Assignor and assignee - who they are with examples

What is "cession"

Assignment is the transfer (assignment) of rights to claim debt. Currently, the most understandable example of assignment is the transfer of the right to collect receivables or a loan issued to a legal entity or individual by a bank to a collection agency.

Also, the concept of “cession” is used in Russia to refer to an agreement for the transfer of rights and obligations within the framework of shared construction from one shareholder to another (occurs with the consent of the developer). However, due to the fact that in this case not only rights and obligations are transferred, in the strict sense it is impossible to call such an agreement “assignment”.

The concept of “cession” is used in Russia to refer to an agreement for the transfer of rights and obligations within the framework of shared construction from one shareholder to another.

Parties to an agreement for the assignment of rights of claim or property

In fact, the procedure for assigning rights involves the involvement of three parties: a person who, by virtue of the original civil law contract, has certain obligations to the other party, a person who, by virtue of the same contract, is a party to whom the first person has obligations, and the person to whom the claims are assigned in accordance with the current civil law contract.

However, it is clear that it is still interested in returning the amount of money transferred to the borrower as a loan.
A possible way out of this situation may be the assignment of rights of claim to them under the loan agreement. As a rule, such an assignment implies the involvement of a third party in the relationship between the two parties, in respect of whom the assignment will be made. At the same time, the process of transfer of rights between the parties involved in this transaction, as well as their rights and obligations in relation to the party bound by obligations to the original creditor, should be considered in detail. Date: March 18, 2022

Legislative regulation of assignment in Russia

The basis of the Russian legislative framework in the field of assignment agreements is Chapter 24 of the Civil Code “Change of persons in an obligation”, Articles 155 and 279 of the Tax Code. Letters from the Ministry of Finance and clarifications from the Supreme Court are devoted to certain regulatory parameters.

The activities of collection agencies are regulated by Federal Law 230-FZ, dedicated to the protection of the rights and interests of individuals when returning overdue debts and carrying out the activities of microfinance organizations.

Please note that in January 2022, changes were made to this law that significantly reduced the rights of collectors.

Parties to the process of transfer of foreclosure rights

In simple terms, assignment is the transfer of rights to claim debt repayment. Now let's look at which parties are involved in this process and what rights they are endowed with, that is, who are the assignor and assignee?

1. The assignor is the original owner of the rights to the debt. This role is most often played by banks and credit organizations that provide loans to legal entities and individuals. In problematic situations, when debt repayment is delayed, these organizations, as a rule, trying to avoid losses, transfer the right to collect debt to a “profile” organization. Russian legislation gives banks and credit organizations such a right, therefore the transfer of rights to claim the repayment of loans is completely legitimate if the requirements of the law are met. The main requirement is the transfer of rights to return only the debt, but not associated expenses, for example, moral damage. Please note that the amount of debt includes interest and penalties. However, the loan is transferred exclusively in the form in which it is described in the agreement. Changing the terms of the loan - adding additional fines, interest, changing the rate - is strictly prohibited.
2. Assignee is the recipient of the rights to claim repayment of the debt. Banks and collection agencies most often act in this capacity. An assignee is a third party who was not initially involved in the conclusion of the agreement between the borrower and the creditors. The new owner of the rights to repay the loan has the same powers as the original one - no less, but no more. For example, if the original agreement provided for the option of repaying the debt by transferring property, the assignee also receives the right to do so. Conversely, if there is no option to repay the loan through the sale of property, the assignee does not have the right to demand repayment of the debt in this way.
3. Debtor is a legal entity or individual who has a problem debt (overdue loan).

The new owner of the rights to repay the loan has the same powers as the original

Assignment, assignment agreement, assignor, assignee: we translate the terms into a publicly accessible language

All these terms are united by one legal situation developing in a specific direction - transfer of ownership.
Let's consider what an assignment and an Assignment Agreement are, an assignor and an assignee, who they are, using an example that is most common and familiar in practice to almost everyone who is a client of the banking system. The subject of the example is credit obligations, or more precisely, debts on a loan for which there was a significant delay in repayment of the debt. Let's consider it step by step, in relation to each part of the assignment agreement.

Cession: what is it?

Assignment is the assignment of rights of claim to another person. As such, rights to securities and shares, rights of claim confirmed by documents can be considered. When making a transaction for the assignment of rights, the concluded agreement is called “title”.

An assignment agreement is a legal document that confirms the fact of assignment (or assignment) of rights and the legality of the transaction. The assignment agreement (agreement on the transfer of rights, agreement on the assignment of rights) reflects the interests of the three parties to the agreement - the assignor, the assignee, the debtor, and all the legal nuances of the assignment. The agreement regulates and confirms the assignment of the rights of the copyright holder to another person.

Types of assignment agreements

In legal practice, there are several options for assignment agreements:

1. Paid. In this case, the assignor pays the second creditor to buy out the debt, and then compensates for losses by repaying the loan by the debtor.
2. Free. There is no payment for such assignment of debt.
3. Paid - the assignor pays collectors for the assignment.
4. Free - the assignee works under a free agreement.
5. Trilateral. The debtor participates in signing the agreement.
6. By court decision or writ of execution.

Assignment agreement - postings to the assignee

Since the assignee did not purchase goods or services, but only bought the receivable, he will take it into account as a financial investment.
And in the process of its formation, he has the right to include in the costs both the amount of the purchased debt and related expenses. Such expenses include the services of intermediaries, as well as any costs incurred associated with the purchase of this asset (clauses 8, 9 of PBU 19/02, approved by order of the Ministry of Finance of Russia dated December 10, 2002 No. 126n). Continuation of the example

Assignment agreement - postings to the assignee:

What debts are transferred under an assignment agreement?

Not all types of debt can be transferred by assignment. The most common ones include:

• overdue loans, credits, advances;
• bills and other securities;
• accounts receivable for any material goods - goods and products.

The Civil Code provides for only one significant limitation on the transfer of debt to a third party (Article 388) - the transfer limitation is the essential importance of the identity of the creditor for the debtor. Thus, debts based on the identities of the creditor and the borrower (for example, between close relatives) cannot be transferred.

Is the assignor obligated to notify the debtor of the transfer of rights of collection?

Now that we have understood the basic concepts and active parties, let’s take a closer look at their rights and responsibilities. To begin with, is the assignor—the original creditor—obligated to notify the debtor of the transfer of rights to collect the debt?

To fully answer this question you need to know two nuances:

1. The assignor is not required to obtain the borrower's consent to assign the debt. He may enter into a contract with a third party without the approval of the debtor.
2. The assignor must notify the borrower in writing of the conclusion of an assignment agreement with a third party. However, in practice, creditors often neglect this responsibility.

Notification of the transfer of the right of collection to a third party will avoid confusion in the processing of payments and document flow. After all, if the borrower is not informed about the need to pay the debt to the new creditor (using new payment details), he will create another debt.

The only exception to this rule is the situation when the possibility and conditions for transferring debt are directly stated in the contract. However, remember that even in the absence of notification, the assignment agreement will be considered legitimate.

Notification of the transfer of the right of collection to a third party will avoid confusion in the processing of payments and document flow.

Basic Concepts

Putting aside complex economic terms that may not be clear to the average person, the term “cession” can be described as the transfer of rights to demand repayment of a debt . This process involves several parties, each of which has a certain list of rights and obligations.

Assignor (from the English “cedent” - transferor of the right) is a party to the transaction (individual or legal entity) who transfers (assigns) the rights of claim to another person

Who is the assignor

The assignor is the original owner of the debt of an organization or individual . As a rule, this status is given to financial structures that issue funds in the form of loans to organizations and individuals. If difficulties arise with the return of funds, financial institutions can contact the collection service. This approach can significantly reduce the amount of loss due to late repayment of issued loans. It should be noted that credit organizations operate on the basis of current legislation that allows the transfer of the right to claim debt to third parties. This means that concluding an assignment agreement is a completely legal process.

It is important to note that in the case under consideration, the object of the contract is only debt. The parties cannot transfer to each other the right to claim additional compensation and cover additional costs. To the amount of the total debt, you can add accrued penalties and fines in the form of interest. According to the established rules, the parties can transfer the debt only in its original form. This means that the parties are prohibited from making additional amendments to the contract with the debtor that change the terms of repayment of the loan.

Who is the assignee

The assignee is the second party to the agreement who receives the right to demand repayment of the debt . This status can be assigned to both a collection service and a third-party banking structure. The assignee acts as a third party who is not mentioned when concluding an agreement between the lender and the borrower.

The new owner has the same rights to demand repayment of the debt as the original owner of the debt. In the case where the contract between the lender and the borrower mentions the possibility of covering debts through the transfer of property assets, the assignee also has the opportunity to exercise this right. If the contract does not contain this clause, then the third party to the contractual relationship cannot call on the debtor to repay the loan by selling material assets.

Definition of debtor

Debtor status can be assigned to an individual who has an unclosed loan taken out from a financial institution. A legal entity can also be a debtor.

Assignee (from the English “cessionary” - legal successor) is a party to an assignment agreement that assumes the obligation to act as a new creditor or a legal successor receiving ownership rights

What is the benefit of the parties

For the assignor, the main benefit is the ability to partially or fully compensate for losses. There are two options here - when the debt is completely purchased by a third party or transferred free of charge for collection, but then receives reimbursement of the debt minus interest.

There are several options for making a profit for the assignee:

• compensation for transfer of debt;
• the opportunity to receive material benefits if the loan was in kind.

In most cases, only overdue debts with losses, the prospects for recovery of which are unclear, are transferred by assignment. In this case, it is more profitable for the creditor to transfer the rights to it to another organization with compensation than to seek repayment of the loan and losses on their own.

How conflict situations between creditors are resolved

Let's look at the situation when the assignee did not pay the assignor under the assignment agreement. How is such a conflict situation resolved? Firstly, all conditions for the transfer of debt, including material remuneration of the parties, are clearly indicated in the agreement.

Secondly, failure by the assignee to fulfill its obligations towards the assignor in a timely manner may give rise to legal proceedings. Thirdly, the transfer of the right to claim debt is in any case unconditional, that is, Russian legislation does not provide for the possibility of returning rights to the original owner.

Therefore, if the assignment agreement is signed, but the assignee does not fulfill its obligations to collect and return funds, the original creditor must collect the overdue debt not from the borrower, but from a third party. The concluded assignment deprives him of the right to appeal to the debtor.

Important nuances

When concluding contracts, all parties must adhere to a number of conditions:

• Openness. It is necessary to indicate all the required details, including signatures and seals for legal entities, as well as passport data from individuals.
• Conditions. All conditions for the transfer of rights must be clearly reflected in the contract, because only in this case can each party be completely confident in their legal security.
• Price. Indicated in the case where the contract is paid
  . If it is free of charge, then this will also need to be indicated.
• Documentation. A complete list of documentation that was provided to confirm ownership of the property, as well as all additional formalities, is indicated.
• The agreement that started it all. It must certainly be available, and its data must be transferred to the newly compiled one.
• Date of. This specifies the precise moment at which rights and obligations are transferred from one party to the other. Most often, this moment is the signing of the contract, although the time of transfer of all necessary accompanying documents is often used.

There are a number of factors that make the conclusion of such agreements impossible. Among them are the payment of alimony, compensation for material damage incurred as a result of harm to health or life

.
In addition, it should be remembered that such a transaction cannot contradict the law or other legal acts
. For example, the assignor is a party to a joint activity agreement, which is why he will certainly need the consent of all participants in this agreement.

Declaring insolvency can be made much easier by a bankruptcy lawyer. In difficult cases, it is better to seek help from a specialist at the very beginning of the process. Credit organizations often transfer the rights to collect debt to third parties, that is, they enter into an assignment agreement

. Find out more about where to get protection from creditors here. You should not delay contacting specialists.

Additional aspects

The assignor and assignee are equally interested in ensuring that the debtor fulfills its obligations by legal means. Most often, the methods of claim and possible sanctions are prescribed in the text of the contract itself, although it is often necessary to refer to the current legislation.

In the process of concluding an agreement, only two parties often participate, and the third party is notified of the transfer of rights only after signing. This is due to the fact that this action will not bring any legal changes to the latter, and the party to whom compensation will be sent can be absolutely anyone.

If the debtor was not notified and sent the funds to the assignor at the address indicated in the original agreement, then the obligations are considered fulfilled to the assignee. All further disputes should no longer affect the rights and freedoms of the debtor, and all imposed sanctions should be declared unlawful and immediately cancelled.

In what form should an assignment agreement be concluded?

A unified form of debt assignment agreement has not currently been developed. The parties have the right to conclude it in a free form, taking into account certain mandatory requirements:

1. Indication of the date of the agreement.
2. Full name of the parties entering into the agreement.
3. Subject of the transaction. This could be financial debt, products, real estate. The subject of the agreement should be described in as much detail as possible.
4. Mutual rights and obligations of the assignor and assignee.
5. Conditions for transferring rights to claim debt - price, interest, and so on.
6. Liability for failure to fulfill obligations.
7. Details of the parties, including payment details, in the form of a table.
8. Signatures of responsible persons with transcript.

A unified form of debt assignment agreement has not currently been developed.

Who are the assignor and assignee?

The parties involved in this agreement are called assignors and assignees. The participant in the transaction who assigns the right of claim under the contract is the assignor, and the receiving party is the assignee. The document certifying the assignment of rights is called title. The ability to collect debt passes from one creditor to another. Actually, the debtor does not participate in this at all (with the exception of tripartite assignment agreements, which we mentioned above), the legal act is completed without him, and he learns about everything, as a rule, after the conclusion of the transaction. There is an assignment of debt. Initially, when determining contractual obligations, the borrower has obligations to the assignor, and after the assignment of rights - to the assignee. The relations arising as a result of the conclusion of these agreements are regulated by Russian legislation in sufficient detail.

When can a contract be invalidated?

In most cases, the debtor does not participate in the signing of this agreement and is faced with the fact of a change of creditor. Many are dissatisfied with this change and go to court with a demand to declare the assignment invalid.

Russian judicial practice shows that the majority of such claims are unsatisfied , especially if, from the point of view of legislation and paperwork, the contract was drawn up correctly. Please note that even the presence in the original agreement of a ban on the sale of debt is often not a restriction. Therefore, there is practically no chance of challenging the assignment agreement in court.