Receivables Financing in Lithuania: Is the Legal Regulation Suited to Accommodate the Practical Needs of Industry?

in Review of Central and East European Law
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This article examines the provisions of the 2000 Lithuanian Civil Code regarding the use of receivables for the purpose of raising finance. It starts by discussing the mechanism that the Code provides for the transfer of receivables—i.e., cession. Also, limitations on cession without debtor approval and the extent of rights that can be ceded are noted. The author then turns to the two main techniques of using receivables for financing. First, she examines the legal provisions on factoring and their practical application, as well as the structure of the industry. She presents some observations on the present structure of the industry, which precludes smaller companies from entering the market. Thereafter, she focuses on the possibilities under the Code of creating a security interest in receivables. Here, she reveals that the mechanism, although it does exist, is not a viable alternative to factoring, as it imposes additional burdens upon economic actors. Finally, the author presents her suggestions to the Lithuanian legislator, specifying the amendments that she believes should be made to the Code in order to encourage wider use of receivables financing in different ways (both by selling and by creating a security interest in receivables), as well as the further development of the industry.



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