Evaluation of Legal Methods for Transferring Assets in Securitization with the Implementation on the Factoring Contract Receivable

Document Type : Scientific Research

Authors

1 Assistant Professor in Private Law, Payame Noor Univesity, Tehran, Iran

2 Master of Private Law, Tabriz University, Tabriz, Iran

3 Master of Private Law, Payame Noor University, Qatar

Abstract

Securitization is a financial instrument, in which Assets are generally transferred in three different methods; Assignment, Novation and Sub-Participation (the latter is used in common law systems). A comparative study among these  Legal Frameworks shows that regardless of the method used for transferring assets in securitization, it should be accomplished in a manner that removes to the extent practicable, these assets from the estate of the selling company in the event of its bankruptcy, which can be achieved by isolating the source of payments and insuring that the transfer of the assets from the Originator to the SPV cannot be interfered, which often referred to as creating a “true sale” of the receivables. On the other hand, Factoring Companies, which are bank-credit institutions, has the primary objective of providing liquidity to traders and funding them through the purchase of their short-terms claims are exposed to cash reduction and liquidity risks due to such activities, causing them to seek funding sources. Thus to study the implementation of securitization on receivables arising from factoring operations as a funding source, it is necessary to consider the different approaches of Legislation in limited or unlimited determination of convertible assets and other characteristics determined for such assets. However, the practice of most developed countries is based on non- restricting these assets and assigning it to the will of the parties, provided that such assets meet all the necessary requirements for securitization.

Keywords

References

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