Set-off in the Context of Receivable Financing

Pamlyn Lee, Vice President, Global Corporate & Sales Financing, Huawei Technologies, China

The English law on set-off bears particular importance to modern commercial and financial transactions. Unlike the lender-borrower structure in conventional loans, the implications of set-off are more complicated in the context of receivable financing where three parties are involved. For a receivable financer, the existence of the right to set-off by the debtor is a key risk that may affect successful debt collection, since it may operate to diminish or even extinguish the value of the receivables he purchased; for a receivable seller seeking receivable financing on a non-recourse basis, his primary concern is on containing the risk of recourse from the financer due to set-off by the debtor. This article explains the circumstances a debtor may exercise set-off against debt assigned from the seller to the financer through receivable financing, and the implicating risks from both the perspective of the financer and seller. The article further highlights particular negotiation points between the financer and seller with regards to mitigating risks associated with such set-off.

Pamelyn Lee is Senior Counsel and Vice President, Global Corporate and Sales Financing for the Huawei group. She specialises in project finance, structured finance and derivatives products, and is predominantly responsible for heading up the group company’s legal team in complex telecom financing projects. Prior to Huawei, Pamelyn was with BNP Paribas CIB where she advised on CDOs, CLOs, equity and credit derivatives. Pamelyn studied law at Oxford University and Durham University.

Huawei is a leading global information and communications technology (ICT) solutions provider. Through our dedication to customer-centric innovation and strong partnerships, we have established end-to-end advantages in telecom networks, devices and cloud computing. We are committed to creating maximum value for telecom operators, enterprises and consumers by providing competitive solutions and services. Our products and solutions have been deployed in over 140 countries, serving more than one third of the world’s population.