assignment of financial assets

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AP®︎/College Macroeconomics

Course: ap®︎/college macroeconomics > unit 4.

Introduction to interest
Introduction to bonds
Relationship between bond prices and interest rates
What it means to buy a company's stock
Bonds vs. stocks

Lesson Summary: Financial assets

Financial assets

Lesson Summary

Key takeaways, cash and demand deposits are the most liquid forms of money, there are many kinds of financial assets, when interest rates increase, bond prices decrease, the interest rate is the opportunity cost of money, key equations, the savings-investment spending identity, common misperceptions.

A lot of people think of loans only as a liability, not an asset, because having a loan means you owe something. But to the person who is owed that money, the loan is an asset. Banks count loans as assets because they are a store of value for them. If a bank has made a loan for $ 100 ‍ , that is $ 100 ‍ it knows will be paid back. In fact, banks frequently sell loans to other banks.
Similarly, people tend to only think of their bank accounts as assets. That’s true, but to the bank that has to pay the account holder that money when they want to withdraw it, that deposit is a liability.
Money is not just pieces of paper or coins with historical faces it. Money is anything that can serve the three functions of money. That means that anything we believe is performing those functions is money, including printed currency, electronic records, or even the giant stone money on the island of Yap.
Some people believe that "financial risk" is when you don't know if the value of something is going to go down or not. In reality, financial risk means uncertainty in any direction, not just down.
A common mistake is to mix up the relationship between bond prices and interest rates. Think of bonds and other financial assets (such as savings accounts) as substitute goods. Like other substitutes, when the price of one goes up, the demand for its substitute goes down. When interest increases (which is basically the “price” you are paid for the money in your savings account), the demand for bonds will decrease. As a result, the price of bonds will decrease.

Discussion questions

Use the format below to create a table describing the four financial assets that includes

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Course Resources

Assignments.

The assignments in this course are openly licensed, and are available as-is, or can be modified to suit your students’ needs. Answer keys are available to faculty who adopt Lumen Learning courses with paid support. This approach helps us protect the academic integrity of these materials by ensuring they are shared only with authorized and institution-affiliated faculty and staff.

If you import this course into your learning management system (Blackboard, Canvas, etc.), the assignments will automatically be loaded into the assignment tool.

You can view them below or throughout the course.

Module 0: Personal Accounting— Assignment: Creating a Budget
Module 1: The Role of Accounting in Business— Assignment: Lopez Consulting
Module 2: Accounting Principles— Assignment: Accounting Principles
Module 3: Recording Business Transactions— Assignment: Recording Business Transactions
Module 4: Completing the Accounting Cycle— Assignment: Completing the Accounting Cycle
Module 5: Accounting for Cash— Assignment: Accounting for Cash
Module 6: Receivables and Revenue— Assignment: Manilow Aging Analysis
Module 7: Merchandising Operations— Assignment: Merchandising Operations
Module 8: Inventory Valuation Methods— Assignment: Inventory Valuation Methods
Module 9: Property, Plant, and Equipment— Assignment: Property, Plant, and Equipment
Module 10: Other Assets— Assignment: Other Current and Noncurrent Assets
Module 11: Current Liabilities— Assignment: Calculating Payroll at Kipley Co
Module 12: Non-Current Liabilities— Assignment: Non-Current Liabilities
Module 13: Accounting for Corporations— Assignment: Collins Mfg Stockholders’ Equity
Module 14: Statement of Cash Flows— Assignment: Kachina Sports Company Cash Flows
Module 15: Financial Statement Analysis— Assignment: Coca Cola FSA

Discussions

The following discussion assignments will also be preloaded (into the discussion-board tool) in your learning management system if you import the course. They can be used as is, modified, or removed. You can view them below or throughout the course.

Module 0: Personal Accounting— Discussion: Winning the Lottery
Module 1: The Role of Accounting in Business— Discussion: The Crafty Coffee Crook
Module 2: Accounting Principles— Discussion: SoftSheets
Module 3: Recording Business Transactions— Discussion: Baker’s Breakfast Bars
Module 4: Completing the Accounting Cycle— Discussion: Closing the Books in QuickBooks
Module 5: Accounting for Cash— Discussion: Counter Culture Cafe
Module 6: Receivables and Revenue— Discussion: Maximizing Revenue
Module 7: Merchandising Operations— Discussion: Inventory Controls
Module 8: Inventory Valuation Methods— Discussion: LIFO, FIFO, Specific Identification, and Weighted Average
Module 9: Property, Plant, and Equipment— Discussion: Cooking the Books
Module 10: Other Assets— Discussion: Other Assets
Module 11: Current Liabilities— Discussion: Current Liabilities
Module 12: Non-Current Liabilities— Discussion: Off-Balance Sheet Financing
Module 13: Accounting for Corporations— Discussion: Home Depot
Module 14: Statement of Cash Flows— Discussion: Facebook, Inc.
Module 15: Financial Statement Analysis— Discussion: Financial Statement Analysis

Alternative Excel-Based Assignments

For Modules 3–15, additional excel-based assignments are available below.

Module 3: Recording Business Transactions

Module 3 Excel Assignment A
Module 3 Excel Assignment B

Module 4: The Accounting Cycle

Module 4 Excel Assignment A
Module 4 Excel Assignment B
Module 4 Excel Assignment C
Module 4 Excel Assignment D

Module 5: Accounting for Cash

Module 5 Excel Assignment

Module 6: Receivables and Revenue

Module 6 Excel Assignment A
Module 6 Excel Assignment B

Module 7: Merchandising Operations

Module 7 Excel Assignment

Module 8: Inventory Valuation Methods

Module 8 Excel Assignment A
Module 8 Excel Assignment B
Module 8 Excel Assignment C

Module 9: Property, Plant, and Equipment

Module 9 Excel Assignment A
Module 9 Excel Assignment B

Module 10: Other Assets

Module 10 Excel Assignment

Module 11: Current Liabilities

Module 11 Excel Assignment

Module 12: Non-Current Liabilities

Module 12 Excel Assignment A
Module 12 Excel Assignment B

Module 13: Accounting for Corporations

Module 13 Excel Assignment A
Module 13 Excel Assignment B
Module 13 Excel Assignment C

Module 14: Statement of Cash Flows

Module 14 Excel Assignment A
Module 14 Excel Assignment B

Module 15: Financial Statement Analysis

Module 15 Excel Assignment

Review Problems

There are also three unit review assignments and a final review. These reviews include a document which sets up the problems and an excel worksheet.

Unit 1 Review Problem (After Module 6)

Review Problem Document

Unit 2 Review Problem (After Module 8)

Unit 3 review problem (after module 9), final review (after module 15).

Assignments. Authored by : Cindy Moore and Joe Cooke. Provided by : Lumen Learning. License : CC BY: Attribution

Accounting for Direct Assignment under Indian Accounting Standards (Ind AS)

By Team IFRS & Valuation Services ( [email protected] ) ([email protected])

Introduction

Direct assignment (DA) is a very popular way of achieving liquidity needs of an entity. With the motives of achieving off- balance sheet treatment accompanied by low cost of raising funds, financial sector entities enter into securitisation and direct assignment transactions involving sale of their loan portfolios. DA in the context of Indian securitisation practices involves sale of loan portfolios without the involvement of a special purpose vehicle, unlike securitisation, where setting up of an SPV is an imperative.

The term DA is unique to India, that is, only in Indian context we use the term DA for assignment of loan or lease portfolios to another entity like bank. Whereas, on a global level, a similar arrangements are known by various other names like loan sale, whole-loan sales or loan portfolio sale.

In India, the regulatory framework governing Das and securitisation transactions are laid down by the Reserve Bank of India (RBI). The guidelines for governing securitisation structures, often referred to as pass-through certificates route (PTCs) were issued for the first time in 2006, where the focus of the Guidelines was restricted to securitisation transactions only and direct assignments were nowhere in the picture. The RBI Guidelines were revised in 2012 to include provisions relating to direct assignment transactions.

Until the introduction of Indian Accounting Standards (Ind AS), there was no specific guidance regarding the accounting of direct assignment transactions, therefore, a large part of the accounting was done is accordance with the RBI Guidelines. The introduction of Ind ASes have opened up several new challenges for the financial entities.

Following issues are relevant:

Whether DA would lead to de-recogntion?
Whether there will be a gain on sale upon such de-recognition?
Whether DA should be be treated as a partial transfer of asset or transfer of the whole asset?
Continuing valuation of retained interest?

In this article, we intend to discuss those issues and suggest potential solutions for those as well.

Prior to addressing the above issues, the following is a comparison between DA and securitisation for a better understanding:

De recognition in case of Direct Assignment

Ind AS 109, provides a clear guidance as to the de recognition principles to be followed. Para 3.2.2 says that:

“3.2.2 Before evaluating whether, and to what extent, derecognition is appropriate under paragraphs 3.2.3–3.2.9, an entity determines whether those paragraphs should be applied to a part of a financial asset (or a part of a group of similar financial assets) or a financial asset (or a group of similar financial assets) in its entirety, as follows.

(a) Paragraphs 3.2.3–3.2.9 are applied to a part of a financial asset (or a part of a group of similar financial assets) if, and only if, the part being considered for derecognition meets one of the following three conditions.

(i) The part comprises only specifically identified cash flows from a financial asset (or a group of similar financial assets). For example, when an entity enters into an interest rate strip whereby the counterparty obtains the right to the interest cash flows, but not the principal cash flows from a debt instrument, paragraphs 3.2.3–3.2.9 are applied to the interest cash flows.

(ii) The part comprises only a fully proportionate (pro rata) share of the cash flows from a financial asset (or a group of similar financial assets). For example, when an entity enters into an arrangement whereby the counterparty obtains the rights to a 90 per cent share of all cash flows of a debt instrument, paragraphs 3.2.3–3.2.9 are applied to 90 per cent of those cash flows. If there is more than one counterparty, each counterparty is not required to have a proportionate share of the cash flows provided that the transferring entity has a fully proportionate share.

(iii) The part comprises only a fully proportionate (pro rata) share of specifically identified cash flows from a financial asset (or a group of similar financial assets). For example, when an entity enters into an arrangement whereby the counterparty obtains the rights to a 90 per cent share of interest cash flows from a financial asset, paragraphs 3.2.3–3.2.9 are applied to 90 per cent of those interest cash flows. If there is more than one counterparty, each counterparty is not required to have a proportionate share of the specifically identified cash flows provided that the transferring entity has a fully proportionate share.

(b) In all other cases, paragraphs 3.2.3–3.2.9 are applied to the financial asset in its entirety (or to the group of similar financial assets in their entirety). For example, when an entity transfers (i) the rights to the first or the last 90 per cent of cash collections from a financial asset (or a group of financial assets), or (ii) the rights to 90 per cent of the cash flows from a group of receivables, but provides a guarantee to compensate the buyer for any credit losses up to 8 per cent of the principal amount of the receivables, paragraphs 3.2.3–3.2.9 are applied to the financial asset (or a group of similar financial assets) in its entirety.”

If the de recognition criteria is not met in entirety, then all the conditions mentioned in para 3.2.2(a) has to be satisfied, which talks about fully proportionate share of total cash flows from the financial asset and fully proportionate share of specifically identified cash flows of the financial asset. If these conditions are met, then partial de recognition is possible. The part that is still recognized, is not connected with de recognition and further accounting related to de recognition. However, for actually de recognizing the asset, the de recognition criteria in para 3.2.3 and para 3.2.6 has to be looked at.

Para 3.2.3 goes as follows:

“3.2.3 An entity shall derecognise a financial asset when, and only when:

(a) the contractual rights to the cash flows from the financial asset expire, or

(b) it transfers the financial asset as set out in paragraphs 3.2.4 and 3.2.5 and the transfer qualifies for derecognition in accordance with paragraph 3.2.6.”

Thus, if the contractual rights to the cashflows expire, then the asset can be de-recognized. If the condition is not met, then it has to be seen that whether the asset is transferred as per para 3.2.5 and the transfer meets the de recognition conditions set out para 3.2.6.

Para 3.2.6 states that:

“3.2.6 When an entity transfers a financial asset (see paragraph 3.2.4), it shall evaluate the extent to which it retains the risks and rewards of ownership of the financial asset. In this case:

(a) if the entity transfers substantially all the risks and rewards of ownership of the financial asset, the entity shall derecognise the financial asset and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer.

(b) if the entity retains substantially all the risks and rewards of ownership of the financial asset, the entity shall continue to recognise the financial asset.

(c) if the entity neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, the entity shall determine whether it has retained control of the financial asset. In this case:

(i) if the entity has not retained control, it shall derecognise the financial asset and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer.

(ii) if the entity has retained control, it shall continue to recognise the financial asset to the extent of its continuing involvement in the financial asset (see paragraph 3.2.16).”

Para 3.2.6 brings out that, if all the risks and rewards of ownership of financial asset is transferred, then the asset shall be de recognized. If the risks and rewards incidental to ownership of financial asset is not transferred, then obviously the asset cannot be de recognized. However, if there is a partial transfer of risks and rewards of ownership, then the surrender of control has to be evaluated. If there is surrender of control, then the asset can be de recognized. If not, there shall be partial de-recognition, that is, the asset shall be recognized in the books of the seller only to the extent of continuing involvement.

Computation of Gain on Sale

It is a general notion that a sale results in a gain or loss, be it arbitrary or anticipated, the same is required to be accounted for. In case of a direct assignment, there is a sale of the loan portfolios, however, the same completely depends upon whether the assigned loan portfolio is getting derecognised from the books of the assignor or not. If it is not derecognised from the books of the assignor, then the question of recognising a gain or loss on sale does not arise. However, if the sale qualifies for de-recognition, then the seller must book gain or loss on sale in the year of sale.

Upon reading of Ind AS 109 and study of example stated in application guidance in para B3.2.17, the way of computing the same can be derived as follows:

Gain on sale = Sale consideration – Carrying value of asset*Fair value of transferred portion/(Fair value of transferred portion + Fair value of retained portion)

This can be explained with the help of the following example:

The gain or loss on sale does not depend on the sale consideration completely. There may be cases where the carrying value of the transaction and sale consideration are same, i.e. at par transactions. As per Ind AS 109, the computation of gain on sale remains same in cases of at-par or premium structured transactions, however, even at-par transactions could lead to a gain or loss on sale..

The reason for same is that the computation of gain on sale takes into account the retained interest by the Assignor comprising of the difference between the interest on the loan portfolio and the applicable rate at which the direct assignment is entered into with the assignee, also known as the right of excess interest spread (EIS) sweep.

The above settles for the computation of the gain/loss, however, the bigger change seen in the present regime is on the part of recognition of such a gain in the books of the Assignor.

In the present scenario, Ind AS 109 prescribes that the gain on sale or de recognition be recorded upfront in the profit and loss statement.

For reference, para 3.2.12 states that:

“ 3.2.12 On derecognition of a financial asset in its entirety, the difference between:

(a) the carrying amount (measured at the date of derecognition) and

(b) the consideration received (including any new asset obtained less any new liability assumed) shall be recognised in profit or loss.”

Further in case of de recognition of a part of financial asset, para 3.2.13 states that:

“3.2.13 If the transferred asset is part of a larger financial asset (eg when an entity transfers interest cash flows that are part of a debt instrument, see paragraph 3.2.2(a)) and the part transferred qualifies for derecognition in its entirety, the previous carrying amount of the larger financial asset shall be allocated between the part that continues to be recognised and the part that is derecognised, on the basis of the relative fair values of those parts on the date of the transfer. For this purpose, a retained servicing asset shall be treated as a part that continues to be recognised. The difference between:

(a) the carrying amount (measured at the date of derecognition) allocated to the part derecognised and

(b) the consideration received for the part derecognised (including any new asset obtained less any new liability assumed) shall be recognised in profit or loss.”

Hence, it is clear that the gain on de recognition should be recorded in the profit and loss statement.

From a practical standpoint, the above recognition is seen as a demotivation for entering into a direct assignment transaction, since the same would result in a volatility or irregularity in the profit or loss statement of the NBFCs.

This approach is in stark contrast to what has been prescribed in the RBI Guidelines on Securitisation, which requires gain on sale to be amortised over the life of the transaction. As per the RBI Guidelines provide the following:

As per para 20.1 of RBI Guidelines on Securitisation of Standard Assets issued in 2006:

“In terms of these guidelines banks can sell assets to SPV only on cash basis and the sale consideration should be received not later than the transfer of the asset to the SPV. Hence, any loss arising on account of the sale should be accounted accordingly and reflected in the Profit & Loss account for the period during which the sale is effected and any profit/premium arising on account of sale should be amortised over the life of the securities issued or to be issued by the SPV. ”

Also, as per para 1.4.1. of RBI Guidelines on Securitisation of Standard Assets issued in 2012:

“The amount of profit in cash on direct sale of loans may be held under an accounting head styled as “Cash Profit on Loan Transfer Transactions Pending Recognition” maintained on individual transaction basis and amortised over the life of the transaction .”

As the accounting treatment offered by Ind AS defaces the profit and loss statement by distorting the income recognition pattern of the NBFCs, NBFCs are not in favour of recording this gain upfront. The concern is aggravated due to the liquidity crunch currently faced by the NBFCs caused by recent downfall of IL&FS. The default on payment obligations of loans and deposits amounting to approximately Rs. 90,000 crore, by India’s leading infrastructure finance company, shook the confidence of the lenders and triggered a panic sentiment amongst the market lenders including NBFCs. As a result of the panic, banks are unwilling to lend to the NBFCs and their cost of funds are going up. However, the banks are showing interest in acquiring their loan portfolios instead. Therefore, the NBFCs are somewhat being forced to accept this distortion in their profit or loss statement.

Another question that arises is- whether de-recognition in books of assignor affects recognition in the books of the assignee.

As per para 3.1.1 of Ind AS 109, an entity shall recognise a financial asset or a financial liability in its balance sheet when, and only when, the entity becomes party to the contractual provisions of the instrument. Therefore, the transferee should recognise the financial asset or financial liability in its balance sheet only when he becomes a party to the contractual provisions of the instrument.

Para B3.2.15 of the same standard, provides that if a transfer of a financial asset does not qualify for de-recognition, the transferee does not recognise the transferred asset as its asset. In such a case the transferee is required to derecognise the cash or other consideration paid and recognises a receivable from the transferor. The transferee may measure the receivable at amortised cost (if it meets the criteria in paragraph 4.1.2) if the transferor has both a right and an obligation to reacquire control of the entire transferred asset for a fixed amount (such as under a repurchase agreement).

Therefore, de-recognition from the books of the seller is clearly a determinant for recognition in the books of the buyer.

Impact on GST on the gain on sale

In the last couple of years, if there is anything that has bothered the financial entities in India, other than IndAS, then it has to be GST. Therefore, it becomes pertinent to take a look at whether GST will become applicable in any manner whatsoever.

Under GST regime, assignment of loans are treated as dealing in securities and are therefore exempted from GST. Link to our detailed writeup in this regard has been provided in the footnote [1] .

Reporting of Retained Interests

A partial de-recognition is where the transferor transfers only a part of the asset and retains a part of it.

Currently, as per the RBI Guidelines, NBFCs are required to comply with the minimum retention requirement of 10%, that is, they should have a continuing interest of 10% on the loans that it intends to transfer. Therefore, if an NBFC is intending to sell of a portfolio of Rs. 100 crores, it has to retain at least 10% of the said portfolio and can sell of only Rs. 90 crores representing the remaining part.

Therefore, this becomes a classic case of partial de-recognition.

The value of retained interest should be accounted for as per the original accounting criteria as and when it was originated. For instance, if the pool recognised under FVOCI method, the retained interst must continue to be valued at FVOCI.

The manner of recognition or valuation of the retained interest will not change when a part of the pool is sold off.

Before the introduction of Indian Accounting Standards, RBI guidelines were followed for de recognizing the asset and recording the gain on sale after de recognition. There was no accounting guidance for financial instruments and their de recognition. In the absence of it, RBI guidelines were followed which talked about true sale. In case, the conditions of true sale were satisfied, then the asset was de recognized and the gain was regularised over the period by amortising the gain on de recognition.

While a well-documented piece of legislation is welcomed, however, every new thing has some shortcomings. In this case, the irregularities in the profit and loss and the complexities surrounding the de-recognition test comes as shortcomings. However, it is expected, with the passage of time, these shortcomings will also be settled.

[1] http://vinodkothari.com/2018/06/gst-on-assignment-of-receivables-wrong-path-to-the-right-destination/

Can the Originator recognise a lower upfront income by giving impact of historical pre-terminations while discounting the future cash flows? This will reduce the impact of irregular upfront income to some extent.

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Understanding the Basics of Assignment and Assumption Agreements

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Note: Links to our free templates are at the bottom of this long guide. Also note: This is not legal advice

Introduction

Understanding the importance of assignment and assumption agreements is essential for any business transaction. These agreements are legal documents which outline the transfer of ownership, rights, and obligations from one party to another in order to protect both parties from liabilities and disputes. Moreover, they help streamline the transition of ownership by providing a clear agreement between all involved.

At Genie AI, we understand that navigating these agreements can be difficult without legal expertise - but it doesn’t have to be! Our team provides free assignment and assumption agreement templates so that anyone can draft high-quality legal documents without paying hefty lawyer fees.

These agreements are crucial in corporate mergers, asset sales, and other business transactions as they protect both assignee and assignor from potential future disputes or disagreements. Furthermore, it helps everyone involved in the process come to an agreement about the transfer of assets or liabilities.

It’s also important for businesses to ensure that all records, documents, and information is properly transferred when assigning contracts - something which assignment and assumption agreements make simpler. Not only does this avoid any potential issues in the future but ultimately makes for a smoother transition when dealing with such matters.

In short, assignment and assumption agreements provide an invaluable service when it comes to safeguarding both parties involved in a business transaction while also simplifying their processes along the way. To learn more about how our team at Genie AI can help you on your way towards drafting these essential documents - read on below for our step-by-step guidance or visit us today to access our template library!

Definitions

Assignor: The party transferring the rights and liabilities. Assignee: The party receiving the rights and liabilities. Asset Assignment and Assumption Agreement: An agreement used when one party transfers all or part of their ownership of a particular asset to another party. Liability Assignment and Assumption Agreement: An agreement used when one party transfers all or part of their liability to another party. Contract Assignment and Assumption Agreement: An agreement used when one party transfers all or part of their contractual obligations to another party. Lease Assignment and Assumption Agreement: An agreement used when one party transfers all or part of their responsibilities under a lease to another party. Representations and Warranties: Promises made by the Assignor and Assignee in order to ensure they understand the risks associated with the transfer and are comfortable taking on the rights and liabilities. Indemnification: A clause outlining the terms under which the Assignor and Assignee are liable for any losses or damages due to the transfer. Choice of Law: A clause specifying which jurisdiction’s laws will govern the agreement. Severability: A clause outlining how the agreement will be enforced if any part of it is deemed unenforceable. Governing Law: A clause specifying which court will have jurisdiction over any disputes that arise out of the agreement. Notices: A clause outlining how notices between the parties will be delivered.

Definition of Assignment and Assumption Agreement

Overview of the different types of assignment and assumption agreements, asset assignment and assumption agreement, liability assignment and assumption agreement, contract assignment and assumption agreement, lease assignment and assumption agreement, the purpose of an assignment and assumption agreement, the process of negotiating an assignment and assumption agreement, identifying the parties involved, discussing the terms, drafting the agreement, final review and signing, key terms and clauses commonly found in assignment and assumption agreements, assignor & assignee, liabilities and obligations, representations and warranties, indemnification, choice of law, severability, governing law, potential issues that may arise when negotiating an assignment and assumption agreement, scope of liabilities, representations & warranties, dispute resolution, contractual limitations, practical considerations when drafting an assignment and assumption agreement, identifying contingent liabilities, understanding applicable laws, drafting clear & concise language, complying with any regulatory requirements, potential benefits of using an assignment and assumption agreement, risk reduction, asset protection, cost savings, potential pitfalls of using an assignment and assumption agreement, unforeseen risks, negotiating difficulties, regulatory non-compliance, conclusion and next steps, finalizing the agreement, implementing the agreement, documenting the outcome, get started.

Understand the legal definition of an Assignment and Assumption Agreement: an agreement between two parties, which transfers one party’s rights, duties and obligations under a contract to another party
Learn who can enter into an Assignment and Assumption Agreement: the parties to the original contract, or their successors
Know what rights and obligations are transferred under an Assignment and Assumption Agreement: all rights, duties, and obligations that have been agreed upon in the original contract
Be aware of the consequences of assigning and assuming obligations: the assignee is responsible for performing all duties and obligations of the contract, just as if they had originally entered into the contract.
When you can check off this step: You will know you have a good understanding of the definition of an Assignment and Assumption Agreement when you can explain it in your own words and are aware of the rights and obligations transferred and the consequences of assigning and assuming obligations.
Understand the three common types of assignment and assumption agreements: asset assignment and assumption agreement, contractual assignment and assumption agreement, and debt assignment and assumption agreement
Learn the key features of each type, including the type of asset or obligation being assigned and assumed
Determine the purpose of the agreement and the advantages of each type of agreement
Check off this step when you feel confident that you understand the purpose and differences between the three types of assignment and assumption agreements.
Research and understand the definitions of an asset assignment and assumption agreement
Learn the different types of assets that can be assigned and assumed in an agreement
Understand the purpose of an asset assignment and assumption agreement
Research and review the legal elements of an asset assignment and assumption agreement, such as the parties involved, the assignor and assignee, the description of the assets to be assigned and assumed, the consideration for the assignment and assumption, the representations and warranties of both parties, the indemnification and other relevant provisions
Draft an asset assignment and assumption agreement with the help of a qualified attorney
When you are satisfied with the asset assignment and assumption agreement that you have drafted, execute the agreement according to the applicable law and have it notarized
Check this off your list and move on to the next step, which is understanding liability assignment and assumption agreements.
Research applicable state and federal laws to ensure the agreement is in compliance
Draft a liability assignment and assumption agreement that assigns all liabilities of the transferor to the transferee
Identify all liabilities to be assigned, including any and all warranty liabilities, product liabilities, and medical liabilities
Include all necessary clauses that provide for the transfer of the liabilities, and state that the transferor will not be liable for any liabilities after the date of the agreement
Get the agreement approved by the assigning and assuming parties
Sign and date the agreement in the presence of a witness
Once all parties have signed the agreement, you can check this off your list and move on to the next step of drafting the Contract Assignment and Assumption Agreement.
Understand the difference between an assignment and an assumption agreement. An assignment agreement transfers the rights and obligations of the original contract from one party to another, while an assumption agreement transfers only the obligations of the original contract to the new party.
Familiarize yourself with the language of the assignment and assumption agreement. The agreement should clearly state the terms of the assignment, the obligations assumed by the new party, and the liabilities being transferred.
Draft the assignment and assumption agreement. Make sure to include all relevant details, such as the parties involved, the original contract being transferred, the new obligations assumed by the new party, and any other important information.
Review the agreement with a legal professional. It is important to have a lawyer or other legal professional review the agreement to make sure it meets all legal requirements.
Sign the agreement. Once both parties have signed the agreement, it is officially binding and the obligations of the original contract are now transferred to the new party.

You will know when you can check this off your list and move on to the next step when you have completed all steps in this section, including drafting, reviewing, and signing the agreement.

Understand the basics of a lease assignment and assumption agreement
Have an understanding of the parties involved in the agreement
Know what is included in the agreement such as the particular lease, the transferor, the transferee, a consideration amount, date of assignment, and other related documents
Have an understanding of the legal implications of the agreement as far as warranties, liabilities, and other related obligations
Understand the process of executing the agreement and any other related steps required
Be aware of any local or state laws that may affect the agreement

Once you have a thorough understanding of the lease assignment and assumption agreement, you can check off this step and move on to the next step in the guide: The Purpose of an Assignment and Assumption Agreement.

Understand the purpose of an assignment and assumption agreement, which is to transfer rights and obligations from one party to another
Learn the different types of assignment and assumption agreements, such as lease assignment and assumption agreements, purchase and sale agreements, and contracts
Identify the parties involved in the agreement, what rights and obligations are being transferred, and how the agreement will be executed
Once you understand the purpose of an assignment and assumption agreement, you can move on to the next step in the guide
Research and determine the terms of the agreement that are appropriate for your situation
Identify any potential legal issues that could arise from the assignment and assumption agreement
Draft the agreement that outlines the terms, conditions, consideration, and liabilities
Both parties must review and approve the agreement in its entirety
Make sure the agreement is signed by both parties and that each party has a copy of the agreement
When both parties have agreed upon and signed the agreement, the assignment and assumption agreement is officially enforceable
You can check this step off your list and move onto the next step once the agreement is signed and all parties have a copy.
Identify all parties involved in the agreement, including the assignor, the assignee, and any other third parties
Be sure to document all of the parties in the agreement and provide contact information for each
Get contact information for all parties involved, including names, addresses, and phone numbers
Verify that all parties involved are of legal age and able to enter into a binding agreement
Make sure that all parties understand their roles and obligations in the agreement

When you can check this off your list: When all parties have been identified, contact information has been provided, and all parties understand and accept their roles and obligations in the agreement.

Learn the key terms used in assignment and assumption agreements, such as “assignor” and “assignee.”
Understand the scope of the agreement and the rights and obligations of each party.
Consider any potential restrictions that might be in place.
Identify any laws or regulations that affect the agreement.

You can check this step off your list and move on to the next step when you have a basic understanding of the terms used in the agreement, and the scope of the agreement and the rights and obligations of each party.

Determine the parties involved in the assignment and assumption agreement and obtain contact information for each.
Draft the agreement and include all the agreed upon terms and conditions.
Review the agreement with all parties to ensure the terms and conditions are accurately reflected.
Revise the agreement as needed to reflect any changes or amendments.
Once all parties have agreed to the agreement and all revisions have been made, the agreement is ready to be signed.
Carefully review the agreement to ensure that all the details and clauses are accurately reflected
Make sure all parties to the agreement have signed the document
Have all parties to the agreement keep a signed copy of the document for their records
Once all parties have signed the document, you can check this off your list and move on to the next step.
Familiarize yourself with the language and terminology used in assignment and assumption agreements.
Understand the components of the agreement, such as the assignor, assignee, consideration, and liabilities.
Become familiar with the common clauses found in assignment and assumption agreements, such as the warranty clause, assignment clause, and liability clause.
Review the agreement for accuracy and ensure that all of the terms and conditions are clear.
Once you have a full understanding of the key terms and clauses in the agreement, you can move on to the next step in the process.
Determine who is the assignor and who is the assignee - the assignor is the one who is transferring their rights and obligations to the assignee
Know the difference between the assignor and assignee - the assignor is the party transferring the rights and obligations, and the assignee is the party receiving them
Understand the implications of the assignment and assumption agreement - the assignor is no longer responsible for the rights and obligations they are transferring to the assignee
Make sure that the assignor and assignee are both aware of their respective roles and responsibilities - this will ensure that the agreement is legally binding

Once you have determined who the assignor and assignee are, know the differences between them, understand the implications of the agreement, and make sure both parties are aware of their roles and responsibilities, you can move on to the next step.

Identify and list out all of the liabilities and obligations that are being assigned in the agreement
Ensure that all liabilities and obligations of the assignor that are to be assumed by the assignee are included in the agreement
Specify the date on which the liabilities and obligations are to be assumed by the assignee in the agreement
Make sure that the assignee is aware of and accepts the liabilities and obligations that are being assigned
Confirm that the assignor is not liable for any of the liabilities and obligations that are being assigned to the assignee
Make sure to include a clause in the agreement that states that the assignor will not be liable for any of the liabilities and obligations that are being assigned to the assignee

When you can check this off your list and move on to the next step:

When the assignor and assignee have agreed on all of the liabilities and obligations that are being assigned in the agreement
When the assignor has agreed to not be liable for any of the liabilities and obligations that are being assigned to the assignee
When the agreement has been reviewed and approved by both the assignor and assignee
Ensure that all statements made by the assignor and the assignee are accurate and current
Identify all representations and warranties made by the assignor to the assignee
Make sure that any representations and warranties made by the assignor are clear and enforceable
Verify that any representations and warranties made by the assignee are accurate and up-to-date
Determine the remedies for breach of any representations and warranties

You can check this off your list and move on to the next step when you have identified all representations and warranties, verified that they are accurate and up-to-date, and determined the remedies for breach.

Assignor should agree to indemnify Assignee from any and all claims, losses and damages that arise from breach of representations and warranties
Assignor should agree to pay Assignee’s legal fees and other costs associated with defending against any claim
Assignee should agree to indemnify Assignor from any and all claims, losses, and damages that arise from the Assignee’s actions after the transfer of the subject matter
Once these indemnification terms are set, you can check this step off your list and move on to the next step.
Determine the state law that will govern the agreement. Generally, the state law that will be applicable is the state in which the agreement is executed.
The state law that you choose should be clear and explicit. Consider consulting a lawyer or legal advisor if you are unsure of the applicable state law.
Make sure to include the state law that has been agreed upon in the agreement.
Check off this step when the applicable state law has been determined and included in the agreement.
Read your agreement carefully to ensure that the severability clause is properly drafted
The severability clause should state that if any portion of the agreement is found to be invalid or unenforceable, the remaining provisions will remain in full force and effect
Familiarize yourself with the definitions of severability, enforceability, and invalidity
Make sure that the agreement includes a severability clause that is tailored to the particular agreement
Once you are confident that the severability clause is properly drafted, you can check this step off your list and move on to the next step.
Research governing laws in the jurisdiction where the agreement will be signed and enforced
Determine the laws that will govern the agreement and include them in the governing law clause
This clause should include the state, country, or other jurisdiction
Once you have determined the governing laws and included them in the clause, you can check this off your list and move on to the next step.
Ensure that the agreement includes a provision specifying a proper notice address for each party
Check that the notice provision includes the name and address of the recipient, the method of service (e.g., mail, e-mail, or fax), and the time period for responding
Review the agreement to make sure that it includes a provision specifying the manner in which the parties will provide notice to each other
Confirm that notice is defined correctly, as this is important for determining the time period for responding
Once all of these points have been verified, you can check this off your list and move on to the next step.
Review the agreement to make sure that the assignment language is drafted correctly and is broad enough to encompass all of the rights and obligations being assigned
Ensure that the parties are not trying to assign any rights or obligations that are not legally assignable
Make sure that the agreement is clear regarding the liabilities of the parties, as they will be assumed by the assignee
Confirm that the assumptions being made by the assignee are clearly laid out in the agreement
Ensure that the agreement is not assigning any rights or obligations that may be subject to the consent of a third party
When all potential issues have been addressed, the agreement can be signed by both parties.
Understand that an Assignment and Assumption Agreement (A&A) will transfer some of the liabilities from one party to another in a business transaction
Identify which liabilities are to be transferred in the A&A
Clarify which liabilities will remain with the original party
Establish a timeline for the transfer of liabilities
Decide which party is responsible for liabilities that occur after the transfer
Make sure that the liabilities are accurately defined and described in the A&A

You will know that you can check this step off your list and move on to the next step when all liabilities have been properly identified, defined and described in the A&A, and all parties have agreed to the timeline for the transfer of liabilities.

Understand the basics of Representations & Warranties and what they mean in the context of assignment and assumption agreements
Learn what should be included in Representations & Warranties and the consequences of not making accurate representations
Research different types of Representations & Warranties, such as those related to title, capacity, authority, and performance
Check that all Representations & Warranties included in the agreement are accurate and up-to-date
Once all Representations & Warranties have been reviewed and confirmed to be accurate, you can check this step off your list and move on to the next step of the guide.
Understand that disputes under an Assignment and Assumption Agreement are generally handled by the parties involved
Understand the purpose of an arbitration clause in the agreement, which is to resolve disputes quickly, fairly, and affordably
Determine if the agreement should include a mediation clause, which is less formal than arbitration and may be more suitable for some disputes
Consider whether the agreement should include a choice of law clause, which will determine the governing law of the agreement
Know that the agreement should specify the venue for any potential dispute resolution proceedings
Understand that the parties may need to provide notice to the other party before initiating a dispute resolution procedure
When you have a full understanding of how disputes will be handled under the Assignment and Assumption Agreement, you can check this step off your list and move on to the next step.
Understand the importance of the contractual limitations outlined in the agreement
Make sure all parties involved in the agreement have agreed to the contractual limitations
Know that contractual limitations are meant to protect the parties involved in the agreement
Be aware that contractual limitations may include time limits, scope of duties, and other stipulations
When all parties involved have agreed to the contractual limitations, you have completed this step and can move on to the next step.
Familiarize yourself with the applicable laws in the jurisdiction in which the assignment and assumption agreement will be executed
Make sure to include language in the agreement that will address any issues that may arise due to a conflict of laws
Ensure that the agreement properly identifies and describes the rights, obligations, and interests that are being assigned and assumed
Identify any contingencies that could affect the transfer of rights and obligations, and include language that addresses such contingencies
Consider adding any additional provisions that may be necessary to ensure the successful completion of the transaction

You can check this off your list and move on to the next step when you have addressed any issues that may arise due to a conflict of laws, properly identified and described the rights, obligations and interests that are being assigned and assumed, identified any contingencies that could affect the transfer of rights and obligations, and considered adding any additional provisions that may be necessary to ensure the successful completion of the transaction.

Identify all contingent liabilities that must be assumed by the assignee, including any pending or potential claims and obligations
Make sure the assignee is aware of, and willing to assume, the contingent liabilities
Include language in the assignment and assumption agreement that outlines the assignee’s assumption of any contingent liabilities
Check that the provisions in the agreement precisely identify the liabilities assumed by the assignee
When all contingent liabilities have been identified and included in the agreement, you can move on to the next step of understanding applicable laws.
Research applicable laws related to assignment and assumption agreements in your jurisdiction
Understand the legal language and key elements of an assignment and assumption agreement
Understand the process for filing and registering an assignment and assumption agreement
Know what documents and information may be required to complete the registration process
Understand the timeline for completion of the registration process
Once you have a good understanding of the applicable laws and the process for registration, you can move on to the next step of identifying any contingent liabilities.
Research the applicable law, and use language that is consistent with the requirements
Draft a clear and concise agreement that covers all relevant topics
Ensure that the language used is precise and unambiguous
Define any legal terms used in the agreement
Make sure that the agreement is in writing and all parties have signed it
Review the agreement and make sure it is legally compliant
When all of the above steps are completed, you can move on to the next step in the guide.
Research applicable laws and regulations that may apply to the assignment and assumption agreement
Obtain any necessary licenses or permits, such as a real estate license
Ensure that all parties understand the regulations that apply to the agreement
Determine if any state or federal laws need to be adhered to
When all applicable laws and regulations have been taken into account and complied with, you can move on to the next step.
Understand the potential advantages of using an Assignment and Assumption Agreement, including:
Transferring existing contractual obligations and liabilities from one party to another
Ensuring continuity in contractual agreements between parties
Avoiding the need for a new contract
When you have a solid understanding of the potential benefits of using an Assignment and Assumption Agreement, you can check off this step and move on to the next one, which is Risk Reduction.
Identify the potential risks that are associated with an assignment and assumption agreement
Analyze how the assignment and assumption agreement may reduce those risks
Understand the legalities that would protect both parties in the agreement
Be aware of the potential regulatory requirements that may apply
When you have thoroughly assessed the risks and understand how an assignment and assumption agreement can protect both parties, you are ready to move on to the next step.
Understand the definition of an assignment and an assumption agreement
Learn the differences between the two agreements
Familiarize yourself with the processes and procedures of an assignment and assumption agreement
Understand the legal implications of an assignment and an assumption agreement
Familiarize yourself with the potential benefits of an assignment and assumption agreement
Understand how an assignment and assumption agreement can be used to protect assets

You’ll know you can check this off your list and move on to the next step when you have a good grasp of the processes and procedures associated with an assignment and assumption agreement, the legal implications of such an agreement, and the potential benefits of using one.

Understand the different costs associated with the transfer of assets, such as attorney’s fees, recording fees, and transfer taxes
Consider the potential cost savings of using an assignment and assumption agreement as opposed to other methods of transferring assets
Determine the effect of the transfer on the financial statements of both parties
Review the agreement to ensure all costs are accounted for

When you have a thorough understanding of the cost savings to be made and have reviewed the agreement to ensure all costs are accounted for, you can move on to the next step.

Be aware of the potential conflicts of interest between the assignor and assignee when an Assignment and Assumption Agreement is used
Consider applicable laws, regulations and contractual restrictions when determining if an Assignment and Assumption Agreement is the best option
Understand that if an Assignment and Assumption Agreement is used, both the assignor and assignee will remain liable for any existing obligations
Be aware that the assignee may not have the same rights as the assignor under the agreement and may not have direct access to the original contract
Understand that the assignee may be liable for any damages or losses caused by the assignor’s breach of the agreement

You’ll know when you can check this off your list and move on to the next step when you have a good understanding of the potential pitfalls and responsibilities associated with using an Assignment and Assumption Agreement.

Understand that when assuming liabilities, there are certain risks that may be unforeseen and difficult to calculate
Be aware that the assignor of the agreement can still be held liable if any unanticipated risks arise
Carefully review the agreement to ensure that the assignor and the assignee are both protected from unforeseen risks
Discuss any potential risks with legal counsel to ensure that all parties understand the potential risks
Have all parties sign the agreement to ensure that everyone is aware of the risks and agrees to them
When all parties have signed, the agreement can be considered complete and all parties can move forward with the transfer of liabilities
Understand the differences between the two parties and their respective interests
Identify the areas where both parties can agree on specific terms and conditions
Determine which party will be liable for any breaches of the agreement
Negotiate a fair deal that both parties can agree to
Consider any legal, financial, and tax implications for both parties
Once negotiations are complete, have the parties sign the agreement
Make sure that both parties understand the terms and conditions of the agreement
Verify that both parties are in agreement and that all negotiations are complete
Check that all the required legal documents are present and in order
Check that all parties involved are aware of their respective responsibilities

You’ll know when you can check this off your list and move on to the next step when all parties have agreed to the terms and conditions of the agreement, all required legal documents have been provided and in order, and all parties have signed the agreement.

Research the laws and regulations that apply to the transaction, including state and local statutes, to assess potential risks
Check for any filing requirements or permits that need to be obtained
Identify any restrictions that could occur due to the parties involved
Document any potential regulatory non-compliance issues
When all potential risks have been identified and documented, you can move on to the next step.
Review the terms and conditions of the agreement, as well as any applicable regulations, to ensure that all parties have a clear understanding of the agreement as a whole.
Seek legal counsel if there are any questions or concerns about the agreement.
Finalize the agreement by signing and exchanging documents.
After the agreement has been finalized, it will be legally binding and enforceable.
Make sure all parties are aware of their responsibilities and obligations under the agreement.
Monitor the agreement to ensure that all parties are complying with the terms and conditions of the agreement.
Check off this step when the agreement has been finalized and all parties have signed and exchanged documents.
Review the agreement carefully and make sure all parties have signed off
Make sure all parties have received a copy of the agreement
Ensure that all parties have received the agreed-upon consideration
File the original agreement with all relevant documents with the appropriate government agency or court
You will know that you have finished this step when all parties have signed the agreement, all parties have received a copy, and the original agreement has been filed with the appropriate government agency or court.
Execute the agreement, making sure both parties have signed it and that all parties involved have read, understood, and accepted the terms and conditions of the agreement.
Make sure that the agreement has been filed with the appropriate state or federal agency, if required.
Start the process of transferring assets and obligations from the assignor to the assignee, as outlined in the agreement.
Make sure that all parties have the necessary information to complete the assignment and assumption. This may include but is not limited to: legal documents, financial documents, contracts, and other pertinent information.
Ensure that all parties have received the necessary payment for the assignment and assumption.
Check that all parties have complied with the terms and conditions of the agreement.
You can check this off your list once you have completed all the steps necessary for the successful implementation of the agreement.
Ensure you have all relevant documents, such as the assignment and assumption agreement, and any other documents mentioned in the agreement
Gather all necessary signatures from the parties involved
Make copies of the signed documents for all parties
File the original documents with the appropriate governmental agency or court
Update any necessary records, including those within your company
Verify that all documents have been properly filed
You can check off this step and move on to the next step when all documents have been properly signed and filed.

Q: What is the difference between an Assignment and Assumption Agreement and a novation agreement?

Asked by Zane on 27th March 2022. A: An Assignment and Assumption Agreement is used to transfer contractual rights and obligations from one party to another, while a novation agreement is used to substitute one contracting party with another. In a novation agreement, all three parties must agree to the substitution, while in an Assignment and Assumption Agreement, only two parties are involved.

Example dispute

Lawsuit referencing assignment and assumption agreement.

A plaintiff may raise a lawsuit referencing an assignment and assumption agreement when one party assumes the rights and obligations of another party in a contract.
The lawsuit may be raised if the party that assumed the rights and obligations did not fulfill them or did not fulfill them in the manner agreed upon in the contract.
The plaintiff must provide proof that the party failed to fulfill the rights and obligations of the contract in order to win the lawsuit.
Settlement may be reached through a negotiated agreement between the parties.
Damages may be awarded if the plaintiff can prove the losses incurred due to the breach of contract.

Templates available (free to use)

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Assignment of Accounts Receivable: Meaning, Considerations

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

Investopedia / Jiaqi Zhou

What Is Assignment of Accounts Receivable?

Assignment of accounts receivable is a lending agreement whereby the borrower assigns accounts receivable to the lending institution. In exchange for this assignment of accounts receivable, the borrower receives a loan for a percentage, which could be as high as 100%, of the accounts receivable.

The borrower pays interest, a service charge on the loan, and the assigned receivables serve as collateral. If the borrower fails to repay the loan, the agreement allows the lender to collect the assigned receivables.

Key Takeaways

Assignment of accounts receivable is a method of debt financing whereby the lender takes over the borrowing company's receivables.
This form of alternative financing is often seen as less desirable, as it can be quite costly to the borrower, with APRs as high as 100% annualized.
Usually, new and rapidly growing firms or those that cannot find traditional financing elsewhere will seek this method.
Accounts receivable are considered to be liquid assets.
If a borrower doesn't repay their loan, the assignment of accounts agreement protects the lender.

Understanding Assignment of Accounts Receivable

With an assignment of accounts receivable, the borrower retains ownership of the assigned receivables and therefore retains the risk that some accounts receivable will not be repaid. In this case, the lending institution may demand payment directly from the borrower. This arrangement is called an "assignment of accounts receivable with recourse." Assignment of accounts receivable should not be confused with pledging or with accounts receivable financing .

An assignment of accounts receivable has been typically more expensive than other forms of borrowing. Often, companies that use it are unable to obtain less costly options. Sometimes it is used by companies that are growing rapidly or otherwise have too little cash on hand to fund their operations.

New startups in Fintech, like C2FO, are addressing this segment of the supply chain finance by creating marketplaces for account receivables. Liduidx is another Fintech company providing solutions through digitization of this process and connecting funding providers.

Financiers may be willing to structure accounts receivable financing agreements in different ways with various potential provisions.

Special Considerations

Accounts receivable (AR, or simply "receivables") refer to a firm's outstanding balances of invoices billed to customers that haven't been paid yet. Accounts receivables are reported on a company’s balance sheet as an asset, usually a current asset with invoice payments due within one year.

Accounts receivable are considered to be a relatively liquid asset . As such, these funds due are of potential value for lenders and financiers. Some companies may see their accounts receivable as a burden since they are expected to be paid but require collections and cannot be converted to cash immediately. As such, accounts receivable assignment may be attractive to certain firms.

The process of assignment of accounts receivable, along with other forms of financing, is often known as factoring, and the companies that focus on it may be called factoring companies. Factoring companies will usually focus substantially on the business of accounts receivable financing, but factoring, in general, a product of any financier.

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A General Assignment of Assets to one’s Living Trust can help avoid a Probate.

Re-titling assets, like stock and bonds, from one’s name into one’s living trust is necessary to avoiding an unnecessary probate of such assets if held outside of the trust. Sometimes people fail to transfer some or all of their intended trust assets into their trust. A general assignment of assets to one’s living trust provides an important safeguard. Let’s examine what a general assignment is and how it helps to fund one’s trust and avoid a probate with the help of a Lake County probate attorney:

A general assignment of assets transfers ownership on a wide variety of assets as the name implies. An all encompassing general assignment is regularly used by estate planners to transfer all types of financial assets (excluding tax deferred retirement accounts) and personal property (such as the contents of one’s home) into the trust. It is a half-step towards actually re-titling the securities and the financial accounts into the name of the trustee. Nevertheless, the settlor should still proceed to contact the banks, brokerages, and stock transfer agents (as relevant) to formally transfer legal title into the name of the trustee. But, in the event that the formal legal title is not transferred prior to death, the general assignment can be used to obtain a court order to transfer legal title into the trust.

In Kucker v. Kucker , (2011), 192 CA 4 th , 90, the Court of Appeal reversed a trial court decision wherein the trial court disallowed a petition to transfer stocks into a trust based on a general assignment of all assets by the settlor to the trustee. The Court of Appeal agreed with the petitioner that a general assignment of all or substantially all of the settlor’s assets into one’s trust does cause the stocks to be owned by the trustee. An otherwise unnecessary probate was thus avoided thanks to a general assignment by the settlor.

Similarly, a declaration of trust by a settlor to hold certain assets listed on a schedule of pledged assets attached to a trust document can likewise be used to accomplish the same result. Most attorneys use a schedule of initial trust assets and a general assignment to reinforce one-another. Moreover, unlike the general assignment, the schedule of trust assets will also include the real estate – together with a full legal description — for the same reason. That is, if a trust transfer deed is not properly executed prior to the settlor’s death, then the schedule of initial trust assets to a declaration of trust can be used to petition the court to transfer legal title into the trust without a probate.

While the general assignment and the declaration of trust are important safeguards against the failure to formally transfer title to trust assets while the settlor is still alive and competent, such safeguards are just safeguards. The better course of action is to see that one’s real estate, stocks and bonds, and financial accounts (and other trust assets) are properly titled in the name of the trustee of one’s trust. After all, filing a court petition entails further expenses and delay in the administration of the trust that can be avoided.

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Assignment of Accounts Receivable

The financial accounting term assignment of accounts receivable refers to the process whereby a company borrows cash from a lender, and uses the receivable as collateral on the loan. When accounts receivable is assigned, the terms of the agreement should be noted in the company's financial statements.

Explanation

In the normal course of business, customers are constantly making purchases on credit and remitting payments. Transferring receivables to another party allows companies to reduce the sales to cash revenue cycle time. Also known as pledging, assignment of accounts receivable is one of two ways companies dispose of receivables, the other being factoring.

The assignment process involves an agreement with a lending institution, and the creation of a promissory note that pledges a portion of the company's accounts receivable as collateral on the loan. If the company does not fulfill its obligation under the agreement, the lender has a right to collect the receivables. There are two ways this can be accomplished:

General Assignment : a portion of, or all, receivables owned by the company are pledged as collateral. The only transaction recorded by the company is a credit to cash and a debit to notes payable. If material, the terms of the agreement should also appear in the notes to the company's financial statements.

Specific Assignment : the lender and borrower enter into an agreement that identifies specific accounts to be used as collateral. The two parties will also outline who will attempt to collect the receivable, and whether or not the debtor will be notified.

In the case of specific assignment, if the company and lender agree the lending institution will collect the receivables, the debtor will be instructed to remit payment directly to the lender.

The journal entries for general assignments are fairly straightforward. In the example below, Company A records the receipt of a $100,000 loan collateralized using accounts receivable, and the creation of notes payable for $100,000.

In specific assignments, the entries are more complex since the receivable includes accounts that are explicitly identified. In this case, Company A has pledged $200,000 of accounts in exchange for a loan of $100,000.

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General Assignment of Assets

General assignment of assets to a trust is a legal process in which an individual transfers ownership of their property to a trust they have established. Facilitated by the use of the general assignment of assets document, this is a fundamental step in creating and funding a trust so the assets can pass according to the terms and instructions outlined in the trust document.

How do you transfer assets into a trust?

Completing a transfer of assets into a trust starts with drafting a formal trust document. This document outlines the terms, conditions, beneficiaries, trustee(s), and instructions for how the assets should be managed and distributed.

To properly execute an assignment of personal property to a trust, you start by listing all of the assets you’d like to transfer. You can use estate planning software to ensure every asset is accounted for and nothing is missed when creating the list of assets to be transferred. After listing all assets to be transferred, the document is signed by the settlor to make the transfer official.

What kinds of property can a general assignment of assets be used for?

A general assignment of assets can be used for both personal property and real property. Personal property can be both intangible such as stocks or tangible like furniture, jewelry, or boats. Real property can include land, houses, apartments, or other buildings or real property. A best practice when completing an assignment of personal property into a trust is to be as specific as possible, especially when it comes to unique or highly valuable property such as collectibles or jewelry.

What are the benefits of using a general assignment of assets document?

Before putting assets into a trust, they are typically held in an individual’s name. Upon an individual’s death, the assets pass by will or beneficiary designations. When you create a trust, however, the trust becomes a container to hold the assets that you’d like to distribute in a specific manner.

Without moving assets into the trust, the trust is simply an empty container because only the assets inside the trust are subject to the terms of the trust agreement. That’s why it’s important to use a general assignment of assets document to ensure that the transfer of assets into the trust is official so there’s no confusion or conflict upon the settlor’s death. In case an individual fails to officially transfer assets into a trust before death, the general assignment of assets document serves as proof that those assets were designated as trust assets.

What else is important to know about the general assignment of assets document?

While the general assignment of assets document is one of many important estate planning documents that individuals should complete when they utilize a trust, it’s important to note that there may be other steps needed to ensure the assets are held in the trust. The following should be kept in mind for transferring certain kinds of property into a trust:

Real Estate – Prepare and execute a deed transferring property ownership to the trust and ensure that the trust is listed as the owner on property records.
Bank Accounts and Investments – Change the ownership and beneficiary designations of bank accounts, investment accounts, retirement accounts, life insurance policies, and annuities to ensure they align with your trust’s provisions.
Personal Property – Be as specific as possible, being sure to describe the personal property in detail to ensure there’s no confusion or conflict upon the owner’s death.
Business Interests – If you own a business, you may assign your business interests to the trust through appropriate legal documentation, such as a buy-sell agreement or assignment of membership interests.

It’s also important that settlors inform relevant parties about the existence of the trust and the assets assigned to it. This may include notifying financial institutions, insurance companies, and key family members or beneficiaries.

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Understanding Assets: The Key to Financial Success

Exploring the importance of assets in financial planning and management..

description: an anonymous individual reviewing financial documents and charts on a laptop, surrounded by books and a cup of coffee.

An asset management company ( NYSE:AMC ) is an investment firm that pools money together from clients and uses that money to make a variety of investments on their behalf. These investments can include stocks, bonds, real estate, and other financial instruments. The goal of an AMC is to help clients grow their wealth over time through strategic investment decisions.

Asset-based lending, or ABL, is when a lender issues you a loan based on the value of your collateral, such as inventory or accounts receivable. This type of lending can be beneficial for businesses that need access to capital but may not qualify for traditional loans based on creditworthiness alone.

Mark to market (MTM) is a method of measuring the fair value of accounts that can fluctuate over time, such as assets and liabilities. This accounting practice helps ensure that financial statements accurately reflect the current market value of an organization's assets and liabilities.

Asset protection is a crucial aspect of financial planning. Strategies such as umbrella coverage, asset titling, homestead exemptions, and retirement planning can help individuals and businesses safeguard their assets from potential risks and liabilities.

Emerging considerations in asset management include the rise of cryptocurrency, staking, decentralized finance (DeFi), and non-fungible tokens (NFTs). These new technologies and investment opportunities present unique challenges and opportunities for investors and asset managers alike.

Assets are classified into three main classes: convertibility, usage, and physical existence. Proper classification of business assets is essential for financial reporting and decision-making. Understanding the nature of assets can help businesses optimize their resources and achieve their financial goals.

IT asset management is the process of accounting for the location and condition of all business assets, including technology assets. The goal of IT asset management is to optimize asset use, reduce costs, and minimize risks associated with asset management.

An asset is essentially any resource with economic value that is expected to provide a future benefit to its holder. Assets can include tangible assets such as real estate and equipment, as well as intangible assets like intellectual property and goodwill. Proper asset management is essential for long-term financial success.

Gold has a key role as a strategic long-term investment and is crucial for a well-diversified portfolio. Investing in gold can help protect against inflation, economic uncertainty, and market volatility. Understanding the role of gold in a diversified investment strategy is essential for investors seeking to preserve and grow their wealth.

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Section 5 of SARFAESI Act, 2002: Acquisition of rights or interest in financial assets.

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002)

Chapter-II Regulation of Securitisation and Reconstruction of Financial Assets of Banks and Financial Institutions

Section 5: Acquisition of rights or interest in financial assets.

5. (1) Notwithstanding anything contained in any agreement or any other law for the time being in force, any 1 [ asset reconstruction company ] may acquire financial assets of any bank or financial institution —

(a) by issuing a debenture or bond or any other security in the nature of debenture, for consideration agreed upon between such company and the bank or financial institution, incorporating therein such terms and conditions as may be agreed upon between them; or

(b) by entering into an agreement with such bank or financial institution for the transfer of such financial assets to such company on such terms and conditions as may be agreed upon between them.

2 [ (1A) Any document executed by any bank or financial institution under sub-section (1) in favour of the asset reconstruction company acquiring financial assets for the purposes of asset reconstruction or securitisation shall be exempted from stamp duty in accordance with the provisions of section 8F of the Indian Stamp Act, 1899 (2 of 1899):

Provided that the provisions of this sub-section shall not apply where the acquisition of the financial assets by the asset reconstruction company is for the purposes other than asset reconstruction or securitisation. ]

(2) If the bank or financial institution is a lender in relation to any financial assets acquired under sub-section (1) by the 1 [ asset reconstruction company ], such 1 [ asset reconstruction company ] shall, on such acquisition, be deemed to be the lender and all the rights of such bank or financial institution shall vest in such company in relation to such financial assets.

2 [ (2A) If the bank or financial institution is holding any right, title or interest upon any tangible asset or intangible asset to secure payment of any unpaid portion of the purchase price of such asset or an obligation incurred or credit otherwise provided to enable the borrower to acquire the tangible asset or assignment or licence of intangible asset, such right, title or interest shall vest in the asset reconstruction company on acquisition of such assets under sub-section (1). ]

(3) Unless otherwise expressly provided by this Act, all contracts, deeds, bonds, agreements, powers-of-attorney, grants of legal representation, permissions, approvals, consents or no-objections under any law or otherwise and other instruments of whatever nature which relate to the said financial asset and which are subsisting or having effect immediately before the acquisition of financial asset under sub-section (1) and to which the concerned bank or financial institution is a party or which are in favour of such bank or financial institution shall, after the acquisition of the financial assets, be of as full force and effect against or in favour of the 1 [ asset reconstruction company ], as the case may be, and may be enforced or acted upon as fully and effectually as if, in the place of the said bank or financial institution, 1 [ asset reconstruction company ], as the case may be, had been a party thereto or as if they had been issued in favour of 1 [ asset reconstruction company ], as the case may be.

(4) If, on the date of acquisition of financial asset under sub-section (1), any suit, appeal or other proceeding of whatever nature relating to the said financial asset is pending by or against the bank or financial institution, save as provided in the third proviso to sub-section (1) of section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) the same shall not abate, or be discontinued or be, in any way, prejudicially affected by reason of the acquisition of financial asset by the 1 [ asset reconstruction company ], as the case may be, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the 1 [ asset reconstruction company ], as the case may be.

3 [ (5) On acquisition of financial assets under sub-section (1), the 1 [ asset reconstruction company ] , may with the consent of the originator, file an application before the Debts Recovery Tribunal or the Appellate Tribunal or any court or other Authority for the purpose of substitution of its name in any pending suit, appeal or other proceedings and on receipt of such application, such Debts Recovery Tribunal or the Appellate Tribunal or court or Authority shall pass orders for the substitution of the 1 [ asset reconstruction company ] in such pending suit, appeal or other proceedings. ]

1. Substituted by Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 , w.e.f. 1-9-2016 through sec. 3 as under:

“3. Throughout the principal Act,— (i) for the words “securitisation company”, “reconstruction company”, “securitisation or reconstruction company” , “securitisation company or the reconstruction company” or “securitisation company or a reconstruction company”, wherever they occur, the words “asset reconstruction company” shall be substituted;

(ii) for the words “securitisation companies or reconstruction companies”, wherever they occur, the words “asset reconstruction companies” shall be substituted;

(iii) for the words “qualified institutional buyer”, wherever they occur, the words “qualified buyer” shall be substituted;

(iv) for the words “qualified institutional buyers”, wherever they occur, the words “qualified buyers” shall be substituted.”

2. Inserted by Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 , (w.e.f. 01.09.2016 vide N. No. S.O. 2831(E) dated 01.09.2016).

3. Inserted by Enforcement of Security Interest and Recovery of Debts Law (Amendment) Act, 2012 (w.e.f. 15.1.2013 vide N. No. S.O. 171(E) dated 15.01.2013).

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Section 41 of sarfaesi act, 2002: amendments to certain enactments, section 40 of sarfaesi act, 2002: power to remove difficulties.

India: Assignment Agreement Of Asset Reconstruction Companies: To Be Registered Or Not

One of the most popular types of transactions in financial markets is debt assignment. It encompasses transferring a debt from a creditor (assignor) to a third party (assignee). The dialogue of having a registered and an unregistered assignment agreement is currently one of the most important issues faced in debt assignment transactions in India. Given the amount of assignment transactions conducted by banks and financial institutions or asset reconstruction companies ("ARCs") in general, the recognition behind the agreement constitutes a major task in such transactions.

Assignment is primarily a contractual notion that refers to an arrangement, in which, one party's rights and duties are transferred to another. By virtue of assignment, the assignee undertakes the role of its assignor and agrees to be bound by it as well as gets the right to enforce it. The rights/interest under an assignment agreement are detailed under Section 5 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act"). While such acquisition, the said agreement must also meet the standards of the Indian Contract Act of 1872 ("Act") in order to be legitimate.

This article primarily focuses on the judgement pronounced by the Hon'ble National Company Law Appellate Tribunal, Principal Bench, New Delhi [Company Appeal (AT) (Ins) No. 470 of 2023] in the matter of Naresh Kumar Agarwal Vs. CFM Asset Reconstruction Pvt. Ltd. & Anr. - Company Appeal (AT) (Ins) No. 470 of 2023, in which the Hon'ble Appellate Tribunal has adjudicated upon the issue of registering the assignment agreement under Section 5 of SARFAESI Act.

Before understanding the ratio of the said judgment, it is pertinent to look into the brief facts of the case:

State Bank of India ("SBI") sanctioned credit facilities in favour of Action Ispat and Power Private Limited ("Principal Borrower"). In 2013, Master Restructuring Agreement was executed between the SBI and several other Banks with the Principal Borrower. M/s Nikhil Footwear Pvt. Ltd. ("Corporate Debtor") executed a Deed of Guarantee in 2013 in favour of SBICAP Trustee Company Ltd. Another Master Restructuring Agreement was executed in 2016. Thereafter, SBI filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("Code") qua Principal Borrower bearing CP (IB) No. 1096 of 2018 which was duly admitted by the Adjudicating Authority vide its order dated 23.03.2022. However, in January, 2021 SBI ("Assignor") and CFM ARC ("Assignee") signed an assignment agreement wherein, SBI assigned debt owned by the Principal Borrower to CFM ARC. Subsequently, CFM ARC filed an application under Section 7 of the Code qua Corporate Debtor bearing CP (IB) No. 106/PB/2022 which was duly admitted by the Adjudicating Authority vide its order dated 28.02.2023. Aggrieved by the order dated 28.02.2023, the Shareholder preferred an Appeal before the Hon'ble Appellate Tribunal.

The opposing viewpoints and methods on this vital subject opened up a bag of worms. The main contention put forth by the Appellant was that the Assignment Agreement being an unregistered one, there was no valid assignment in favour of ARC so as to entitle it to initiate proceedings under Section 7 of the Code. Appellant further contented that the Adjudicating Authority having already commenced CIRP against the Principal Borrower by admitting Section 7 application filed by the State Bank of India, on the basis of same debt and same set of facts, another applications cannot be admitted simultaneously.

The Respondent reciprocated by submitting that Assignment of the financial debt by Bank or Financial Institution in favour of the ARC can be effected in accordance with the statutory scheme provided in Section 5 of the SARFAESI Act and it does not contemplate Assignment of financial debt by registered document. Moreover, an application under Section 7 of IBC was already admitted qua another Corporate Guarantor filed by ARC which was passed, based on the same assignment.

Section 5 of the SARFAESI Act, is an enabling provision to empower the ARCs to acquire financial assets in the manner provided in Section (5)(1). While considering the facts and circumstances of the case, the Hon'ble Appellate Authority, clarified that a deeming provision is contained in Section 5(2), which gives the ARC the authority to acquire financial assets in the manner specified therein. According to Section 5(2), ARC shall, upon such acquisition, be deemed to be the lender and shall be entitled to all rights of such bank or financial institution. The legislator always has a purpose and an objective in mind when it employs the deeming fiction. However, it cannot be the intent of the Code to hinder ARCs from filing an application solely by means of an unregistered assignment. Therefore, the Hon'ble Appellate Tribunal held that,

"...We, thus, are of the view that argument of the Appellant that application under Section 7 by Respondent No. 1 – Assignee of the State Bank of India was not maintainable, cannot be accepted"

"...Section 7 is an enabling provision which permits the Financial Creditor to initiate CIRP against a Corporate Debtor. The Corporate Debtor can be the Principal Borrower as well as the Corporate Guarantor."

"...no error has been committed by the Adjudicating Authority in admitting Section 7 application. We, thus, do not find any error in the impugned order admitting Section 7 application..."

Conclusion:

All in all, it stands settled by the Appellate Authority that when an ARC acquires an asset in a particular manner and procedure, as prescribed under the provisions of Section 5 of SARFAESI Act, the deeming section will come into play rather than the importance being given towards the document being registered or not. However, it has been made evident by the Appellate Tribunal that the instant ratio shall be applicable, only if the assignments pertain to ARCs, in accordance with the provisions prescribed under the SARFAESI Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Applicability of SARFAESI to Assignment of Loan by an NBFC

[ Siddharth Tandon is a BB.A. LL.B student at National Law University, Jodhpur]

The primary objective of enacting the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (or the SARFAESI Act) was to empower the financial institutions by identifying and remedying the problem of non-performing assets (NPA) by providing efficient solutions such as recovery of NPA without intervention of courts. Although from the time of its enactment the Act did recognise non-banking financial companies (NBFCs) as coming under the ambit of ‘ financial institutions ’, it required the Central Government to pass a notification stating the same. The need for such a notification was felt by the Central Government almost thirteen years after the Act came into force, when it was stated by the then Finance Minister of India, Mr. Arun Jaitley, in his 2015 budget speech.

After almost eighteen months, the Central Government passed a notification recognizing and listing a total of 196 substantially important NBFCs, which were allowed to take benefit of the provisions of the SARFAESI Act. The notification also listed certain conditions to be fulfilled by the NBFCs to come under the purview of the Act. The NBFCs should be:

Covered under clause (f) of section 45-I of the Reserve Bank of India Act ( or the RBI Act), 1934, which defines ‘NBFCs’
Registered with RBI;
Having assets worth rupees five hundred crore and above as per their last audited balance sheet.

In addition to this, the notification also highlighted that only those NBFCs with “such security interest which is obtained for securing repayment of secured debt with principal amount of rupees one crore and above” will be allowed to make use of sections 13 to 19 of the SARFAESI Act, which are of utmost importance when it comes to recovery of loan arrears.

This is where the notification leads to a problem. Only NBFCs which have given secured loans having a principal amount of rupees one crore or more are allowed to make use of sections 13 to 19 of the Act for recovery of the loan, while the other financial institutions have a reduced threshold of rupees one lakh. Hence, an issue arises during the assignment of loan by an NBFC to any other financial institution, where the principal amount is less than rupees one crore. Will such financial institution, which otherwise would have been allowed to use the provisions of the Act, be allowed in this situation where it is an assignee of a loan from an NBFC not coming under the purview of the Act.

The word “assignment” can be defined as “a transfer or setting over of property, or of some right or interest therein, from one person to another; the term denoting not only the act of transfer, but also the instrument by which it is effected”. [i] As has previously been held in multiple cases , ‘assignment of loan or debt’ is permissible under the provisions of the Transfer of Property Act.

The law of assignment is based on the principle of “nemo dat quad non habet” , meaning that ‘the assignee cannot have better rights than that of the assignor’. This maxim forms the basis of the issue that if an NBFC itself does not have the right to make use of provisions of recovery of loan arrears of SARFAESI Act, how the assignee financial institution can do the same.

This question was dealt by the Bombay High Court in 2015 in Kotak Mahindra Bank Ltd v Trupti Sanjay Mehta and Others . In this case, an NBFC had sanctioned a loan to an institution which had defaulted in paying back the loan. The debt was subsequently assigned to a bank, which invoked the SARFAESI Act for recovery of the amount. The borrower filed an application with the Debt Recovery Tribunal (DRT) stating that as the original lender did not possess the right to enforce the Act, the assignee should not be allowed to do the same. Aggrieved by the judgment of the DRT which was pronounced against the bank, it filed a petition in the Bombay High Court.

The High Court delved into the definition of ‘borrower’ as defined in the SARFAESI Act to hold: “The third part [of the definition of ‘borrower’] … clearly restricts the definition to a ‘borrower’ of a Bank or Financial Institution who acquires any right or interest and specifically excludes any other type of Institution”. It went on to state that “by virtue of the restrictive definition, only debts which are assigned to a Bank from another Financial Institution (or vice versa), such debts alone are covered under the term “borrower”. If the legislature intended to expand the scope of “borrower” to mean any debt assigned to a Bank or Financial Institution by a Non-Banking Financial Institution or any other private person, it would not have excluded a Non- Banking Financial Institution or any other person in the last part of the definition.” It finally held: “The Objects and Reasons of the SARFAESI Act … clearly disclose that this mechanism has … been designed only for the benefit of Banks and Financial Institutions and not for other categories such as Non-banking Financial Institutions etc.”

The Court read the Act restrictively by not allowing ‘NBFCs’ to be interpreted into the provisions. But to place reliance on this case for answering the issue in contention would not be correct. This is because the Bombay High Court gave this judgment during the time when the Central Government had not come up with the notification identifying various NBFCs coming under the purview of the Act. Though it cannot be said that the notification overruled the judgment, it can definitely be stated that it changed the legal environment in which this issue exists. After the notification, the reasoning of the Bombay High Court holds little water.

Another case, which indirectly deals with this issue, is Indiabulls Housing Finance Limited v. Deccan Chronicles Holdings Limited . The Supreme Court in this case held: “No doubt, till the respondent (an NBFC) was not a ‘financial institution’ within the meaning of Section 2(1)(m)(iv) of the Act, it was not a ‘secured creditor’ as defined under Section 2(1)(zd) of the Act and, thus, could not invoke the provisions of the Act. However, the right to proceed under the Act accrued once the Notification was issued.” It further held: “… the definition clauses dealing with ‘debt securities’, ‘financial assistance’, ‘financial assets’, etc., clearly convey the legislative intent that the Act applies to all existing agreements irrespective of the fact whether the lender was a notified ‘financial institution’ on the date of the execution of the agreement with the borrower or not.”

This case, though relevant in the sense that it portrays the inclusive nature of the statute, does not directly give us the answer to the present issue.

An analysis of the present legal regime, including the cases of various courts as well as statutes have not been able to correctly provide us with a clear answer. The case of Trupti Sanjay Mehta , though directly dealing with the question, cannot be relied upon as the judgment came before the notification was passed. Similarly, the IBFSL judgment cannot be relied upon, as it is less about assignment of loan and more about whether an NBFC is allowed to make use of provisions of the Act even if the loan was given out before the notification was passed.

Therefore, according to the author, in order to arrive at an answer, a different and a more inclusive viewpoint needs to be taken. The right to make use of the provisions of SARFAESI Act cannot be considered as a contractual right, which can be transferred or taken away by way of contract. Thus, the fact that an assignee cannot have better rights than that of assignor is not applicable as the rule is in relation to contractual rights, and not in respect to legal rights. At this point, reliance can be placed on the case of ICICI Bank Limited v. Official Liquidator of APS Star Industries Ltd. , where it was held: “In assigning the debts with underlying security, the bank [a financial institution] is only transferring its asset and is not acquiring any rights of its client(s)…The High Court(s) has erred in not appreciating that the assignor bank is only transferring its rights under a contract and its own asset, namely, the debt … without in any manner affecting the rights of the borrower(s) in the assets.”

Thus, as long as there is no interference with the right of the borrower, the assignment of loan should be held to be rightful, along with the assignee having full discretion to make use of the Act for recovery of loan.

– Siddharth Tandon

[i] Alexander M. Burrill, A Treatise on the Law and Practice of Voluntary Assignments for the Benefit of Creditors §1, at 1 (James Avery Webb ed., 6 th ed. 1894).

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Under IFRS 9, investments in debt instruments are either measured at: (1) amortized cost, (2) FVOCI (with subsequent reclassification to profit or loss) or (3) FVTPL, depending on the entity's business model for managing the assets and the cash flows characteristic of the instrument, regardless of legal form.Under US GAAP, the legal form of a debt instrument primarily drives classification.
Assignment of Accounts Receivable
The financial accounting term assignment of accounts receivable refers to the process whereby a company borrows cash from a lender, and uses the receivable as collateral on the loan. ... The balance sheet consists of assets, liabilities, and owner's equity in the company. It is one of the four key financial statements issued by public companies.
Reserve Bank of India
1.1.1 Under these guidelines, NBFCs can transfer a single standard asset or a part of such asset or a portfolio of such assets to financial entities through an assignment deed with the exception of the following : Revolving credit facilities (e.g., Credit Card receivables) Assets purchased from other entities
General Assignment of Assets
General assignment of assets to a trust is a legal process in which an individual transfers ownership of their property to a trust they have established. Facilitated by the use of the general assignment of assets document, this is a fundamental step in creating and funding a trust so the assets can pass according to the terms and instructions outlined in the trust document.
Understanding Assets: The Key to Financial Success
Proper asset management is essential for long-term financial success. Gold has a key role as a strategic long-term investment and is crucial for a well-diversified portfolio. Investing in gold can help protect against inflation, economic uncertainty, and market volatility. Understanding the role of gold in a diversified investment strategy is ...
Section 5 of SARFAESI Act, 2002: Acquisition of rights or ...
Section 5: Acquisition of rights or interest in financial assets. 5. (1) Notwithstanding anything contained in any agreement or any other law for the time being in force, any 1[asset reconstruction company] may acquire financial assets of any bank or financial institution—. (a) by issuing a debenture or bond or any other security in the ...
Assignment Agreement Of Asset Reconstruction Companies: To Be ...
By virtue of assignment, the assignee undertakes the role of its assignor and agrees to be bound by it as well as gets the right to enforce it. The rights/interest under an assignment agreement are detailed under Section 5 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act").
Solved Ch 04-Assignment
Accounting questions and answers. Ch 04-Assignment - Analysis of Financial Statements3. Asset management ratiosAsset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has invested in a particular type of asset (or group of assets) to the amount of revenues the asset is generating.
Applicability of SARFAESI to Assignment of Loan by an NBFC
[Siddharth Tandon is a BB.A. LL.B student at National Law University, Jodhpur] The primary objective of enacting the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (or the SARFAESI Act) was to empower the financial institutions by identifying and remedying the problem of non-performing assets (NPA) by providing efficient solutions […]

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Lesson Summary: Financial assets

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Module 3: Recording Business Transactions

Module 4: The Accounting Cycle

Module 5: Accounting for Cash

Module 6: Receivables and Revenue

Module 7: Merchandising Operations

Module 8: Inventory Valuation Methods

Module 10: Other Assets

Module 11: Current Liabilities

Module 12: Non-Current Liabilities

Module 13: Accounting for Corporations

Module 14: Statement of Cash Flows

Module 15: Financial Statement Analysis

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Unit 1 Review Problem (After Module 6)

Unit 2 Review Problem (After Module 8)

Accounting for Direct Assignment under Indian Accounting Standards (Ind AS)

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De recognition in case of Direct Assignment

Computation of Gain on Sale

Impact on GST on the gain on sale

Reporting of Retained Interests

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Understanding the Basics of Assignment and Assumption Agreements

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Assignment of Accounts Receivable: Meaning, Considerations

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A General Assignment of Assets to one’s Living Trust can help avoid a Probate.

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General Assignment of Assets

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