The concept of factoring : a Maltese legal perspective

Abstract

Chapter 1 assesses the dual historical development of the legal-economic concept of factoring. The benefits and limitations of factoring are also discussed. The institute of factoring emerges as an alternative source of finance. Chapter 2 is an attempt to analyse the nature of a factoring agreement. An indepth analysis of the requisites and of the parties to this institute is given. Types of factoring agreements are also assessed within the meaning of the Civil Code and the Financial Institutions Act. A comparison of the local laws applicable to factoring portrays factoring as a legal financial concept, having its own distinctive features. Factoring emerges as a financial service. Chapter 3 deals with the rights and obligations of the assignor and the assignee within the context of article 1484 A of the Civil Code. Other rights and obligations within the context of the MFSA Policy Document on Factoring are also discussed in an attempt to portray the wider market application of factoring. Chapter 4 puts forward an analysis of the element of risk in relation to the parties in a factoring transaction. Insolvency and bankruptcy of the parties in relation to a factoring agreement play an important role in the assessment of risk. Risk management tools are also discussed. Risk remains a salient feature in the business of factoring. Chapter 5 gives a general overview of the elements of procedure in relation to the collection of debts within the context of factoring as they emanate from local laws, MFSA Policies and case law. Chapter 6 discusses the role played by the MFSA and its Tribunal within a factoring scenario. The role of the assignee as a financial institution is also analysed. The possession of a licence by the assignee is indispensible for the provision of factoring services. Chapter 7 puts forward proposals which are likely to improve the perception and application of factoring in the Maltese legal market.