Future Receivables Factoring Agreement Template for India

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.

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