'True Sales' In Receivables Financing

The Court of Appeal's decision in Bank of Ireland v Eteams (International) brings further important legal clarity for all forms of receivables finance transactions, as well as the 'true sale' opinions given by lawyers in the context of such deals.

Eteams (International Limited) had entered into a receivables financing agreement with the Bank of Ireland. The terms of the agreement were typical for an invoice discounting/debt factoring transaction: the company sold customer receivables to the Bank at a discount, the Company agreed to collect those receivables on behalf of the Bank, and there were provisions whereby receivables could, at the Bank's election, be transferred by the Bank back to the Company – for example, in the event of a default by the party responsible for paying the receivable. The Company became insolvent and the Company's liquidator contended that the agreement was not a sale transaction at all – but rather was a charge created by the Company over