September 16, 2024
Factoring companies in the Republic of Uzbekistan
The Republic of Uzbekistan has taken measures to support medium and small businesses. In particular, factoring companies will be established by Presidential Decree-№106 dated 12.08.2024.
Factoring is a financing activity under the assignment of a monetary claim. Thus, according to Article 749 of the Civil Code of Uzbekistan, under the contract of financing under assignment of monetary claim, one party (financial agent) transfers or undertakes to transfer to the other party (client) monetary funds on account of monetary claim of the client (creditor) to a third party (debtor) arising from the provision of goods, works or services by the client to a third party, and the client assigns or undertakes to assign this monetary claim to the financial agent.
The monetary claim to the debtor may be assigned by the client to the financial agent also to ensure the fulfillment of the client’s obligation to the financial agent.
Obligations of the financial agent under the contract of financing under the assignment of monetary claim may include keeping accounting records for the client and providing other financial services to the client related to the monetary claims that are the subject of the assignment.
According to the newly adopted Presidential Decree-№106, factoring organizations may now be financial agents. They may carry out their activities only after registration in the records of the Central Bank of Uzbekistan as a non-banking credit organization.
From 1st January 2025, it is permitted:
– to carry out factoring operations in foreign currency, in case the client’s counterparty is a non-resident;
– to credit organizations to resell (refactoring) monetary claims acquired under factoring agreements.
However, the financial agent may not change the currency of the monetary obligation and the country of payment without the debtor’s consent.
The decree also provides that
– liability for violation of the prohibition on assignment of monetary claims is abolished;
– to ensure priority of claims on assigned rights, notices of assignment of monetary claims shall be registered in the collateral register.
An electronic factoring services platform (Factoring Platform) will be implemented. This platform is used for:
– input by business entities of information and documents on monetary claims for the use of factoring services;
– automation of the financing process by verifying the authenticity of documents that are the basis for monetary claims, as well as ensuring prompt collection of information on debtors and its analysis in real-time;
– providing convenient, fast, and secure technological infrastructure for credit organizations to provide factoring services to supply chain participants.
To ensure verification of the authenticity of monetary claims, their registration, assessment of the debtor’s solvency, integration with the “Electronic Government” system with access to the database of electronic invoices, the system of electronic consignment notes, and the electronic database of taxpayers with the possibility of obtaining financial statements of legal entities is provided.
The Central Bank has established requirements for cybersecurity and information systems. Also, to popularize and develop factoring services, develop industry standards, strengthen ties between factoring market participants, and support the initiative of commercial banks and microfinance organizations, a National Association of Factoring shall be established. For further development of factoring, a roadmap is attached to the Decree, providing for the following steps:
– Improvement of the legal framework of the factoring services market in Uzbekistan;
– Introduction of an electronic platform;
– Introduction of minimum requirements for electronic platforms providing factoring services;
– Creation of the possibility of wide application of factoring in foreign trade operations;
– Expansion of factoring services in commercial banks.
