Assignment of credit is one of those terms in which the legal aspects are intermingled with the accounting ones and that due to this circumstance its correct understanding is more complex. Well, at a general level it refers to a business of a legal nature by which a person or company (creditor) transfers to another (assignee) the rights that the first of them represents against a third party.
But with a very special particularity that is what characterizes this figure and that is that at no time does the initial relationship disappear.
For this operation to originate, a very important basic requirement must be met. It is none other than the obligation to be carried out under a consensus by both parties. That is, the common will of the two to reach a agreement on these conditions in the assignment of credit. Something that does not materialize in all situations and that causes the operation to be cancelled.
One of the reasons for carrying it out is due to the fact that it can benefit both parties in this complex legal process. Mainly because current assets are not paralyzed of small and medium-sized companies and therefore can continue to develop their line of business as normal.
Modalities of an assignment of credit
This operation, both accounting and legal, is not completely homogeneous. Rather, on the contrary, two different models are enabled in its management. One of them is the assignment of credit with notice which is based on the fact that both parties to the process agree to the due reminder of the change of ownership. It is the most frequent since it avoids possible problems in the dispute and is formalized with the knowledge of all parties.
While on the contrary, the assignment of credit without notification is also available. In which this movement takes place without any notice notice to the debtor about the change in the transmission of the collection right. In some cases, it can lead to some problems in the relationships of the business agents that are part of this process. Beyond other technical considerations.
How this product works
The assignment of credit is based on providing liquidity in the greatest immediacy of time. Let us suppose a specific case of a company that has a receipt or invoice receivable for the sale of a product or the development of a service and that its due date is three months at sight.
And that for any circumstance, you need your amount for the proper functioning of your accounting. In these situations they can opt for this product through their management with a bank that allows them to formalize the assignment of credit.
What would be achieved? Well, something as important as collect that money in advance regarding its expiration. Where you would have to pay a previously agreed interest rate and its consequent commissions.
These operations are executed when the company needs this point of liquidity immediately and they are delays in time. However, for the operation to be profitable, it will be necessary for the amount of the receipt or invoice to be high and not small amounts.
On the other hand, it is very convenient to know that the credit assignment contract is a document that is managed through a notary and in which the data of the two parties that make up this process appear.
Like the amount of the accounting movement and that must be signed for its validity to be total and legitimate. Being one of the most common products by small and medium-sized companies that go through the odd difficulty in their box.
Example of assignment of credit
Nothing better than checking this product in practice. We are going to suppose that a small and medium-sized company in the service sector has a debt against another company that makes it a debtor. Well, with the application of the assignment of credit, the first of them would transmit this line of credit to a third company. So from this moment the latter would become the debtor of the amount. In practice, this means that the latter would be the one that occupy the position of creditor against the debtor. It would be more or less a reversal of roles in a very short space of time.
Credit assignment contract model
The primary objective of this contract is to regulate the terms and conditions by which the assigning entity assigns in this same act to the assignees the credits derived from the promissory notes identified. On the other hand, the assigning entity assigns and transfers all the rights that constitute the credits that derive from the identified promissory notes and where the assignee accepts and acquires them by way of purchase and sale. It is a much more complex product that requires financial knowledge on the part of the companies or people who are part of this very special process.
You can download a credit assignment contract model in the link that we just left you.
Assignment of mortgage credit
Regarding this variant, something more common than in the others, it should be noted that the assignment of a credit is that agreement of wills by which the mortgagee assigns his credit to a third party. Although for a better understanding it should be noted that in this case three figures are affected in this process, not two. First, the creditor who assigns the credit (can be a natural or legal person). Then the debtor who remains in their positions and finally the new creditor.
Within this general context, the assignment of mortgage credit is currently regulated by the Mortgage Law in Spain. Where the interests of the users involved in this financial process are protected. On the other hand, the regulation makes its limitations very clear by stating that "all rights acquired by virtue of an obligation are transferable subject to the laws, unless otherwise agreed, it says that the mortgage loan can be sold or assigned to a third party in whole or in part, with the formalities required by law”. On the other hand, for this scenario to occur, it is completely necessary that this modality in the assignment requires a public deed and must be formalized just as it is done when contracting a mortgage loan.
Assignment of credit in executive process
One of the big questions that arise is the following: can an assignment of credit be claimed without further formality in a judicial process? Well, there are different gaps in this matter that court rulings are trying to clarify. For example, the order of the Provincial Court of Barcelona from last year, in which it is revealed that "by means of ordering procedure of September 18, 2015, PL Salvador Sárl was required to, within a period of 10 days, provide notarial certification stating the date of the assignment, the identity of those executed as well as the amounts for which said credit was assigned.
In any case, there is a common denominator in these cases and it refers to the fact that our legal system does not expressly establish that the accreditation of assignment of credits is the notarial certification. Noting their desire for the parties in terms of the form of that accreditation with the only requirement that the accreditation be reliable. Despite the discrepancies that may exist between some of the parties that are part of this process.
Opposition to the assignment of credit
On the other hand, it is very convenient to know that the credit assignment contract is a document that is managed through a notary and in which the data of the two parties that make up this process appear. Through a more complex process in other models and that is the endorsement presented by the detractors of this financial product. Like the amount of the accounting movement and that must be signed for its validity to be total and legitimate.
While on the other hand, it is necessary to comply with a basic requirement: the obligation to be carried out under a consensus by both parties. That is, the common will of the two parties to reach a agreement on these conditions in the assignment of credit. Something that does not materialize in all situations and that causes the operation to be cancelled. Being some of the most relevant drawbacks in its execution.