A cession agreement is a document that is concluded between a credit institution and a similar organization. It involves the legal transfer to the debtor of the right to assign claims. In simpler terms, the one to whom a person owes money can transfer his debt to another person. Thus, the borrower will not owe the first lender, but the second.
A tripartite assignment agreement will be presented.
Features of cession and its concept
The assignment agreement is applied in many areas, but it is not always possible to transfer the right to assign claims. This primarily relates to the following obligations:
- Payment of alimony.
- Compensation for damage in monetary terms that was caused as a result of harm to human life and health.
- Compensation for non-pecuniary damage.
All of the above examples are related to personal duties and the assignment of rights, they are not subject to.
An assignment agreement is concluded only when the creditor was unable to take the amount of the loan from the debtor along with interest on it, even after he had made every effort. In such situations, loan agreements are usually sold for ten to twenty percent of the loan amount. Also, such a document can be transferred free of charge, after which a written notice of this circumstance is sent to the debtor. A sample tripartite assignment and posting agreement will be presented in this article.
Assignment Agreement: Civil Law
The assignment agreement can be divided into four types:
- The agreement between individuals. This type of agreement can usually be signed between spouses as part of the division of property. In addition, it is concluded when a citizen acts as a guarantor of a loan agreement. And also in situations where parents take obligations on children's debts. The relevant document concluded by individuals is signed without the participation of a notary. The main requirement is that the document must contain passport data along with the amount of the debt, time and method of returning funds.
- Tripartite assignment agreement between legal entities (sample is presented below). With this type of interaction, only the name of the debtor changes, but the organization itself remains the same. Often, this occurs as part of the reorganization of a legal entity, and the agreement is sealed.
- Sale along with the granting of debt between legal entities and individuals. A similar kind, mainly, can be found in the same person. For example, a loan is issued to a legal entity, but due to the circumstances it is required to transfer debt directly to a private person. At the same time, the loan amount, along with the terms and all obligations under the agreement, remains the same. The document indicates passport data, and the document itself is sealed.
- Tripartite cession agreement. This type of interaction involves the transfer of rights to debt claims to a third party. At the same time, the bank cannot be absolutely sure that information on the transfer of debt will reach the debtor. That is why, as part of the preparation of the document, the borrower is notified that in case of non-payment of the loan payment, his debt can be transferred to a third party. The role of such a person may be legal or natural person.
A tripartite cession agreement may help with the execution of the transaction.
Parties to the agreement
The debt transfer procedure is regulated by the 24th chapter of the Civil Code, in which:
- A debtor is a person who has taken a loan and is obliged to repay it.
- The role of the assignor is the original creditor.
- The assignee is a secondary creditor, that is, a person for whom the right to claim has been ceded.
Accounting entries for the assignment agreement will be considered at the end of the article.
Trilateral agreement
A feature of this agreement is that the borrower himself directly agrees to the transfer of rights to the claim voluntarily. Under such an agreement, the assignee has the right to legally demand a return of the debt.
Purchased or donated contract
In this case, three options are possible:
- An agreement in which one creditor sells to another the right to claim a debt is considered onerous. Sometimes credit institutions go for it so that at least a small amount of money on the debt is returned. Moreover, the responsibility for the settlement of the debtor with the second creditor is not in their competence.
- The role of assignees may be collection organizations that are not entitled to conduct banking activities, but may require debts from borrowers. At the same time, the amount of debts along with the terms of loan agreements remain the same.
- In the event that the debt was not sold, and it was given without payment, then such a document is considered free of charge.
Writ of execution and assignment of claims
In court, the assignment of rights on writ of execution is most often encountered. In this case, for a fee or for free transfer debts on writ of execution. In order for this to turn out to be legal, it is required to present the cession agreement, and, in addition, to file a lawsuit. As practice shows, the court can refuse full satisfaction of the transfer of rights of claim, and also allows only partially to dispose of these powers.
What documents are required to conclude an agreement?
In order to conclude an agreement, the following documents are needed:
- Purchase and sale agreement, which reflects the details of the parties.
- Documents that confirm the actual debt. For example, it can be invoices, as well as acts of reconciliation. All documentation must be signed and sealed.
- Loan agreement indicating the amount of debt along with the schedule of payments and the timing of settlements.
The main condition is to obtain the consent of the debtor to transfer to the assignee the right to claim debt. If there is no such approval, then the agreement will be deemed invalid. In a loan agreement, it will look like this: “I, Petrov Petr, authorize the transfer of information to third parties about credit operations, obligations and personal data.”
The tripartite cession agreement is fairly simple.
Tripartite assignment agreement: conditions of conclusion
To conclude this agreement requires:
- The presence of the assignor along with the assignee and the debtor.
- Agreement between the assignee and the assignor.
It is important to emphasize that the main difference between a tripartite agreement and a bilateral cession document is the presence of a debtor.
The document must indicate the following:
- The full name of the debtor, and, in addition, the assignor and the assignee.
- Further details of the parties are required. In the event that an agreement was concluded between individuals, then indicate their names along with the passport data of the parties. If, however, legal entities participate in the agreement, bank details and positions are indicated.
- The power of attorney by which the contract is concluded. In the event that a representative of the organization is present.
You can download a sample tripartite assignment agreement online for free.
Sections of the agreement
The main part contains the subject of the contract. Also reflect the amount of the loan along with the terms of the monthly payments. The second part indicates the following:
- It must be specified in the agreement that the right to claim is transferred to the assignee on the basis of a concluded document between the original lending institution and the debtor.
- Next, new bank details are prescribed, for which payments must be received, which are stipulated in the loan agreement.
- The next section explains in what form the right to assign claims is transferred: for a certain price or free of charge. As a rule, the amount of payment cannot be more than ten percent of the cost of the loan.
- In addition, they indicate the consequences of non-compliance with the contract and additional conditions by the parties, which may affect the procedure for resolving issues in court and the like.
- At the very end, indicate the name along with passport details, registration and actual place of residence. In the event that the contract was concluded between legal entities, you should also indicate the name of the organization, and, in addition, the details of the current account, PSRN, TIN and so on.
Such an agreement will serve as the basis for legal claims by the assignee of the debt. In addition, it is a guarantee in case of problems or any shortcomings.
An example of a tripartite cession agreement is best shown to a lawyer in advance.
Agreement form
The cession agreement form is governed by the Civil Code. Article No. 389 stipulates that this contract must be concluded in writing. Such a document is subject to state registration.
Registration in the state register
In the event that the matter relates to the right of assignment to real estate, then it should:
- Collect, and, in addition, transmit all the documentation to the Federal Registration Service. It must be certified by the signature of a notary.
- Securities are required, such as a certificate of ownership of shared ownership, along with an assignment agreement with all related documentation.
- The assignor and the assignee must provide the constituent documentation, a certificate of registration of a legal entity, and, in addition, an extract from the register.
The cession agreement is considered legal only when it is registered in the state register, otherwise it will not have legal force. The registration process lasts thirty days. A sample tripartite assignment agreement between legal entities is in demand.
Registration of transactions with non-residents
In the event that there is a need to conclude a cession agreement with persons who are not citizens of Russia, then the whole procedure must be accompanied by a transaction passport. A new passport may be required if the non-resident creditor changes. The procedure for concluding a cession agreement with non-residents should be carried out in accordance with the law “On currency control and regulation”.
Postings to the debtor under the assignment agreement
To correctly reflect the assignment, the assignor or the previous creditor applies accounting entries. As a rule, accounts 62, 76, 91 are used. Debt assignment is reflected:
- For debit 76 and loan 91.1 - assignment to the new lender of the right to claim obligations.
- For debit 91.2 and credit 62, expenses in the amount of receivables that are on the balance sheet of the assignor are written off.
Obviously, the assignment transaction between the assignee and the assignor will be different. Which ones?
The assignee postings are made using account 58, which reflects the acquired rights as a financial investment. In accounting, such acquisitions are accepted at cost of the fact, do not include here only VAT. Consider the examples of postings under the assignment agreement and the laws under which it works.
Suppose organization 1 bought 2 products from the organization - D 41 K 60. Organization 2 decided to transfer the debt of organization 3 under the assignment agreement. Upon receipt of a notice about this, organization 1 reflects this with the following posting - D 60 K 60. And repayment of the debt is carried out by organization 3, since it now has the right of claim under the assignment agreement - D 60 K 51.