The factoring agreement is a legal instrument by which a company contracts a specialist, the factor, to manage its credits from its customers.
Generally, the factor can also perform a financing function, as it advances to the company the nominal amount of the purchased credits. In addition, the factor can also perform an insurance function because it can assume the risk of non-performance of the company’s debts. Therefore, the factor performs a function of total management of the credits, taking care of its collection and possible enforcement.
The factoring agreement has an Anglo-Saxon origin and for this reason it is an atypical Italian contract, in the sense that there is no specific discipline that recognizes it.
However, under Italian law the factoring falls within the scope of assignment of receivables, pursuant to Art. 1260 of the Italian Civil Code, according to which the creditor may transfer his credit for a consideration or free of charge, provided that the credit is not strictly personal or the transfer is not prohibited by law.
Law no. 52/1991 introduced the assignment of business credits, as the closest model to factoring. According to this discipline, factoring must meet certain conditions:
The factoring agreement may be:
Factoring contracts are common among companies operating in sectors where the delay of payments to customers is one of the criticalities. To understand the company’s financial situation and recover debts, it is always necessary to be assisted by experts.
VGS Lawyers can assist you on this matter, guiding you on your factoring agreement or your credit collection matters.