The Accounts Receivable Purchase Agreement is a sophisticated financial instrument used when businesses seek to monetize their accounts receivable for working capital purposes. This agreement, structured under Canadian law, enables companies to sell their receivables to financial institutions or factoring companies, either with or without recourse. The document addresses crucial aspects including purchase price calculations, representations about the quality of receivables, servicing arrangements, and default scenarios. It must comply with Canadian federal and provincial regulations, particularly regarding secured transactions, banking, privacy, and consumer protection. The agreement is particularly valuable for businesses seeking to improve cash flow, reduce credit risk, or optimize working capital management through off-balance sheet financing.
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1. Parties: Identification of the seller and purchaser of the receivables
2. Background: Context of the transaction and business relationship
3. Definitions and Interpretation: Key terms used throughout the agreement and rules of interpretation
4. Purchase and Sale: Core provisions regarding the sale and assignment of receivables
5. Purchase Price and Payment: Calculation of purchase price, payment mechanics, and timing
6. Conditions Precedent: Conditions that must be satisfied before purchases can occur
7. Representations and Warranties: Seller's assertions about the receivables and their business
8. Covenants: Ongoing obligations of the parties
9. Administration and Collection: Process for managing and collecting the receivables
10. Events of Default: Circumstances constituting default and consequences
11. Indemnification: Parties' obligations to compensate for losses
12. Term and Termination: Duration of agreement and termination rights
13. Confidentiality: Protection of confidential information
14. General Provisions: Standard boilerplate clauses including notices, amendments, governing law
1. Servicing Provisions: Detailed provisions for when the seller continues to service the receivables
2. Recourse Provisions: Terms regarding seller's obligation to repurchase or make payments for defaulted receivables
3. Security Interest: Creation of security interest if structured as a secured transaction
4. Customer Notification: Process for notifying account debtors of the assignment
5. Credit Insurance: Provisions relating to credit insurance if applicable
6. Parent Guarantee: Guarantee provisions if parent company support is required
7. Cross-Border Provisions: Additional terms for international receivables
8. True Sale Opinion: Requirements for legal opinions confirming true sale treatment
1. Schedule A - Eligibility Criteria: Detailed criteria for receivables eligible for purchase
2. Schedule B - Purchase Price Calculation: Formula and methodology for calculating purchase price
3. Schedule C - Form of Purchase Notice: Template for notices requesting purchase of receivables
4. Schedule D - Excluded Receivables: List or categories of receivables excluded from the agreement
5. Schedule E - Servicing Requirements: Detailed servicing standards and procedures
6. Schedule F - Required Reports: Forms and templates for required reporting
7. Schedule G - Closing Documents: List of required documentation for closing
8. Appendix 1 - Form of Assignment: Template for individual assignments of receivables
9. Appendix 2 - Notice to Debtors: Form of notice to be sent to account debtors
Relevant legal definitions
Clauses
Relevant Industries
Manufacturing
Wholesale Distribution
Retail
Technology
Healthcare
Construction
Professional Services
Transportation and Logistics
Energy
Telecommunications
Agriculture
Industrial Services
Relevant Teams
Legal
Finance
Treasury
Credit and Collections
Accounts Receivable
Risk Management
Operations
Compliance
Business Development
Commercial
Relevant Roles
Chief Financial Officer
Treasury Manager
Finance Director
Credit Manager
Accounts Receivable Manager
Corporate Counsel
Legal Counsel
Risk Manager
Financial Controller
Operations Manager
Commercial Director
Business Development Manager
Credit Analyst
Collections Manager
Compliance Officer
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