standard format for requesting purchase of receivables
4. Operational Procedures: Detailed procedures for submission, verification, and funding of receivables
5. Required Documents: List of documents required for each receivable purchase
6. Form of Notices: Standard forms for various notices including assignment notices
7. Expected Customer List: List of expected customers generating future receivables
8. Excluded Customers: List of customers whose receivables are excluded from the arrangement
9. Reporting Requirements: Templates and formats for required reports
10. Power of Attorney: Format of power of attorney for collection and enforcement
Relevant legal definitions
Clauses
Relevant Industries
Manufacturing
Information Technology
Telecommunications
Construction
Healthcare
Retail
Wholesale Trade
Professional Services
Transportation and Logistics
Energy and Utilities
Infrastructure
Textiles
Automotive
Agriculture
Relevant Teams
Finance
Legal
Treasury
Accounts Receivable
Compliance
Risk Management
Operations
Commercial
Credit Management
Business Development
Contract Management
Relevant Roles
Chief Financial Officer
Finance Director
Treasury Manager
Financial Controller
Credit Manager
Accounts Receivable Manager
Legal Counsel
Compliance Officer
Risk Manager
Operations Manager
Commercial Director
Business Development Manager
Contract Manager
Working Capital Manager
Finance Manager
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