Factoring Licenses May Be Abolished

By Dmitry Gubarev and Oxana Gorshkolepova

The RF Duma is considering an amendment to the Civil Code that, if ratified, will resolve an inconsistency in Russian law and open the door for any commercial entity to engage in factoring.

On April 14, 2006, the RF State Duma carried out the first reading of a draft federal law that would abolish the requirement in the RF Civil Code that factoring companies hold licenses (the "Factoring Amendment").

Factoring, which is also referred to as accounts receivable financing, is the selling of a company's accounts receivable at a discount to a factor who then assumes the credit risk of the account debtors and receives cash as the debtors settle their accounts.