Equitable Assignment Singapore Airport

1.1       Formalities. In order to create an enforceable debt obligation of the obligor to the seller: (a) is it necessary that the sales of goods or services are evidenced by a formal receivables contract; (b) are invoices alone sufficient; and (c) can a binding contract arise as a result of the behaviour of the parties?

Under Singapore law, it is generally not necessary for a sale of goods or services to be evidenced by a formal receivables contract in order to create an enforceable debt obligation of the obligor to the seller. The debt obligation of the obligor to the seller may also be enforced if parties can demonstrate that there was an oral or implied agreement supported by consideration.  This is reiterated in Section 4 of the Sale of Goods Act (Cap. 393, 1999 Revised Edition).  It would nonetheless still be advisable from an evidentiary viewpoint to have a receivables contract reduced to writing. 

It should be noted, however, that certain debt obligations must be evidenced by a written contract in order for the same to be enforceable against the obligor.  For example, under Section 6 of the Civil Law Act (Cap. 43, 1999 Revised Edition), a contract for the sale or other disposition of immovable property or any interest in such property must be evidenced in writing.  Similarly, an agreement that is not to be performed within the space of one year from the making thereof (i.e. the sale of goods and services at a future date) must also be made in writing failing which no action may be brought on the agreement.

A binding receivables contract may be implied by the conduct of the parties notwithstanding the absence of a written agreement.  The issuance of an invoice by the Seller may be construed as giving rise to a debt obligation especially where it can be established from the surrounding circumstances that parties had by their conduct implicitly agreed to the sale of goods and services.  A typical example is where parties have a pre-existing or ongoing business relationship where the Seller has issued similar invoices as part of the transaction for the sale of goods and services which have been previously accepted by the obligor as giving rise to an enforceable debt obligation.

1.2       Consumer Protections. Do your jurisdiction’s laws: (a) limit rates of interest on consumer credit, loans or other kinds of receivables; (b) provide a statutory right to interest on late payments; (c) permit consumers to cancel receivables for a specified period of time; or (d) provide other noteworthy rights to consumers with respect to receivables owing by them?

There is no express limit on the rate of interest on consumer credit, loans or other kinds of receivables except where the credit, loan or other kinds of receivable has been extended by a “moneylender” as defined under Section 2 of the Moneylenders Act (Cap. 188, 2010 Revised Edition).  However, the following guiding principles are generally considered when determining whether the interest rate imposed should be enforced:

(i) the interest rate imposed represents a genuine pre-estimate of loss and not an in terrorem penalty;

(ii) the terms of the contract involving a person dealing as a consumer are reasonable within the meaning of the Unfair Contract Terms Act (Cap. 396, 1994 Revised Edition);

(iii) the interest rate is imposed as part of a bona fide contract and not a sham transaction in order to circumvent any statutory or other licensing requirements applicable for moneylending; and

(iv) the interest rate imposed does not lead to the transaction being an extortionate credit transaction within the meaning of Section 103 of the Bankruptcy Act (Cap. 20, 2009 Revised Edition) which may be voided by the court if it was entered into within three years before the commencement of the bankruptcy of the consumer.

The Moneylenders Act does not apply to an “excluded moneylender” (for example, banks, credit societies, pawnbrokers or persons who lend solely to corporations or business/real estate investment trusts or who do not carry on the business of moneylending) or an “exempt moneylender”.

Insofar as licensed moneylending is concerned, the prescribed maximum fees/rates chargeable on a loan by a licensed moneylender under the Moneylenders Rules 2009 are as follows:

(a) nominal interest rate of 4% per month; and

(b) late interest at the nominal interest rate of 4% per month.

Late fees, administrative fees, variation fees, unsuccessful deductions etc. in relation to a loan (other than business loans) are also provided for and subject to certain restrictions as to how much may be charged.

Under Section 23(1) of the Moneylenders Act (Cap. 188, 2010 Revised Edition), a court may (in the course of proceedings brought by a licensed moneylender for the recovery of a loan or enforcement of a contract for a loan or any guarantee or security given for a loan) re-open moneylending transactions where the rate of interest or late interest charged is deemed to be excessive and the transaction is unconscionable and substantially unfair.  Section 23(4) of the Act extends the abovesaid powers of the court to any proceedings for relief brought by a borrower, a surety or other person liable to repay a loan to a licensed moneylender, and Section 23(5) of the Act extends the same powers to the Official Assignee when determining whether the debt or liability claimed by a licensed moneylender against a borrower in his bankruptcy is proved, and its value.

The Rules of Court further provide that (unless otherwise agreed between parties) a default rate of interest applies on judgment debts and costs at the (presently) civil interest rate of 5.33% per annum (as directed by the Chief Justice with effect from 1 April 2007).

Insofar as consumer protection is concerned, the Consumer Protection (Fair Trading) Act (Cap. 52A) provides for the right of consumers to cancel certain regulated contracts (which generally refer to direct sales contracts, long-term holiday product contracts, time share or time share related contracts) within prescribed cancellation periods of five days to up to six months in certain cases.  The Act also provides certain remedies to consumers in relation to unfair practices of suppliers in relation to a consumer transaction, and “lemon law” rights for the repair, replacement, refund or reduction in price of defective products sold to a consumer.

1.3       Government Receivables. Where the receivables contract has been entered into with the government or a government agency, are there different requirements and laws that apply to the sale or collection of those receivables?

Under Section 2 of the Government Contracts Act (Cap. 118, 2013 Revised Edition), all contracts including contracts for the sale of goods and services entered into with the Singapore government or a government agency and reduced in writing must be made in the name of the government and signed by a Minister or by any public officer duly authorised in writing by the Minister for Finance, either specially in any particular case, or generally for all contracts below a certain value in his Ministry or department.

Claims against the Singapore government or a government agency would be subject to the provisions of the Government Contracts Act (Cap. 118, 2013 Revised Edition). Insofar as civil claims against the Government or a government agency are concerned (including claims for receivables under a contract for the sale and purchase of goods and services), such claims will generally be treated the same as any similar claim made against a non-governmental entity.

 

2.1       No Law Specified. If the seller and the obligor do not specify a choice of law in their receivables contract, what are the main principles in your jurisdiction that will determine the governing law of the contract?

Where no choice of law has been specified in a receivables contract, the Singapore courts will firstly consider whether the intention of the parties with regard to the governing law can be inferred from the contract or the surrounding circumstances at the time when the contract was made. 

Where a common intention of the parties to adopt a particular governing law cannot be inferred from the contract or the surrounding circumstances, the Singapore courts will have to determine the objective proper law applicable to the contract, being the law with the closest and most real connection with the transaction.  In doing so, the Singapore courts will examine the connecting factors (including but not limited to where the parties are situated and where the obligations under the contract are to be performed) and arrive at what a reasonable man ought to have intended the governing law to be had thought about the matter at the time when the contract was made.

2.2       Base Case. If the seller and the obligor are both resident in your jurisdiction, and the transactions giving rise to the receivables and the payment of the receivables take place in your jurisdiction, and the seller and the obligor choose the law of your jurisdiction to govern the receivables contract, is there any reason why a court in your jurisdiction would not give effect to their choice of law?

Where the parties have expressly stipulated the contractual governing law to be Singapore law, the Singapore courts will generally uphold the same unless the choice of law was made in bad faith or is otherwise illegal or contrary to public policy in Singapore.

2.3       Freedom to Choose Foreign Law of Non-Resident Seller or Obligor. If the seller is resident in your jurisdiction but the obligor is not, or if the obligor is resident in your jurisdiction but the seller is not, and the seller and the obligor choose the foreign law of the obligor/seller to govern their receivables contract, will a court in your jurisdiction give effect to the choice of foreign law? Are there any limitations to the recognition of foreign law (such as public policy or mandatory principles of law) that would typically apply in commercial relationships such as that between the seller and the obligor under the receivables contract?

Where the parties have expressly stipulated the contractual governing law to be a foreign law other than Singapore law, the Singapore courts will generally uphold the same notwithstanding that one or more of the parties to the contract are resident in Singapore unless the choice of foreign law was made in bad faith or is otherwise illegal or contrary to public policy in Singapore. 

For example, the parties may be deemed to have acted in bad faith where the choice of foreign law was made deliberately for the purpose of evading the operation of Singapore law which is intended to be mandatorily applicable in Singapore to the parties and/or the transaction. Section 27(2) of the Unfair Contract Terms Act (Cap. 396, 1994 Revised Edition), provides that the Act is to apply notwithstanding any contract term purporting to apply the law of some country outside Singapore where either the (a) the term appears to the court, or the arbitrator or arbiter to have been imposed wholly or mainly for the purpose of enabling the party imposing it to evade the operation of the Act, or (b) in the making of the contract, one of the parties dealt as consumer, and he was then habitually resident in Singapore, and the essential steps necessary for the making of the contract were taken there, whether by him or by others on his behalf.

Singapore has enacted the Choice of Court Agreements Act 2016 (which came into effect on 1 October 2016) giving effect to the Hague Convention on Choice of Court Agreements, providing for the recognition and enforcement of choice of court agreements in relation to courts of Contracting States.

2.4       CISG. Is the United Nations Convention on the International Sale of Goods in effect in your jurisdiction?

Singapore ratified the United Nations Convention on the Contracts for International Sale of Goods (Vienna, 1980) on 16 February 1995.  Save for Article 1(b) of the Convention which has been specifically excluded, the provisions of the Convention have been incorporated into Singapore law under the Sale of Goods (United Nations Convention) Act (Cap. 283A, 2013 Revised Edition).  The said Act, however, only applies to contracts for the sale of goods between parties from contracting states to the Convention.

 

3.1       Base Case. Does your jurisdiction’s law generally require the sale of receivables to be governed by the same law as the law governing the receivables themselves? If so, does that general rule apply irrespective of which law governs the receivables (i.e., your jurisdiction’s laws or foreign laws)?

There is no requirement under Singapore law for a contract for the sale of receivables to be governed by the same law governing the receivables themselves.  Parties are free to choose a contractual governing law which is different from the law governing the receivables, and the Singapore courts will generally uphold the choice of law of the parties unless the choice of law was made in bad faith or is otherwise illegal or contrary to public policy in Singapore.  Notwithstanding the choice of contractual governing law, where the receivables are payable in Singapore, Singapore law may still apply mandatorily to certain issues including the assignability, perfection, enforceability and recovery of the receivables in Singapore.

3.2       Example 1: If (a) the seller and the obligor are located in your jurisdiction, (b) the receivable is governed by the law of your jurisdiction, (c) the seller sells the receivable to a purchaser located in a third country, (d) the seller and the purchaser choose the law of your jurisdiction to govern the receivables purchase agreement, and (e) the sale complies with the requirements of your jurisdiction, will a court in your jurisdiction recognise that sale as being effective against the seller, the obligor and other third parties (such as creditors or insolvency administrators of the seller and the obligor)?

In the absence of any qualifying information, the Singapore courts will generally recognise such a sale as being effective in Singapore as against the seller, the obligor and other third parties (such as creditors or insolvency administrators of the seller and the obligor) unless the choice of Singapore law to govern the receivables purchase agreement was made in bad faith or is otherwise illegal or contrary to public policy in Singapore.

The relevant laws in Singapore will also apply in the determination of the following issues: (a) the capacity of the parties located in Singapore to enter into or perform their respective obligations under the contract; (b) the validity and perfection of the sale of the receivables by the seller to the purchaser; and (c) the enforceability of the obligations of the parties in Singapore especially in the event of their insolvency. 

3.3       Example 2: Assuming that the facts are the same as Example 1, but either the obligor or the purchaser or both are located outside your jurisdiction, will a court in your jurisdiction recognise that sale as being effective against the seller and other third parties (such as creditors or insolvency administrators of the seller), or must the foreign law requirements of the obligor’s country or the purchaser’s country (or both) be taken into account?

Similar to Example 1, the Singapore courts will generally recognise the sale as being effective in Singapore as against the seller and other third parties (such as creditors or insolvency administrators of the seller) located in Singapore unless the choice of Singapore law to govern the receivables purchase agreement was made in bad faith or is otherwise illegal or contrary to public policy in Singapore.

The relevant laws in Singapore will also apply in the determination of the following issues: (a) capacity of the parties located in Singapore to enter into or perform their respective obligations under the contract; (b) the validity and perfection of the sale of the receivables by the seller to the purchaser; and (c) the enforceability of the obligations of the parties in Singapore especially in the event of their insolvency.

The law governing the receivables will apply in determining questions relating to the assignability, perfection, enforceability and recovery of the receivables.

The foreign law requirements of the obligor’s country or the purchaser’s country may be relevant when determining the capacity of the obligor or purchaser to enter into or perform their respective obligations under the contract and the enforceability of the obligations of the obligor or purchaser in their respective jurisdictions especially where there are mandatory laws applicable in the event of their insolvency.

3.4       Example 3: If (a) the seller is located in your jurisdiction but the obligor is located in another country, (b) the receivable is governed by the law of the obligor’s country, (c) the seller sells the receivable to a purchaser located in a third country, (d) the seller and the purchaser choose the law of the obligor’s country to govern the receivables purchase agreement, and (e) the sale complies with the requirements of the obligor’s country, will a court in your jurisdiction recognise that sale as being effective against the seller and other third parties (such as creditors or insolvency administrators of the seller) without the need to comply with your jurisdiction’s own sale requirements?

Provided that it has been established that the sale is valid and enforceable under the foreign governing law of the contract and the Singapore courts have jurisdiction, the Singapore courts will generally recognise the sale as being effective as against the seller and other third parties (such as creditors or insolvency administrators of the seller) located in Singapore without the need to comply with the sale requirements under Singapore law unless the choice of foreign governing law was made in bad faith or is otherwise illegal or contrary to public policy in Singapore.

The foreign law governing the receivables will apply in determining questions relating to the assignability, perfection, enforceability and recovery of the receivables.

The relevant laws in Singapore will however apply in the determination of the following issues: (a) capacity of the seller to enter into or perform its obligations under the contract; (b) the validity and perfection of the sale of the receivables by the seller to the purchaser located in a third country; and (c) the enforceability of the obligations of the parties in Singapore especially in the event of their insolvency.

3.5       Example 4: If (a) the obligor is located in your jurisdiction but the seller is located in another country, (b) the receivable is governed by the law of the seller’s country, (c) the seller and the purchaser choose the law of the seller’s country to govern the receivables purchase agreement, and (d) the sale complies with the requirements of the seller’s country, will a court in your jurisdiction recognise that sale as being effective against the obligor and other third parties (such as creditors or insolvency administrators of the obligor) without the need to comply with your jurisdiction’s own sale requirements?

Provided that it has been established that the sale is valid and enforceable under the foreign governing law of the contract and the Singapore courts have jurisdiction, the Singapore courts will generally recognise the sale as being effective as against the obligor and other third parties (such as creditors or insolvency administrators of the obligor) located in Singapore without the need to comply with the sale requirements under Singapore law unless the choice of foreign governing law was made in bad faith or is otherwise illegal or contrary to public policy in Singapore.

The foreign law governing the receivables will apply in determining questions relating to the assignability, perfection, enforceability and recovery of the receivables.

The relevant laws in Singapore will however still apply in the determination of the following issues: (a) capacity of the obligor to enter into or perform its obligations under the contract; and (b) the enforceability of the obligations of the obligor in Singapore especially in the event of their insolvency.

3.6       Example 5: If (a) the seller is located in your jurisdiction (irrespective of the obligor’s location), (b) the receivable is governed by the law of your jurisdiction, (c) the seller sells the receivable to a purchaser located in a third country, (d) the seller and the purchaser choose the law of the purchaser’s country to govern the receivables purchase agreement, and (e) the sale complies with the requirements of the purchaser’s country, will a court in your jurisdiction recognise that sale as being effective against the seller and other third parties (such as creditors or insolvency administrators of the seller, any obligor located in your jurisdiction and any third party creditor or insolvency administrator of any such obligor)?

Provided that it has been established that the sale is valid and enforceable under the foreign governing law of the contract and the Singapore courts have jurisdiction, the Singapore courts will generally recognise the sale as being effective as against the seller and other third parties (such as creditors or insolvency administrators of the seller, any obligor in Singapore and any third party creditor or insolvency administrator of any such obligor) in Singapore without the need to comply with the sale requirements under Singapore law unless the choice of foreign governing law was made in bad faith or is otherwise illegal or contrary to public policy in Singapore.

However, as the governing law of the receivables, Singapore law will apply in determining questions relating to the assignability, perfection, enforceability and recovery of the receivables.

The relevant laws in Singapore will also apply in the determination of the following issues: (a) capacity of all parties located in Singapore to enter into or perform their respective obligations under the contract; (b) the validity and perfection of the sale of the receivables by the seller to the purchaser located in a third country; and (c) the enforceability of the obligations of all parties located in Singapore especially in the event of their insolvency.

 

4.1       Sale Methods Generally. In your jurisdiction what are the customary methods for a seller to sell receivables to a purchaser? What is the customary terminology – is it called a sale, transfer, assignment or something else?

In Singapore law, there is no specific terminology which must be used in order for a seller to sell receivables to a purchaser.  However, a sale of receivables (whether current or future) usually takes the form of an absolute assignment from the seller to the purchaser in exchange for which the purchaser provides a consideration (which may be pecuniary or otherwise) to the seller.  It is also not uncommon for a seller to assign to the purchaser receivables together with the contract rights conferred onto the seller under the underlying sale agreement to enforce the terms of the same against the obligor. 

A legal assignment of receivables from a seller to a purchaser under Singapore law requires that:

(a) the underlying contract between the seller and the obligor under which the receivables are payable permits assignment of such receivables;

(b) the assignment must be absolute;

(c) the assignment must be in writing and signed by the assignor; and

(d) notice in writing of the assignment must be given to the obligor.

If any of the above requirements are not met, the assignment of receivables may still be recognised under Singapore law as an equitable assignment.

4.2       Perfection Generally. What formalities are required generally for perfecting a sale of receivables? Are there any additional or other formalities required for the sale of receivables to be perfected against any subsequent good faith purchasers for value of the same receivables from the seller?

The formalities required under Singapore law for perfecting a sale of receivables are as set out in question 4.1 above.  A party who has received a legal assignment of the receivables will have priority over any subsequent good faith purchaser for value of the same receivables from the seller without the need to take any further steps.

A subsequent legal assignment of receivables in good faith, for value and without notice of a preceding equitable assignment over the same receivables will take priority over such a preceding equitable assignment unless the subsequent purchaser was not bona fide or was aware at the time of the assignment to that subsequent purchaser of the earlier equitable interest in those receivables.

4.3       Perfection for Promissory Notes, etc. What additional or different requirements for sale and perfection apply to sales of promissory notes, mortgage loans, consumer loans or marketable debt securities?

Promissory notes can be sold and transferred by delivery (if it is a bearer instrument) or by delivery and endorsement (if it is a negotiable instrument).  A promissory note is categorised as a “bill of exchange” under Section 3(1) of the Bills of Exchange Act (Cap. 23, 2004 Revised Edition) and is subject to the provisions thereunder.  Under Section 21 of the Act, the holder of a bill is presumed to have received valid delivery of the same from the drawer, acceptor or indorser until the contrary is proven. 

Loans including mortgage and consumer loans can be sold and transferred by way of assignment.  The requirements for the legal assignment of loans are similar to that for a legal assignment of receivables as set out under question 4.1 above.  Where the mortgage loan is secured by a mortgage over an asset which requires or in respect of which legal title is derived from registration with any authority or registry (for example, for immoveable property and ships etc.) and which is also to be transferred together with the loan, registration of the transfer of the mortgage will need to be lodged with the appropriate authority or registry (e.g. Singapore Land Authority, Singapore Ship Registry, etc.).  In addition, where the mortgagor is a company, particulars of the mortgage will need to be lodged with the Accounting and Corporate Regulatory Authority of Singapore.

Marketable debt securities can be sold and transferred by giving instructions for the transfer of the same from the account of the seller to the account of the purchaser in the clearing system.

4.4       Obligor Notification or Consent. Must the seller or the purchaser notify obligors of the sale of receivables in order for the sale to be effective against the obligors and/or creditors of the seller? Must the seller or the purchaser obtain the obligors’ consent to the sale of receivables in order for the sale to be an effective sale against the obligors? Whether or not notice is required to perfect a sale, are there any benefits to giving notice – such as cutting off obligor set-off rights and other obligor defences?

A sale of receivables by the seller must be notified in writing to the obligor in order for the same to be effective as against the obligor.  The sale of receivables is effective as against the creditors of the seller notwithstanding the absence of a written notification to the obligor.

While it is customary for the seller as the contracting party to give notice to the obligor, a purchaser may also notify the obligor if the seller fails to do so.  The consent or acknowledgment of the obligor to the sale of the receivables is not required unless the transfer of the receivables is expressly prohibited in the contract between the seller and the obligor under which the receivables arise.

The giving of the written notice to the obligor of the sale of the receivables entitles the purchaser to certain benefits including:

1. ensuring that payment of the receivables is made to the purchaser instead of the seller and that a failure of the obligor to do so subsequent to notification does not constitute a satisfactory discharge of the obligations of the obligor under the underlying contract;

2. “cutting off” the set-off rights of the obligor (other than those which have already accrued prior to the notice of assignment being given);

3. the purchaser will have the right to seek recourse directly against the obligor and its creditors for payment of the receivables without joining the seller; and

4. the purchaser will be able to claim priority to the receivables as against any subsequent good faith purchaser of the same receivables for value without notice of the prior sale.

4.5       Notice Mechanics.  If notice is to be delivered to obligors, whether at the time of sale or later, are there any requirements regarding the form the notice must take or how it must be delivered? Is there any time limit beyond which notice is ineffective – for example, can a notice of sale be delivered after the sale, and can notice be delivered after insolvency proceedings have commenced against the obligor or the seller? Does the notice apply only to specific receivables or can it apply to any and all (including future) receivables? Are there any other limitations or considerations?

There is no prescribed form for the notice of sale and no specific method required for the delivery of the same.  The only requirement is for the notice to be made on writing.

There is no limit beyond which the notice will be ineffective.  The notice of sale can be delivered at any time subsequent to the sale including after insolvency proceedings have commenced against the obligor or the seller.  However, the sale will be inchoate until the notice is given and the purchaser will lose his priority as against subsequent good faith purchasers of the same receivables for value without notice of the prior sale.

A notice of the sale of receivables can apply for specific receivables as well as any and all future receivables.

There may be limitations in the enforcement of the purchaser’s rights to the receivables in a situation where the notice is given after insolvency proceedings have commenced against the obligor or the seller since the assets of the seller and obligor will be subject to the insolvency regime.

4.6       Restrictions on Assignment – General Interpretation. Will a restriction in a receivables contract to the effect that “None of the [seller’s] rights or obligations under this Agreement may be transferred or assigned without the consent of the [obligor]” be interpreted as prohibiting a transfer of receivables by the seller to the purchaser? Is the result the same if the restriction says “This Agreement may not be transferred or assigned by the [seller] without the consent of the [obligor]” (i.e., the restriction does not refer to rights or obligations)? Is the result the same if the restriction says “The obligations of the [seller] under this Agreement may not be transferred or assigned by the [seller] without the consent of the [obligor]” (i.e., the restriction does not refer to rights)?

A restriction in either of the first two examples is likely to be construed as prohibiting a transfer of receivables by the seller to the purchaser unless consent of the obligor has been obtained. 

However, a restriction in a receivables contract to the effect that “[t]he obligations of the [seller] under this Agreement may not be transferred or assigned by the [seller] without the consent of the [obligor]” is not likely to be construed as prohibiting the sale and transfer of receivables as the same would be treated as a right conferred on the seller and not an obligation.  It is not uncommon for only the rights and benefits of the seller to be transferred to the purchaser but with the obligations to remain with the seller under the receivables contract.

4.7       Restrictions on Assignment; Liability to Obligor. If any of the restrictions in question 4.6 are binding, or if the receivables contract explicitly prohibits an assignment of receivables or “seller’s rights” under the receivables contract, are such restrictions generally enforceable in your jurisdiction? Are there exceptions to this rule (e.g., for contracts between commercial entities)? If your jurisdiction recognises restrictions on sale or assignment of receivables and the seller nevertheless sells receivables to the purchaser, will either the seller or the purchaser be liable to the obligor for breach of contract or tort, or on any other basis?

If the receivables contract explicitly prohibits an assignment of receivables or the “seller’s rights” under the receivables contract, whether in the wording set out in question 4.6 above or otherwise, the Singapore courts will generally enforce such restriction.  As far as we are aware, there are no exceptions to this rule.

Where such restrictions are present but the seller nevertheless sells receivables to the purchaser, the seller (as party to the receivables contract) will be liable to the obligor for breach of contract.  If the purchaser is also aware of the restriction but nonetheless procures or induces the seller to breach the receivables contract by the sale of the receivables, the purchaser may be made liable for inducing the breach of contract.

4.8       Identification. Must the sale document specifically identify each of the receivables to be sold? If so, what specific information is required (e.g., obligor name, invoice number, invoice date, payment date, etc.)? Do the receivables being sold have to share objective characteristics? Alternatively, if the seller sells all of its receivables to the purchaser, is this sufficient identification of receivables? Finally, if the seller sells all of its receivables other than receivables owing by one or more specifically identified obligors, is this sufficient identification of receivables?

There is no requirement for any specific information to be provided so long as the sale document provides sufficient details to enable the receivables to be clearly identified at the time of the sale or as and when any future receivables sold under the receivables contract comes into existence.  This is a question of fact.

The sale of “all receivables”, whether or not qualified by the exclusion of certain specifically identified receivables or not, may not always be sufficient identification of the receivables intended to be sold by the seller.  In the absence of clarity on what constitutes “receivables” for the purposes of the sale, the use of the terms such as “all receivables” without an accompanying definition may give rise to disputes between the parties as to the scope of receivables to which the purchaser is entitled under the sale. 

4.9       Recharacterisation Risk. If the parties describe their transaction in the relevant documents as an outright sale and explicitly state their intention that it be treated as an outright sale, will this description and statement of intent automatically be respected or is there a risk that the transaction could be characterised by a court as a loan with (or without) security? If recharacterisation risk exists, what characteristics of the transaction might prevent the transfer from being treated as an outright sale? Among other things, to what extent may the seller retain any of the following without jeopardising treatment as an outright sale: (a) credit risk; (b) interest rate risk; (c) control of collections of receivables; (d) a right of repurchase/redemption; (e) a right to the residual profits within the purchaser; or (f) any other term?

The Singapore courts would generally treat a transaction as being a genuine and outright sale where the relevant documents explicitly state the parties’ intention as such. That being said, a court is entitled to and would examine the facts, circumstances and effect of the transaction notwithstanding its express provisions.

There is a risk of recharacterisation of the sale as a loan with (or without) security where it appears to the Singapore courts from the express wording of the sale contract or the surrounding circumstances that the parties had an inappropriate or dishonest intention of entering into a sham transaction whether for the purpose of circumventing any applicable laws or to disguise what is substantially a loan with (or without) security or otherwise.

A purported sale where the credit risks and interest rate risks remain with the seller may be construed as being inconsistent with the sale of the receivables to the purchaser.  Granting the seller the right to repurchase or redeem the receivables are also indicative of the sale being intended more as a security rather than an outright sale.  The retention by the seller of control over collection of the receivables or the right to residual profits within the purchaser may or may not, depending on the circumstances, contribute towards the sale being treated as a loan with (or without) security.  The Singapore courts typically consider these factors along with any other facts which in their opinion may be relevant in inferring the true intention of the parties.

4.10     Continuous Sales of Receivables. Can the seller agree in an enforceable manner to continuous sales of receivables (i.e., sales of receivables as and when they arise)?  Would such an agreement survive and continue to transfer receivables to the purchaser following the seller’s insolvency?

A seller can agree in an enforceable manner to a continuous sale of receivables so long as the formalities required to perfect the sale are complied with.  In order to ensure the purchaser’s priority to the receivables, notice of the sale should be given to each and every obligor from whom the receivables sold are payable as and when the obligation arises.

Such an agreement can survive and continue to transfer receivables to the purchaser following the seller’s insolvency provided the obligor continues to be obliged to pay such receivables under its contract with the seller.

4.11     Future Receivables. Can the seller commit in an enforceable manner to sell receivables to the purchaser that come into existence after the date of the receivables purchase agreement (e.g., “future flow” securitisation)? If so, how must the sale of future receivables be structured to be valid and enforceable? Is there a distinction between future receivables that arise prior to versus after the seller’s insolvency?

A seller can commit in an enforceable manner to sell receivables to the purchaser that come into existence after the date of the receivables purchase agreement so long as the formalities required to perfect the sale have been complied with.

As with question 4.10 above, notice of the sale must be given to the obligor at the future date when the seller enters into the contract with the obligor under which the obligor’s obligation to pay the receivable arises to ensure the purchaser’s priority to the same.

Receivables that arise after the seller’s insolvency is only legally assigned to the purchaser if notice has been given to the obligor of the sale and the receivables remain payable under the contract between the seller and the obligor notwithstanding the seller’s insolvency.  Until notice is given, the purchaser only has an equitable assignment of the receivables and is vulnerable to claims from intervening good faith purchasers or assignees of the same receivables for value without notice of the prior sale.

4.12     Related Security. Must any additional formalities be fulfilled in order for the related security to be transferred concurrently with the sale of receivables? If not all related security can be enforceably transferred, what methods are customarily adopted to provide the purchaser the benefits of such related security?

The formalities required in order to transfer related security concurrently with the sale of receivables depends on the nature of the security. Most types of security can be transferred by way of assignment or novation of the rights of the seller to the purchaser.  Additional requirements may be in place for assignment of certain types of security.  For example, if the security is a mortgage over Singapore registered land or a ship, the transfer of the same requires registration with the Singapore Land Authority (in the case of land) and the Singapore Ship Registry (in the case of a ship). If the obligor is a company registered in Singapore, particulars of the security and the secured party will need to be lodged with the Accounting and Corporate Regulatory Authority of Singapore if they fall within the categories set out under Section 131(3) of the Companies Act (Cap. 50, 2006 Revised Edition).

If there is any security which cannot be enforceably transferred, it is customary for the purchaser to require the seller to either hold the security on trust for the purchaser or to concurrently discharge the security in favour of the seller and create an identical security in favour of the purchaser.  The former retains the priority of the purchaser to the security as from the time it was granted to the seller.  The latter, while potentially leading the purchaser to lose priority in respect of the security, will give the purchaser a direct recourse against the obligor without joining the seller.

4.13     Set-Off; Liability to Obligor. Assuming that a receivables contract does not contain a provision whereby the obligor waives its right to set-off against amounts it owes to the seller, do the obligor’s set-off rights terminate upon its receipt of notice of a sale? At any other time? If a receivables contract does not waive set-off but the obligor’s set-off rights are terminated due to notice or some other action, will either the seller or the purchaser be liable to the obligor for damages caused by such termination?

Assuming that a receivables contract does not contain a provision whereby the obligor waives its right to set-off against amounts it owes to the seller, the obligor’s set-off rights terminate at the time the obligor receives notice of the sale and assignment of the receivables without prejudice to any pre-existing rights of set-off accrued prior to that time.

Notwithstanding the above, the seller may remain liable to the obligor for the damages resulting from the termination of the obligor’s set-off rights after notice of the sale and assignment has been given.

4.14     Profit Extraction. What methods are typically used in your jurisdiction to extract residual profits from the purchaser?

In Singapore, where the sale is outright, the benefit of any residual profits resulting from the sale of the receivables to the purchaser is retained by the purchaser.  Where the seller wishes to extract the residual profits from the purchaser, an agreement between the seller and the purchaser as to how and in what circumstances residual profit is paid back to the seller will need to be in place.  However, such an arrangement may lead to the Singapore courts questioning whether in substance the transaction is a genuine sale or recharacterising the sale as a loan.

 

5.1       Back-up Security. Is it customary in your jurisdiction to take a “back-up” security interest over the seller’s ownership interest in the receivables and the related security, in the event that an outright sale is deemed by a court (for whatever reason) not to have occurred and have been perfected (see question 4.9 above)?

While it is not uncommon for the sale of the receivables to be accompanied by the sale of all ancillary security granted by the obligor to secure its obligations under the receivables contract, it is not customary for “back up” security interests over the seller’s ownership interest in the receivables to be taken in a transaction for sale of receivables.  Consistent with a genuine sale, both the benefit and risk of non-payment of the receivables by the obligor is passed on to the purchaser.  To secure such risks by taking “back up” security interests over the seller’s ownership interest in the receivables may be construed as being more akin to a loan with security.

5.2       Seller Security. If it is customary to take back-up security, what are the formalities for the seller granting a security interest in receivables and related security under the laws of your jurisdiction, and for such security interest to be perfected?

We refer to our response under question 5.1 in respect of any security interest granted by the seller over the receivables.

In respect of any other security to be transferred to the purchaser together with the sale, please refer to our response under question 4.12.

5.3       Purchaser Security. If the purchaser grants security over all of its assets (including purchased receivables) in favour of the providers of its funding, what formalities must the purchaser comply with in your jurisdiction to grant and perfect a security interest in purchased receivables governed by the laws of your jurisdiction and the related security?

If the purchaser grants security over all of its assets (including purchased receivables) in favour of the providers of its funding, the purchaser will need to take such appropriate steps to create and perfect the security created over each asset secured depending on the nature of the asset.

Insofar as receivables are concerned, any assignment of the receivables by way of security (as opposed to a sale) will need to be perfected by giving notice of the assignment to the obligor from whom the receivables are or will be due.

- Сегодня не его дежурство. - Похоже, что-то стряслось, - сказала Сьюзан.  - Наверное, увидел включенный монитор.

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