Law on factoring

Factoring contract

Factoring shall be a financial service of buying and selling of existing non matured or future short-term monetary receivable, that arose from a contract of sale of goods or provision of services at home and abroad.

Participants in factoring shall be:

  • The assignor, who sells to the factor its receivable against the debtor that arose from a contract of sale of goods or provision of services, shall be a bank, a company or an entrepreneur based in the Republic of Serbia, and also those persons with headquarters abroad, registered in accordance with the local regulations
  • The factor, who buys receivables from the assignor, shall be:
    a bank, in terms of the law governing the operations of banks
    a company organized as a corporation or limited liability company, headquartered in the Republic of Serbia, which has the approval of the ministry responsible for finance affairs to perform factoring
    a foreign bank or a foreign company – exclusively in international factoring
  • The debtor shall be a bank, a company or an entrepreneur based in the Republic of Serbia, or such persons domiciled abroad, registered in accordance with the local regulation.

Subject of factoring

The subject of factoring may be:

  • any existing non matured or future, whole or partial, short-term monetary receivable that arose from a contract of sale of goods or provision of services, concluded between legal persons and entrepreneurs
  • any existing non mature or future, whole or partial, short-term monetary receivable of a legal person and an entrepreneur that has arisen under the contract of sale of goods or provision of services concluded with a beneficiary of the budget of the Republic of Serbia, the budget of an autonomous province, or the budget of the units of local government, as well with a beneficiary of the funds of the mandatory social insurance organizations
  • future receivable may be subject of the factoring only if it is determinable, and if the factoring contract contains information about who shall be a debtor of such receivable. Provision in the factoring contract that provides the sale of future receivable shall produce legal effect at the moment such receivable arises.

Subject of the factoring may not be a claim arising from the sale of goods or provision of services for personal, family or household purposes.

Types of factoring

For the purposes of the Law on factoring may be:

  • domestic
  • international.

According to the obligation of assuming the risk of debt collection, domestic and international factoring may be:

  • non-recourse factoring
  • recourse factoring.

Factoring contract

Factoring may be done only on the basis of a contract concluded in written or electronic form.

The contract, whose subject has not been defined in accordance with the Law on factoring, shall not be considered a factoring contract in terms of the Law on factoring.

Factoring contract shall not be considered as a credit or loan contract, pursuant to the regulations of the Republic of Serbia, and business practices.

Factoring contract shall contain in particular:

  • data on the contracting parties
  • information on the type of factoring
  • basis and details of the receivable that is the subject of the contract
  • amount, method of calculation and payment of purchased receivable to the assignor
  • amount, method of calculation and payment of the compensation to the factor
  • right of factor to interest and other costs that may arise out of the contract
  • date of entering into the agreement
  • signatures of legal representatives of each contractual party, other person authorized to sign the contract or attorney of such persons.

Factoring contract shall cease to be valid after its concluded expiry date.

If it is not concluded for a fixed term, it may not cease before all sold receivables are not collected or compensated by the assignor.

Factoring contracts of one assignor concluded with various factors, which as a subject have the sale of the same receivable, shall be prohibited, and any such subsequently signed factoring contract shall be null and void. Provisions of a factoring contract and general terms and conditions of the assignor or the factors that prescribe a rule different to the mentioned rule shall be null and void.

Assignor shall conduct the sale of each receivable specified in factoring contract while simultaneously handing over to the factor:

  • the contract (in original or a copy certified by a competent authority) and/or invoices and other documents evidencing basis and identifying the receivable
  • the notice to the debtor that the receivable is sold to the factor.

The assignor and the factor shall draft a separate document evidencing the handover of the documentation.

The date when the assignor handed over to the factor the documentation, as specified in the handover document, shall be considered as the date of sale of the receivable.

Assignor shall be obliged to submit a notification to the debtor of the sale of receivables in written or electronic form. After receipt of the notification, the debtor shall be bound to pay the receivable to the factor.

By payment of receivable to the assignor, the debtor shall not be relieved of the obligation towards the factor, if he was notified about the sale of receivable before payment, while the assignor shall promptly transfer such payment to the factor.

Notification of the sale of the receivable may be done for all the receivables that are the subject of the factoring contract, regardless of whether they exist at the time of conclusion of the contract or not.

The notification shall contain:

  • information about the factoring contract
  • information about the factor to which the debtor shall be obliged to pay and
  • the instructions for payment.

If the notification refers to one or more existing receivables, notification, in addition to the mentioned information, it shall contain the invoice number, amount of receivable and currency of payment.

After receipt of the notification, the debtor shall be bound to pay the receivable to the factor.

By payment of receivable to the assignor, the debtor shall not be relieved of the obligation towards the factor, if he was notified about the sale of receivable before payment, while the assignor shall promptly transfer such payment to the factor.

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