Novation of a debt into a loan obligation is considered the optimal solution for many companies that find themselves in a difficult financial situation. To do this, a special agreement is drawn up in lieu of past debts, which may relate to a purchase and sale agreement, lease or other types of contracts.
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It's fast and free! This process is regulated by Art. 414 of the Civil Code, and also takes into account the information contained in Art. 808 and art. 818 Civil Code.
Civil Code of the Russian Federation Article 414. Termination of an obligation by novation
1. An obligation is terminated by an agreement of the parties to replace the original obligation that existed between them with another obligation between the same persons (novation), unless otherwise established by law or follows from the essence of the relationship.
2. Novation terminates additional obligations associated with the original obligation, unless otherwise provided by agreement of the parties.
Civil Code of the Russian Federation Article 808. Form of a loan agreement
1. A loan agreement between citizens must be concluded in writing if its amount exceeds at least ten times the minimum wage established by law, and in the case where the lender is a legal entity - regardless from the sum.2. In confirmation of the loan agreement and its terms, a receipt from the borrower or another document certifying the transfer by the lender of a certain amount of money or a certain number of things to him may be presented.
Civil Code of the Russian Federation Article 818. Novation of debt into a loan obligation
1. By agreement of the parties, a debt arising from the purchase and sale, lease of property or any other basis may be replaced by a loan obligation.
2. The replacement of a debt with a loan obligation is carried out in compliance with the requirements for novation (Article 414) and is carried out in the form provided for concluding a loan agreement (Article 808).
The meaning of the event
Debt may be generated by a company for a paid advance for the upcoming supply of goods, provision of services, or performance of work. A receivable is formed by the supplier at the time of shipment of materials in favor of the counterparty, transfer of property for rent and other relationships. It is not always possible for the debtor to fulfill the terms of the contract in full and within the established time frame.
In practice, there are often cases when the defaulter is unable to complete the work, pay for materials, etc. It is in such a situation that the optimal solution is to replace one type of obligation with another. Debt novation is a procedure that provides for the preservation of mutual settlements between counterparties, but in a different form. The debt itself continues to exist in value terms, but the terms of the transaction change.
The original agreement can be valid between individuals and legal entities, so the new contract is concluded between them. That is, there are no new participants in the innovation relationship. The essence of updating the contract is to replace the subject of the agreement.
For example, under a supply agreement, the supplier was unable to ship materials to the buyer for a certain amount due to the absence of the object of the transaction. Since the consumer is interested in returning the previously listed advance, he compromises and accepts the counterparty’s offer to convert the subject of the transaction into borrowing.
The borrower does not actually receive money on loan from the lender. The previous agreement had a cost dimension, which is translated into a lending agreement on new terms. It is likely that the debtor will have to pay interest on the loan amount in order to interest the customer in the feasibility and profitability of the transaction.
Novation of debt implies the preservation of debt relations, only in a slightly different form
Concept of debt obligation
Debt obligations are represented by certain relationships that arise between two parties, which are the lender and the borrower. Based on a special agreement, funds are transferred from one person to another as a loan under certain conditions.
The person or company that took this money for temporary use at interest has a debt obligation that must be fulfilled, taking into account the conditions discussed during the preparation of the loan agreement.
Important! Such contacts can be made by both individuals and different companies. If it is necessary to carry out innovation, then the main condition for this is that the loan agreement itself must be drawn up correctly.
Particular attention is paid to the subject of the transaction, and this may include:
- money;
- equity participation in the construction of a facility, and the debtor is obliged to receive a finished property from the builders;
- purchase or sale of any property;
- provision of items, real estate or transport for rent.
What is a loan obligation? Photo: myshared.ru
For each of the above cases, novation is allowed, but only on the condition that it is acceptable to each party to the transaction. Important! With the help of innovation, past obligations are leveled.
Features of novation of debt into a loan obligation
This process is carried out if the debtor has an uncovered obligation. Sometimes it is necessary to change the subject of the agreement. This results in the item or service specified in the previous contract being replaced by new items or services.
For example, a construction company, on the basis of an equity participation agreement, must provide the buyer, who is an individual, with residential real estate ready for occupancy.
If for some reason it is not possible to put the property into operation, the developer can replace the property with a sum of money equal to the price of the apartment. The entire process is carried out taking into account the information contained in Art. 818 Civil Code.
In this case, the agreement must be drawn up in writing if the following conditions exist:
- the organization acts as a creditor;
- the amount of debt exceeds 1 thousand rubles.
When making a novation, the debtor's previous obligations are neutralized. This is due to the fact that they are replaced by new debts prescribed in the contract.
This document must additionally contain information on the conditions under which new obligations are fulfilled. If the company or person complies with the new terms of the contract, then he no longer has debts to the creditor.
When is an innovation recognized as legal?
Innovation cannot always be used, and in some situations such a transaction may be declared completely illegal by the court. Legitimacy is possible only when the subject of the transaction is replaced, but not other conditions.
For example, a company enters into a contract with a private person, on the basis of which it undertakes to pay the owner of the premises 15 thousand rubles for its temporary use. There will be no substitute for drawing up another loan agreement, which states that the organization is obliged to pay 15 thousand rubles.
What are debt obligations, watch in this video:
This is due to the fact that no changes are made to the amount of payment, and the subject of the transaction does not change. In such a situation, the innovation will be considered legal if the borrower issues a special promissory note to the lender, which indicates the amount of 15 thousand rubles. In this case, the form of obligation is replaced.
Another factor in the legality of a transaction is that the same parties must participate in it. If a new contract is formed, then the same persons who put their signatures on the previous contract will certainly sign it.
Important! If the new document lacks at least one signature found on the previous contract, then this contract will not have legal force, since it is easily recognized as invalid. Other rules for conducting the process competently include:
- all signatures by persons must be voluntary;
- It is not allowed to initiate the process unilaterally;
- the subject of the contract cannot be related to the personality of the debtor;
- The innovation cannot be applied in relation to payments for damage caused, which can be moral or physical, as well as in relation to alimony.
The item may be replaced, but this must be specified in the new agreement.
The legislative framework
Novation of debt is regulated by laws and regulations:
- Art. 414 of the Civil Code describes the termination of obligations by drawing up a novation agreement;
- Art. 818 of the Civil Code contains information about the transfer of debt into a loan obligation using novation.
Classification
Businesses and citizens need to understand what an outstanding debt novation agreement is used for and what it is. Novation is the process of approving a new subject of agreement, drawn up on paper. Innovation is a procedure for implementing an agreement reached by the parties. In economic and legal practice, a standard grouping of agreements for updating transactions is provided: offset, novation, compensation.
All types are characterized by paperwork certified by the signatures of the participants. Changes can be made at the discretion of the counterparties at any time during the validity of the main obligation. The main feature of such transactions is the use of payment methods that were not initially considered by the parties at all. It is important that offset and compensation completely or partially cover the existence of the debt, and novation transfers it to another form.
The innovation procedure can be used for two main directions:
- The existing arrears on bills of exchange, purchase of inventory items, and provision of services are replaced by a loan agreement.
- The reverse form, when a loan obligation turns into a supply contract, contract, lease, etc.
The main feature of innovation is a radical change in the terms of the contract. Moreover, the creditor actually does not incur any losses, and the debtor finds a method of pre-trial settlement of the dispute. If an addition is made, the agreement on installments or deferment is applied, but in fact the agreement does not change. When one counterparty assigns a debt to another person, we are not talking about novation, but about assignment.
In the accounting of both parties to the novation, the previous obligation is recognized as extinguished and subject to liquidation. The financial service specialist must complete the appropriate postings. New debt is accounted for in accordance with the term of the loan as a short-term or long-term liability.
According to Art. 167, 171 of the Tax Code of the Russian Federation in the tax accounting of the supplier, the repayment amount is recognized as revenue and participates in the formation of the base for calculating income tax. The buyer does not have the right to submit a VAT deduction claim to the budget, since no actual payment for goods or services has been made. If the lender is an individual and dividends are expected to be paid, the borrowing company is the tax agent. Therefore, each time you transfer the loan body and interest, it is necessary to withhold personal income tax and transfer it to the budget.
Any agreement must be certified by the signatures of both parties
What it is
Novation, in accordance with Article 414 of the Civil Code of the Russian Federation, is an agreement between two parties to replace the original obligation existing between them with a new one.
There are two main directions of innovation:
- novation of a bill of exchange into a loan agreement - when the borrower had an obligation to provide the bill of exchange to the lender, but was unable to, then by mutual agreement they change it to an obligation to repay the loan.
- novation of a loan into a bill of exchange occurs when the borrower takes a cash loan from the lender, the obligation for which, as a result of novation, is replaced by another - the provision of a bill of exchange.
Instead of a bill of exchange, services or goods may be specified.
In the case of a loan, the obligation of the borrower to return the specified amount to the lender is replaced by a new obligation, which is stipulated in the novation agreement.
That is, the previous obligation is terminated, and a new one is created in return. If part of the loan has already been repaid, an agreement is drawn up for the remaining amount.
For example, with a loan of 500 thousand rubles, 300 thousand were repaid, and the remaining 200 thousand were converted into the supply of goods by the borrower for this amount.
Novation must be distinguished from the usual change of conditions in the original obligation, or the introduction of additions to it:
- loan repayment terms;
- the amount of interest on the loan;
- procedure for making payments, etc.
These actions cannot be considered an innovation, since the main parameters of the obligation, after their introduction, remained unchanged.
Regulatory resource
Any mutual settlements between individuals and organizations must be regulated by the norms of current legislation. Innovation transactions are no exception. Chapter 26 of the Civil Code of the Russian Federation regulates the procedure for terminating the existence of obligations, including changing the form of payments.
According to Art. 407 of the code, the parties, on a mutual initiative, decide on full or partial repayment of the debt, determine the potential consequences and risks. Article 414 confirms the right of a creditor and a debtor to formalize an agreement to completely replace one type of debt with another, if the original contract and the code of state laws do not contain direct prohibitions on such actions.
A loan obligation is formed between individuals subject to ten times the amount of arrears compared to the minimum wage. This threshold does not apply to legal entities. According to Art. 815 of the Civil Code of the Russian Federation, the borrower can issue a bill of exchange and transfer it in payment of the loan debt.
Art. 818 of the Civil Code allows innovations under sales and lease contracts. It is impossible to replace alimony debts and arrears that have a direct connection with the identity of the counterparties. For example, damage from an accident, injuries from physical impact, moral and material harm.
Decor
When repaying a loan in goods, services, a bill of exchange, etc., an agreement on novation of the loan is concluded. It indicates that the parties have reached an agreement in this matter, and also determines the value of the products that are supplied against the loan.
This includes determining the fate of penalties and interest on the loan and the costs of packaging, loading and delivery of goods. Once the novation agreement is signed, the lender becomes the buyer and the borrower becomes the seller.
The lender's accountant performs the following actions:
- keeps records of products that have been received and are equal in value to the loan;
- enters this amount into the “expenses” section;
- indicates interest on the loan in the section “non-operating income”;
- transfers money that was issued as a loan into advance payments under supply contracts;
- records the delivered products, receives a shipping invoice and keeps records of incoming VAT.
With simplified taxation of the lender, the entire cost of goods goes into the “expenses” section, and the obligation becomes fully repaid.
But if only the main body of the loan is returned in goods, it will be necessary to reflect the interest received on it in a separate item.
The borrower, in turn, must perform the following actions:
- take into account the income received from the sale of goods;
- in the “expenses” column, indicate the purchase price of goods with which the loan is repaid, or the costs of their production;
- interest that must be paid to the lender is included in non-operating expenses;
- issue an invoice with VAT for advance payment within 5 days from the date of signing the contract;
- Having shipped the goods, issue a shipping invoice;
- charge VAT on the goods and record it in the journal.
Sample loan novation agreement.
Transaction regulations
The defaulter cannot, on his own initiative, unilaterally decide to borrow money from the creditor under the guise of changing the terms of the current agreement. Both parties schedule a meeting, discuss details, assess consequences and risks. You can entrust the preparation of the form to a qualified lawyer or download it via the Internet. There will be no significant difference in the samples, since borrowing does not imply special conditions or nuances.
The structure of the template is drawn up taking into account the requirements of civil law and aspects of the initial agreement. The form of the obligation must necessarily change; the participants in the relationship remain the same. To eliminate possible disputes and disagreements in the future, it is necessary to provide direct links to the base contract.
The contract must be concluded in accordance with existing legislation
The innovation can be applied at any stage of settlements between counterparties. It is not prohibited to reach a settlement agreement during the trial and decide to terminate the debt by novation into a loan.
For example, let’s imagine that the Master company did not pay the Tools company for the supply of components. The creditor files a lawsuit. The debtor, having assessed the potential costs, the risk of loss of property, bankruptcy, invites the creditor to compromise and replace the monetary obligation with a loan at interest. The addressee of the appeal will satisfy the request, since in addition to the principal debt he will receive additional profit.
Features of the innovation of a commodity loan into a cash loan and vice versa
In economic circulation, the innovation of a commodity loan into a cash loan has found quite wide application. This type of transaction, in addition to agreeing on the terms of terminating the obligation to return the goods, requires agreeing on the essential aspects of a new loan obligation. Otherwise, a new obligation will not arise, and the rules on contracts of sale or delivery (as its varieties) will be applied to existing legal relations with all the ensuing consequences.
When replacing a cash loan with a commodity loan, the structure of the agreement can be quite cumbersome, since the specifics of the commodity loan agreement must be taken into account (see the article “Commodity loan agreement - legal subtleties”). In this case, it is advisable to conclude a separate commodity loan agreement and then transform existing obligations from commodity and cash loan agreements into a new commodity loan agreement for the total amount of debt.
IMPORTANT! A simple instruction to repay a previously issued cash loan through the transfer of property will not replace the old obligation with a new one (the purpose of the novation), but will terminate the old obligation by providing compensation.
Filling out the form
We list the main details and conditions, the reflection of which is an important point in the novation transaction:
- The name of the document, place and date of its preparation.
- Full name of the creditor, debtor for individuals, name for organizations.
- Power of attorney for an authorized person.
- Description of the subject of the agreement indicating the details of the obligation to be closed.
- Amount of debt.
- The transfer of one form of debt to another is approved, with details of the procedure for its repayment.
- The loan is issued at interest or free of charge.
- The parties confirm full fulfillment of the previous contract.
- It is recommended to describe confidential information and responsibility for its disclosure.
- The rules for resolving disputes are described.
- Details of the participants in the transaction and signatures of authorized persons.
When concluding a contract, it is important to follow all the rules for document execution.
To facilitate the process, you can use a sample agreement on novation of debt for the supply of goods as a loan obligation.
Important points of the innovation document
The emergence of a debt obligation is permissible only if there is a loan agreement. Persons who previously played the role of a credit institution and a client in the main loan agreement, which is the first basis, take part in the innovation.
At the date of implementation of the innovation, the validity of the original obligation is considered to be an important requirement. To make an innovation, it is necessary to reach mutual agreement between the participants. It is prohibited to perform it on behalf of one of the parties to a financial agreement.
The reason for making a novation is the inability to pay for the original contract. The newly drawn up contract specifies the conditions that entail the payment of additional costs and expenses to the credit institution. The use of credit money should rightfully be reimbursed in the form of interest charges, which should be reflected in the novation.
Important! In the event of amicable consideration of all issues and conditions, the parties may novation of the loan agreement. The document must clearly stipulate all the requirements, and for each of them it is necessary to bring the participants to a mutual agreement.
Agreement on novation to the loan agreement
We refer to___ hereinafter as the “Creditor”, represented by __________, acting___ on the basis of ____________, on the one hand, and ______________, hereinafter referred to as the “Debtor”, represented by ____________, acting___ on the basis of ________, on the other, referred to together as “”, and separately The “Parties” have entered into this agreement (hereinafter referred to as the Agreement) as follows. 1.1. came to an agreement to replace the Debtor’s obligation to the Creditor arising from Agreement __________ N _____ dated “___” __________ _____.
Novation of alimony obligations and obligations to compensate for harm to life and health
Paragraph 2 of Article 414 of the Civil Code of the Russian Federation in its original wording established that novation is not allowed in relation to obligations to compensate for harm caused to life or health, and to pay alimony.
These provisions were not included in the new edition of this article.
Instead, in paragraph 1 of Art. 414 of the Civil Code of the Russian Federation there is an indication that a ban on innovation may arise from the essence of the relationship. Since obligations to compensate for harm to life and health, as well as alimony obligations are aimed at ensuring the particularly significant interests of citizens, such obligations cannot be novated. The possibility of their termination in a manner other than execution is excluded.
