Vidhi Codex

THE FACTORING REGULATION ACT, 2011

The Factoring Regulation Act, 2011

General201136 sections7 chapters

This Act regulates factoring, where a business sells its receivables (money owed to it by buyers) to a factor in return for immediate funds. Factors must register with the Reserve Bank of India, which can give them directions and call for information. The Act sets out how receivables are assigned, how the debtor must be notified, and when a payment by the debtor discharges the debt. It protects debtors' rights and defences, and requires assignments to be registered with a central registry. It includes special protections where the seller is a micro or small enterprise, and penalties for breaking its rules.

Start reading →Read full ActSections

Chapter I PRELIMINARY →

  1. 1Short title, extent and commencement
  2. 2Definitions

Chapter II REGISTRATION OF FACTORS →

  1. 3Registration of factors
  2. 4Provisions of non-banking financial companies apply to factor
  3. 5Recruitment for registration as a factor not to apply to bank or Statutory corporation or Government company
  4. 6Powers of Reserve Bank to give directions and to collect information from factors

Chapter III ASSIGNMENT OF RECEIVABLES →

  1. 7Assignment of receivables
  2. 8Notice to debtor and discharge of obligation of such debtor
  3. 9Discharge of liability of debtor on payment to assignee
  4. 10Payment made by debtor to assignor to be held in trust for benefit of assignee in certain cases

Chapter IV RIGHTS AND OBLIGATIONS OF PARTIES TO CONTRACT FOR ASSIGNMENT OF RECEIVABLES →

  1. 11Rights and obligations of parties to contract for assignment of receivables
  2. 12Liability of debtor
  3. 13Assignor to be trustee of assignee
  4. 14Liability of debtor in case of an assignor being micro or small enterprises
  5. 15Principle of debtor protection
  6. 16Defences and right of set off of debtor
  7. 17Modification of original contract
  8. 18Breach of contract

Chapter V REGISTRATION OF ASSIGNMENTS →

  1. 19Registration of certain assignments of receivables transactions
  2. 20Public inspection

Chapter VI OFFENCES AND PENALTIES →

  1. 21Penalties
  2. 22Penalties for non-compliance of direction by Reserve Bank
  3. 23Offences
  4. 24Cognizance of offences
  5. 25Offences by factors

Chapter VII MISCELLANEOUS →

  1. 26Provisions of this Act to override other laws
  2. 27Application of other laws not barred
  3. 28Limitation
  4. 29Confidentiality of information
  5. 30Power to exempt
  6. 31Provisions of this Act not to apply or affect in certain cases
  7. 31APower to make regulations
  8. 32Power of Central Government to make rules
  9. 33Laying of rules
  10. 34Power to remove difficulties
  11. 35Amendments to certain enactments

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