• U.S. Governmental Receivables
  • July 13, 2007 | Author: Francis L. Keldermans
  • Law Firm: Holland & Knight LLP - Chicago Office
  • A lender perfects its security interest in U.S. government receivables by compliance with Article 9 of the Uniform Commercial Code (UCC). However, in order to ensure that it receives payments directly from the applicable governmental agency on such U.S. Government receivables a lender should comply with the provisions of the Assignment of Claims Act of 1940, 31 U.S.C. § 3727, 41 U.S.C. § 15 (the Act).

     

    Assignment of Claims Act

    The Act provides for notice to contracting and disbursing officers and to sureties on bonds but does not establish a national filing system and therefore is not within the scope of subsection 9-311 (a)(1) of the UCC. An assignee of a claim against the United States will benefit from compliance with the Act. But regardless of whether the assignee complies with the Act, the assignee must file under Article 9 in order to perfect its security interest against creditors and transferees of its assignor.

    The Act permits a company to assign monies due or to become due under a contract, but only if certain conditions are met.

    The Act and implementing regulations, 48 C.F.R. subpart 32.8, lay out the procedures. A contractor may assign monies due or to become due under a contract if all the following conditions are met, “(a) the contract specifies payments aggregating $1,000.00 or more; (b) the assignment is made to a bank, trust company, or other financing institution, including any federal lending agency; (c) the contract does not prohibit the assignment; (d) unless otherwise expressly permitted in the contract, the assignment –

    i. covers all unpaid amounts payable under the contract;

    ii. is made only to one party, except that any assignment may be made to one party as agent or trustee for two or more parties participating in the financing of the contract; and

    iii. is not subject to further assignment.”

    In 48 C.F.R. 32.805, the assignor must have the assignment executed by an authorized representative, which is attested to by the Secretary or Assistant Secretary and include a corporate seal. The assignee must forward written notice of the assignment, together with a true copy (see below) of the assignment instrument to the contracting officer or agency head, surety on any bond applicable to the contract, and dispersing officer designated in the contract to make payment. The assignee must forward to the parties identified above three copies of the Notice of Assignment together with one true copy of the Instrument of Assignment. The true copy must be a certified duplicate or photostat copy of the original assignment.

     

    What’s the Point

    In order to properly perfect its security interest in U.S. government receivables, a lender must comply with the attachment and perfection requirements under Article 9 of the UCC. In order to expedite the flow of payments from U.S. government agencies a lender should abide by the requirements of the Assignment of Claims Act. In order to protect its interest in payments from U.S. government receivables the lender must send an original and three copies of the notice of assignment together with a true copy of the assignment instrument to the contracting officer or the agency head, surety on any bond applicable to the contract, and the disbursing officer designated in the contract to make payment. The true copy should be a certified duplicate or photostat copy of the original assignment. A sample Notice of Assignment follows.

    Notice of Assignment

    TO: ____________________________________ [address to one of the parties specified above].

    This has reference to Contract No. ______ dated ______ entered into between ______ [contractor’s name and address] and ______ [government agency, name of office and address], for ______ [describe nature of the contract].

    Moneys due or to become due under the contract described above have been assigned to the undersigned under the provisions of the Assignment of Claims Act of 1940, as amended, 31 U.S.C. 3727, 41 U.S.C. 15.

    A true copy of the instrument of assignment executed by the Contractor on ______ [date], is attached to the original notice.

    Payments due or to become due under this contract should be made to the undersigned assignee.

    Please return to the undersigned the three enclosed copies of this notice with appropriate notations showing the date and hour of receipt, and signed by the person acknowledging receipt on behalf of the addressee.

    Very truly yours,

    _____________________________

    [name of assignee]

    By___________________________

    [signature of signing officer]

    Title________________________

    [title of signing officer]

    _____________________________________________________

    ______________________________________________________
    [address of assignee]


    Acknowledgement

    Receipt is acknowledged of the above notice and of a copy of the instrument of assignment. They were received at ____ (a.m.) (p.m.) on ______ 20____

    _____________________________________________________
    [signature]

    _____________________________________________________

    [title]

    On behalf of

    _____________________________________________________

    [name of addressee of this notice]