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We draft factoring agreements and help our clients to negotiate them considering prevailing industrial practice, individual arrangements achieved between parties, and the overriding requirements of Lithuanian law.  In particular, we advise on the following issues:

Knowledge & Insights

Factoring is a type of transaction that is used businesses who are interested in sustaining even cash flow for their daily operations. The receivables linked with sale of goods and completion of works may either be:

Customarily, the creditworthiness of a client is checked by the financing party before entering into the factoring arrangement, and the financing party is entitled to decide according to which contracts and/or invoices the financing party is entitled to take over the client’s receivables. 

The factoring services are not subject to any licensing in the Republic of Lithuania. In practice, such financing is mostly provided by credit institutions. However, even though the factoring is not licenced, certain requirements have to be met by the company that provides such services. A founder of the company which intends to provide factoring services has to submit proof that he or she is not convicted of any criminal activity, he or she acquired funds lawfully, the founder was not convicted of any criminal activity, this entity does not jeopardize the security of the Lithuanian financial system, etc. The company exercising factoring must have: (i) accounting system, (ii) internal quality control, (iii) staff, (iv) security systems and facilities, (vi) internal management and (vii) organizational structure, (viii) insurance of assets. The supervising authority may refuse to approve a head of such financial institution.  

The Lithuanian Civil Code specifies that the transfer of a claim to the financing party under the factoring arrangements shall be valid even when such transfer is expressly prohibited or limited in the agreement as between the client and the debtor. The transfer of receivables has to be notified to the debtors. The debtor is entitled to request the financing party to submit evidence about such transferred claim. 

A client is responsible before the financing party for the validity of invoices, unless the parties agree to contract out this provision. If the debtor of a client defaults in settling the assigned invoices, the client remains be responsible for the non-refunded money.

Šulija Partners Law Firm Vilnius, registered office Jogailos street 11, Vilnius, LT-01116, Lithuania, fax +370 52051926, e-mail:

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