Promissory note surety. Types and rules for issuing bills of exchange

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Security, the issue and circulation of which is regulated by bill of exchange law, is called a bill. Its purpose is to satisfy in cash the debt of one person (that is, the debtor) to another person (that is, the creditor). The rights to this type of securities can be transferred to a third party without the consent of the issuer, but by order of the owner.

Promissory note is recognized as the original form of all securities. It is the first, the earliest commodity circulation security in the world, from which, to one degree or another, all other types of securities originated. And the bill itself replaced the IOU.

Today, the bill is still active, but its place in the world of securities is more than modest, in comparison with bonds or stocks.

What's the difference

A promissory note is a debt security, while a share is an equity one. They are united only by loan capital, and not by its productive or commodity form.

A promissory note differs from a bond in several features arising from real formstheir existence as securities:

- a bill can be used as a means of settlement or payments, which is absolutely prohibited for bonds;

- the issue of bonds must be registered by the state, this is not provided for bills of exchange;

- it is possible to sell a bond under a sale and purchase agreement, but a promissory note can only be sold by order of the person who owns it;

- a bond - issuance paper, a bill of exchange has a private character (although there are large lots of bills on the market), etc.

Two forms of bills

These are generally recognized types - promissory note and bill of exchange.

The first, sometimes called a solo promissory note, is an unconditional (or unconditional) obligation to pay a monetary debt to a creditor. And only on the terms specified in the bill. In fact, this is an IOU of the payer.

A promissory note is issued on the basis of a commodity transaction, if the buyer does not have the amount necessary to pay. Instead, this security is issued, for which the seller, after a specified period of time, will have to receive the amount specified in the promissory note. At the end of the term, the holder of the bill presents the buyer (that is, the debtor) with a bill of exchange, receives his money. And the debtor receives this security, which is now considered redeemed. A promissory note is issued in the name of the creditor.

The second bill, called a draft, is an order, considered unconditional, from the person who issued it to his debtor with the condition to pay the amount prescribed in the paper to a third party (the bill holder). That is, translationa bill of exchange is a written document containing an order to transfer the specified amount to a third party.

The meaning of a bill of exchange is clear from the name - it transfers a debt from one person to another. In most cases, the drawer (the one who issues the paper) is simultaneously the debtor of one person and the creditor of another. Therefore, the bill of exchange requires the debtor to pay not to the drawer, but directly to the creditor.

Details of a bill as a security

Any security is a strictly formal document. Therefore, the issuance of a bill of any type is subject to special rules.

Promissory note details:

- bill mark, that is, an indication that this is a "promissory note";

- the obligation to pay a certain amount is not conditional;

- the amount is indicated in figures and words (corrections invalidate the paper);

- timing of debt payment;

- meeting point with the holder;

- name and address of the payee (or on whose order the payment will be made);

- place and full date of drafting the bill;

- drawer's signature (handwritten only).

Details of a bill of exchange differ only in the bill of exchange mark ("bills of exchange"), the unconditional requirement to pay a certain amount on this paper, as well as the name of the payer and his location.

Amount as a prop of a bill

Both in the promissory note and in the bill of exchange the amount of the debt is indicatednumbers and duplicated in words. In case of their discrepancy, the bill is considered issued for the amount indicated in words. If there are several, the smaller amount applies. Regulatory requirements do not allow splitting debt into several parts or terms. For the bill is recognized as an abstract obligation to pay a specified amount, regardless of the reason for its issuance.

It is allowed to issue a bill with the amount indicated with interest. They can be included in the total payment or specified separately. Moreover, the interest rate will be effective if the bill of exchange has a payment date upon presentation or within a specific period from presentation. In other cases, even if the rate is specified, the payer has the right not to pay interest.

Debtor's address and name

If the bill payer is a registered legal entity, then the full legal address and name must be specified as a requisite. If the debtor is an individual, then his full name, surname and patronymic, as well as the place of registration and passport data are indicated in full. For a promissory note, this is sufficient. In a bill of exchange, the drawer and the debtor are different people. Therefore, in this paper, both the second address and the name of the person are added to the details.

Payment condition

A promissory note is issued by the debtor, so he writes in the paper his obligation to pay the required amount.

A bill of exchange is issued by the creditor to the payer, but with the condition to pay the debt to a third party - the drawer's creditor. Therefore, the bill of exchange does not contain an obligation, but a demand to pay the debt.

Promissory note maturities

Legislatively they are established as follows:

- "Upon presentation." That is, as soon as the bill is presented, payment is made. This must happen within a year from the date of issue of the bill, unless a specific date is specified in it. In case of delay, the bill becomes invalid.

- "At a certain time after presentation." Payment of the debt occurs after the agreed time after the date of presentation. This must be recorded on the front side of the bill of exchange. This mark will be the actual consent to the return of the debt or the day of protest in the acceptance.

- "In a certain period from the drafting" - the return occurs after the specified number of days from the date of the drafting of the bill.

- "On a certain day" - the payment of the debt must be made on the day specified in the security.

In the absence of a term, a bill of exchange can be presented for payment within a year from the date of its execution. If the date and term of payment are not indicated on the paper at the same time, the bill is invalid.

Place of debt redemption

Unless otherwise specified in the security, the place of payment is the location of the debtor. If the place of payment and the location of the payer are not entered in the bill, then it becomes invalid. As well as with the indicated several places of payment.

Date and place of paper compilation

The location of the debtor and the place of registration of the bill may notcoincide. However, if the place of drawing up is not specified in the form of the bill, then the paper is considered to be issued in the place that is located next to the name of the debtor. If the bill does not contain any of the specified places or it is non-existent, then the security is recognized as invalid.

The date of drawing up a bill is a very important attribute, since it starts the countdown of the payment period and the obligation period on the bill. It is invalidated if an unrealistic compilation date is indicated.

Signature

It is placed below the full name and location of the debtor in the lower right corner, and only by hand. If the document is signed by a legal entity, then in addition to his signature, the signature of the chief accountant and company seal are required. Invalidity of the bill will be recognized in the absence of the signature/signatures. And also if the document was signed by non-existent persons or those who do not have the right to sign it.

Guarantees

For both a promissory note and a bill of exchange, the regulations provide for an additional guarantee of payment on an accepted security through the issuance of a bill of exchange guarantee (aval). It is provided by a third party (most often a bank) both for the main payer and for any other person liable for the bill.

Aval is a special inscription on the front side of the document or on an additional sheet (allonge). It indicates: for whom the bank guarantee was issued, the date and place of its issue. And also put the seal of the bank and the signatures of its first officials. "Consider as aval" - this expression is recognized as a classic. But it is possible to use any other, suitable in meaning.

The guarantor of the bill (avalist) is jointly and severally liable. If the guarantor paid for the paper, then the rights arising from the document pass to him.

Only a financial institution can act as a guarantor. That is, an individual and even a legal entity, no matter how solvent it may be, cannot give a guarantee of a bill of exchange.

What does a guarantee give

There are a number of reasons that do not contribute to the development of bill circulation in our country. Here are some of them:

- distrust of persons (individual or legal) who issued the bill;

- possibility of fraud;

- the absence in our country of a system for fixing and accounting for bills;

- the rules and regulations for the rapid collection of the bill amount from the main payer who refused to pay (or his insolvency), etc. are not prescribed

Our legislation puts the bill of exchange among other securities in the lowest position, and this ensures that in the event of bankruptcy of the drawer, the case for damages will be the last in line.

Judicial procedures for such financial claims drag on for a very long time, and no one gives a guarantee of a positive outcome. Therefore, creditors are trying to further protect themselves by issuing an aval. Irrespective of the purpose for which a bill is avalized, the avalist becomes a participant in the bill of exchange. Moreover, on the rights equal with other signatories of the document.

What does the recipient risk

Oddly enough, but a bill of exchange guarantee does not give a 100% guarantee of a refund. Therefore, when drawing up a document, a number of certain rules must be observed. They will help to minimize possible troubles. It is unlikely that it will be possible to get rid of everyone, which is probably why the bill is considered a high-risk security.

First of all, it is necessary to consult a highly qualified lawyer who knows all the nuances of bill legislation. He begins his work by checking the registration of a security and a guarantee for it. Any typographical error, typographical error or inaccuracy of the data may serve as a reason why the drawer will refuse to pay with the wording "form defect".

Secondly, the lawyer checks the guarantor. Moreover, solvency is not the main thing. You need to pay attention to the charter of the organization (firm). Sometimes in the statutory form a provision is fixed on a ban on transactions related to a guarantee of a bill of exchange. And if, nevertheless, any official of such an organization (firm) signed the promissory note, then the responsibility for the aval falls on him. True, excess of authority will be punished. There are cases when only the head of the company can give an aval, and even his first deputy does not have such a right. Naturally, a guarantee given by such a person also entails serious difficulties.

Here it should be noted that the avalist always runs the risk of signing a promissory note. After all, the company (or individual) that issued the bill and refused itpay, shifts all responsibility to the guarantor. Russian legislation in this regard is always adamant. Even if it is proved that the drawer initially had malicious intent, and he intended to mislead the guarantor by his actions, even this will not relieve him of liability. That is, you still have to pay the debt.

Purchase of bills

This procedure is considered one of the most reliable and popular among similar financial instruments on the securities market. Buying a bill is not only a profitable means of payment, but also an opportunity for a successful investment.

Income can bring the so-called bill interest. They are charged on the debt amount specified in the promissory note. Interest-bearing bills are issued only "at sight", "at sight, but not earlier than a known date", and also "within a certain period of time from presentation". The calculation is made for the entire period (number of days) when the security is held by the holder of the bill. The start date of the period is the date of drafting the bill or the number written in the text of the document. Moreover, the Civil Code specifies that the countdown starts from the next day from the dates described. And the Bank of Russia gives such an explanation: the day of the actual placement of the bill is not included in the billing period for bill interest.

The end date of the interest period is the maturity date (inclusive). Naturally, the period for which interest is calculated cannot be longer than the period allowed for presenting the security for payment.

Towho pays interest on a bill, a certain procedure has been introduced for finding the number of days of circulation of a security per month. They are calculated as follows:

- if interest is accrued in the first month - from the day of the beginning to the last day of this month;

- if interest payable is accrued in the month of presentation - from the first day of the current month to the day specified for presentation;

- if in any other month - the number of calendar days.