Most of the time, when customers and clients owe money to a company, the company or the creditor collects all the debts by him but sometimes in special situations and particular circumstances, the creditor has the legal right to assign his accounts receivable to a third party. This means that after assignment, the assignee will receive the payments from the debtors on behalf of the creditor. This process is known as debt assignment.
Introduction to the Notice of Debt Assignment:
In case a creditor has decided to go with debt assignment i.e. selling his accounts receivable to a third party, he is legally required to inform the debtors about the change of the situation and advise them to redirect their payments to the assignee. It is not required by the law that the assigner first gets consents from his debtors before assigning his debt to a third party but he is legally obligated to inform them about this change. On the contrary, even if the creditor decides of not telling the debtors about the situation, the assignee has the legal obligation and responsibility of informing his debtors about the change and asking them to send the payments to him instead of the assigner or actual creditor. The notification letter that is sent for this purpose is known as the notice of debt assignment.
Brief description of Notice of Debt Assignment:
There are many situations and circumstances in which a creditor assigns his debt or accounts receivable to a third party. For example, the creditor agreed to receive his debt after a year but he needs urgent cash for his business and as according to the agreement, he can’t ask his debtors to pay before expiration, he has the legal right of assigning his debt to a third party and get paid from them in advance. Another situation is when a company wants dissolve the business and end all the operations but as the debtors will pay the company long after the business is closed, the business partners assign their debt to a third party and get paid instantly from the assignee without waiting for months to be paid.
Key elements to include in the Notice of Debt Assignment:
- Name of the person who is assigning his debt to a third party i.e. assigner with complete address
- Name of the third party who has been assigned with debt i.e. assignee with complete address
- Date when the notice of assignment is being sent to the debtors
- Reasons of assigning the debt to the assignee as explained by the assigner (not necessary)
- Date from which the debtors are advised to redirect their queries and payments to the assignee
- Details of the payments each debtor is asked to redirect to the assignee
- Duration of assignment or expiration of the assignment (if applicable)
- Details of responsibilities, rights and obligations of the assignee towards the receivers or debtors of the notice
- Signature of the sender of the notice i.e. assigner or assignee
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Sample Business Contracts
Assignment of Debt Agreement - Communicate.com Inc., Pacific Capital Markets Inc. and Domain Holdings Inc.ASSIGNMENT OF DEBT AGREEMENT PCMI THIS ASSIGNMENT OF DEBT AGREEMENT dated the 28th day of June, 2002, AMONG: COMMUNICATE.COM INC., of Suite 600, 1100 Melville Street, Vancouver, British Columbia, V6E 4A6 (the "ASSIGNEE") AND: PACIFIC CAPITAL MARKETS INC., of 1100 Melville Street, 6th Floor, Vancouver, British Columbia, V6E 4A6 (the "ASSIGNOR") AND: DOMAIN HOLDINGS INC., of 600 - 1100 Melville Street, Vancouver, British Columbia, V6E 4A6 (the "DEBTOR") WHEREAS: A. The Debtor is indebted to the Assignor for the principal amount of One Hundred Twenty-Two Thousand and Five Hundred (US$122,500) Dollars in U.S. funds (the "Debt") pursuant to the terms of a finders' agreement dated January 12, 2000 among the Debtor, Siden Capital Corp. and the Assignor. B. The Assignee wishes to purchase, and the Assignor wishes to grant, assign, transfer and set over unto the Assignee his entire right, title and interest in and to the Debt upon the terms and conditions contained in this agreement. C. The Assignee is indebted to the Assignor for the principal amount of Four Hundred Thousand (US$400,000) Dollars in U.S. funds, which is evidenced by a promissory note dated November 10, 2000 (the "Promissory Note"). D. The Assignee and the Assignor wish to restructure the terms of the Promissory Note upon the terms and conditions contained in this agreement. NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and the mutual promises, covenants, conditions, representations and warranties hereinafter contained and the sum of Ten ($10.00) Dollars now paid by the Assignee to the Assignor and for other good and valuable consideration, the receipt of which are acknowledged, and subject to the terms and conditions hereinafter set out, the parties agree as follows: <PAGE> 1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ASSIGNOR --------------------------------------------------------- 1.1 The Assignor represents, warrants and covenants to the Assignee that: (a) the above premises are true and complete, that the Debt has not been prepaid in full or in part, and that the Debtor has been given notice of this Assignment by the Assignor; (b) the full amount of the Debt is due and owing by the Debtor to the Assignor; and (c) the Assignor now has a good right, full power and absolute authority to assign its right, title and interest in and to the Debt in the manner set out in Article 2 hereof according to the true intent and meaning of this agreement. 1.2 The representations, warranties and covenants contained in Section 1.1 are provided for the exclusive benefit of the Assignee and a breach of any one or more thereof may be waived by the Assignee in whole or in part at any time without prejudice to its rights in respect to any other breach of the same or any other representation or warranty or covenant. Any representations, warranties and covenants contained in Article 1 will survive the signing of this agreement. 2. ASSIGNMENT OF THE DEBT AND RESTRUCTURING OF TERMS ------------------------------------------------- 2.1 The Assignor grants, assigns, transfers and sets over unto the Assignee his entire right, title and interest in and to the Debt, including, without limitation, all rights, benefits and advantages of the Assignor to be derived therefrom and all burdens, obligations and liabilities to be derived thereunder, in consideration of the premises and the consideration set out in Section 2.3. 2.2 The Assignor agrees to restructure the terms of the Promissory Note by changing the Promissory Note from a demand note to a term of 12 months from the date of this agreement, in consideration of the premises and the consideration set out in Section 2.3. 2.3 In consideration of the assignment of the Debt and the restructuring of the terms of the Promissory Note, the Assignee will (a) issue 2 million share purchase warrants, which will entitle the Assignor to acquire 2 million common shares in the capital of the Assignee at a price of US$0.05 per share (the "Warrants"), and (b) sign and deliver a new promissory note as evidence of the restructured terms of the Promissory Note. 2.4 The Assignor acknowledges and agrees that the Warrants, and any common shares obtained as a result of the exercise of the Warrants, may only be resold in compliance with the Securities Act of 1933, pursuant to a registration statement or an exemption from registration under the Securities Act of 1933. The Assignor acknowledges that the share certificates representing the shares issued on the exercise of the Warrants will bear a trading restriction legend and may bear any other legend, if the legend or legends are reasonably required by the Assignee to comply with state, federal or foreign law. -2- <PAGE> 3. CONSENT OF DEBTOR ----------------- 3.1 The Debtor agrees and consents to the assignment of the Assignor's interest in the Debt to the Assignee pursuant to the terms and conditions of this agreement. 3.2 The Debtor represents, warrants and covenants to the Assignee that (a) the full amount of the Debt is due and owing at the time of this agreement, (b) the Debt has not been prepaid in full or in part, and (c) any interest owing on the Debt ahs been paid in full up to June 1, 2002. 3.3 The Debtor agrees and acknowledges and that the Assignee is entitled to make demand at any time for payment of the full amount of the Debt. 4. COUNTERPART ----------- 4.1 This agreement may be signed in one or more counterparts, each of which when so signed will be deemed an original, and such counterparts together will constitute one in the same instrument. IN WITNESS WHEREOF this agreement was signed by the parties hereto as of the day and year first above written. The Common Seal of ) COMMUNICATE.COM INC. ) affixed was hereunto in the presence of: ) ) /s/ David Jeffs ) ) C/S --------------------------------------------) AUTHORIZED SIGNATORY ) The Common Seal of ) PACIFIC CAPITAL MARKETS INC. ) affixed was hereunto in the presence of: ) ) /s/ James R. King, Jr. ) ) C/S -------------------------------------------- AUTHORIZED SIGNATORY ) The Common Seal of ) DOMAIN HOLDINGS INC. ) affixed was hereunto in the presence of: ) ) /s/ David Jeffs ) ) C/S -------------------------------------------- AUTHORIZED SIGNATORY )