Factoring in Africa: Legal & Regulatory Environment Introduction to IFG s Model Law Afreximbank 13. June 2014 Lagos, Nigeria
Why is Factoring important? Support for (in particular SME) business to develop and grow Support for export development Creating and supporting employment Efficient economic growth
IFG Started in 1963 Members in more than 60 countries Representing the Commercial Finance Industry worldwide (Factoring, Invoice Finance, Asset Based Lending)
Connect Creating Business Opportunities for Members through Two- Factor platform and other cross-border business solutions. Global association but regional approach through Chapters (Asia, Latin America, Africa, Central East Europe) Partnering with like-minded associations (CFA USA, ADFIAP, national associations ) and international organizations (EBRD, EIF, CFEC, ) Connect members with specialized service providers (IT, Legal, Risk, Consulting )
Educate Developing Talent in Factoring Industry E-learning in different languages (English, French, Spanish, Russian, Chinese) University certificated Course on Finance International Trade & Commercial Finance Leadership Business game Mentoring and Consulting
Influence Research and Statistics Center Access to networking & Learning Defending the industry with policy makers : EU Federation for Factoring & Commercial Finance Co-operation with CFA for harmonization Draft Model Law on Factoring
Legal & Regulatory Environment for Factoring: An Overview
EUF Legal Study 2013 Third version of comparative analysis of legal & regulatory environment for Factoring & ABL in 28 EU countries + 5 non EU countries (USA, Russia, Norway, Switzerland, Turkey)
Some Survey Questions - Legal requirements to operate? - Specific Law on transfer of Receivables? - What third party rights may affect assigned receivables? - Validity of Ban on Assignment? - Difference according to purpose of assignment? (purchase, collateral, pledge)? - Situation of financier in case of insolvency of client?
Conclusion of the EUF study Many differences between countries, even within EU. Illustration: Legal Requirements to operate: Yes in e.g. France, Germany, Italy, Portugal, Turkey No in e.g. UK, USA, Russia, Switzerland, Netherlands, Belgium
International Conventions Unidroit Convention on International Factoring, Ottawa 1988 owhy? International Factoring has a significant role in development of international trade owhat? Adopting uniform rules to provide legal framework that facilitates (international) factoring, while maintaining a fair balance of interests ostatus: Entered into force in 1995 o Belgium, France, Germany, Hungary, Italy, Latvia, Nigeria, Ukraine
International Conventions United Nations Convention on the Assignment of Receivables in International Trade (UNCITRAL New York 2001) opromote movement of goods & services cross-border ocovers ABL, Factoring, Forfaiting, Securitization, Project Finance okey Provisions: o Validates assignment of future & bulk receivables o Clarifies priority rights ostatus : not entered into force / signed by Liberia, Luxemburg, Madagascar and USA
Other conventions / international initiatives UNCITRAL legislative guide on Secured transactions (2007) Incorporates principles of convention on assignment of receivables UNCITRAL guide on Security rights in Intellectual Property (2010) UNCITRAL guide on implementation of Security Rights Registry (2013) At present : UNCITRAL discusses Model Law on Secured Transactions Rome I Regulation (EU regulation) on law applicable to contractual relations (priority in case of conflicting assignments not decided yet, but probably based on law of assignor)
IFG s Model Law on Factoring Prepared by IFG s Legal Committee Chairman : Corneliu Robu Editor : Dr Ulrich Brink
Terms of Reference Legal environments for factoring are not uniform In emerging markets (such as Africa) there is a need for guidance Important to start with a legal environment based on best practices IFG s Model law is based on principles of UNCITRAL Convention (important for future harmonization) Reduces scope to cover factoring transactions
Key elements Scope includes all types of factoring (With or without recourse, Invoice Discounting and Reverse Factoring) With or without notification to debtor Possibility to assign future receivables Electronic assignments are possible Ban on assignment is not valid Assignee is entitled to payment Competing Laws : Law of assignor has priority Registry system for assignments is recommended
Thank You! More information: www.ifgroup.com Erik Timmermans : SG@ifgroup.com