Risk Participation Agreement
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RISK PARTICIPATION AGREEMENT

- EXAMPLE TEXT -

 

RON WELLS  CCE

 

It is recommended that Tax and International Commercial Law advice should be obtained before a text such a this is utilised.

 

SELLER
Address
City
Country

"Seller" as Supplier

and

BANK
Address
City
Country

"Bank" as Risk Participant

 

agree to assume part of the payment risk emanating from the following commercial transaction.

 

Sale

In accordance with contract …(reference number)… Seller has sold …(quantity)… of … (product description)… to be delivered in …(delivery month or date range)…, with payment due …(number)… days after …(Bill of Lading date or other reference date)… (the "Due Date") representing a total value of approximately USD ……………

 

Purchase

…(full name of buyer)… ("Buyer") has purchased the above mentioned goods and has issued a Payment Undertaking.

 

Payment

The above mentioned amount of approximately USD ………… will be paid by Buyer directly to Bank's account with …(name of Bank’s USD clearing bank)… on the Due Date (see above). These funds received on Bank's account will be remitted to Seller's account at …(name of Seller’s bank)… net of Bank’s fee, as per Paragraph 6 below, on the Due Date (see above).

Therefore, the parties agree as follows;

 

1. Risk Participation

Seller and Bank will share pro rata in the payment risk of Buyer on a several basis as follows:

a) Bank USD ……………. (US Dollar …………..)

b) Seller USD …..…….…. (US Dollars …………)

 

2. Bank’s Undertaking

Bank undertakes to purchase the pro rata share of the account receivable due and shall pay an amount up to its risk participation amount if and only if, Buyer fails to pay the contractual obligation on or before the 7th banking day in New York following the Due Date. Bank shall not have any obligation to make any payment to Seller if the failure by Buyer to pay is based upon non-performance by Seller - Bank accepts that it will be sufficient evidence of performance by Seller under the terms and conditions agreed between Buyer and Seller if Seller presents to Bank a copy of the …(Bill of Lading or other delivery document)… conforming to the terms and conditions agreed between Buyer and Seller in the underlying contract. In case of partial default by Buyer, Bank’s purchase undertaking amount will be reduced to the pro rata share of its participation in the amount in default.

 

3. Seller's Undertaking

In case of a claim, Seller undertakes to sell and assign the pro rata share of the account receivable to Bank subject to the terms and conditions of this Risk Participation Agreement.

Seller is responsible to obtain all necessary legal and other approvals required for Seller to enter into this agreement.

 

4. Effective Date

This purchase undertaking will be effective and legally binding on the date Bank receives this Agreement, duly countersigned by Seller, and all Conditions Precedent have been satisfied.

 

5. Duration

This agreement is valid until …(date)... Any claims hereunder must be received by Bank no later than …(date)... . Notwithstanding the foregoing, this agreement shall not expire as to any claims made prior to …(date)... which have not been finally settled between Bank and Seller prior to …(date)...

 

6. Pricing

Seller agrees to pay to Bank ...(agreed charge rate)… on Bank’s aggregate maximum risk participation of USD ………….(US Dollars ………….). This commission will be deducted from the payments received, or in case of non-payment by Buyer, by direct payment arranged by Seller to Bank.

 

7. Conditions Precedent

In order for this Agreement to become effective Seller will provide Bank with the following documents:

a) Copy/ies of the related commercial invoice(s).

b) A Payment Undertaking signed by Buyer (as per enclosure text). Buyer’s signature is to be     authenticated by a well known commercial bank in form and substance satisfactory to Bank.

c) Copy/ies of appropriate shipping documents.

 

8. Conditions for Claim

  1. Bank shall purchase from Seller Buyer's account receivable pursuant to this agreement and shall pay the respective amount to Seller within two banking days in New York after the presentation of the following documents to BANK:

i) Copy of Seller's telex or facsimile sent to Buyer protesting non-receipt of funds on Due Date ("Protest Notice");

ii) Not earlier than four banking days in New York after submitting the Protest Notice, Seller's statement as follows:

Seller hereby claims under the unfunded Risk Participation Agreement dated ...(date)... and signed by Seller and Bank, and certifies to Bank that full/Partial Payment …(as applicable)… of USD ……………. has not been received by Seller and that Seller requests Bank to honour this request for purchase of Buyer's account receivable in the pro rata amount of USD …………….. Seller confirms that this non-receipt of payment has not arisen out of any breach of contract by Seller under Seller's contract with Buyer, and Seller's rights which are to be assigned to Bank are free and clear of withholdings, counterclaims, and setoffs.

b) Seller will not have agreed to any alterations to the financial terms of its contract with Buyer without Bank’s prior consent.

c) Seller shall disclose and assign the respective claim to Bank and agrees to furnish to Bank promptly upon Bank’s request such documentation and perform such reasonable legal acts as Bank in its sole determination, deems necessary or advisable to constitute or perfect Bank's claim on Buyer in the event Buyer fails to pay under its Payment Undertaking and Bank has made payment to Seller pursuant to its undertaking described herein.

In addition Seller agrees to cooperate fully with Bank in any legal or other proceedings brought by Bank against Buyer.

All costs and expenses (excluding in-house legal or administrative expense) incurred by Bank in connection with the collection of any amounts payable by Buyer in connection with the enforcement of any document relating to the Payment Undertaking shall be borne between Bank and Seller pro rata on the basis of this Risk Participation Agreement.

 

9. Notices

Any notice under this Agreement shall be in writing (including telegraphic, telex or facsimile communication). All such notices shall be deemed to be given when transmitted by telex and the appropriate answer-back is received, transmitted by facsimile machine and confirmed in writing, delivered to the telegraphic office, personally delivered or, in the case a mailed notice, when sent by registered or certified mail, postage prepaid to the participants’ above-mentioned addresses or to such other address as may be advised from time to time to Bank in writing.

 

10. Governing Law and Jurisdiction

This Agreement shall be governed by and construed in accordance with the law of England. All legal aspects of the relationship between Seller and Bank shall be governed by English Law and the place of exclusive jurisdiction of lawsuits and any other kinds of legal proceedings shall be the Courts of England.

 

……………………..

Agreed accepted by

SELLER

Dated: ……………

 

 

……………………..

Agreed accepted by

BANK

Dated: ……………

 

© Copyright 2000 R K Wells

 
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Last Updated:  January 02, 2017 17:19 -0000