All securities and debt securities on the territory of the Russian Federation are regulated by certain legislative acts. For example, the main law in this niche is the law “On the Securities Market”. But it does not apply to the bill. For this concept, there is a separate federal law - “On promissory notes and bills of exchange”, which was created on the basis of the Geneva Convention, signed already in 1930 (“On a Uniform Law on Bills of Exchange and Promissory Notes”).
But still, for a simple resident, for a simple man in the street and a worker, the concept of a bill, if familiar, is usually extremely vague in the mind. You may have heard the word promissory note along with the names of other debt securities, such as receipt, loan agreement, credit agreement. But what does it mean and what characteristics does it have - this is a question that is sometimes better to understand than to simply ignore. So let's figure it out.
Definition and types
A bill in simple words is a type of debt security that gives the right to one party to a transaction to receive money from the other party in full and within a specified time frame or upon presentation.
To put it simply, this is a promise to pay. The subject of a bill of exchange is only money.
The concept has been known since the beginning of our era (VII century). The bill system was developed to speed up the trading process and ensure the security of trade transactions. The merchants of Italy, for example, brought their ships loaded with goods into the harbor. They sold it. And instead of cash, which was unsafe, they received bills of exchange, which they presented for payment upon return.
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More about the course
The legislation regulating the circulation of the document is, of course, not that old, but its age is also impressive. In 1930, a special law was adopted at the Geneva Conference. In Russia, they use the federal law of 1997, which refers to the 1937 Decree.
But both documents say that they are being introduced due to our country’s accession to the International Convention, therefore they practically repeat the law of 1930. It turns out that the circulation of this security is regulated not by civil, but by international law, which increases its reliability.
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There are two main types of bills:
- Simple. Its hallmark is the participation of two parties. The payer or debtor is the person who issued the document. He is called the drawer of the bill. Example: Alexey wants to open his own business, he needs 500 thousand rubles for this. He turns to Nikolai with a request to borrow money. Nikolai agrees and receives the status of bill holder. Alexey writes out a bill. Depending on the stated conditions, Nikolai presents the bill for payment on a certain date. Alexey returns the money.
- Transfer or draft. There are 3 parties involved. Sergey is added to the described example. It was he who was indicated by Alexey as the debt payer in the issued bill. Nikolai demands money from Sergei. Naturally, Sergey must give consent (acceptance) at the time of registration of the security for the payment of money.
There are other classifications. By method of income received:
- Discount. Has a nominal value. For example, the debtor Alexey issues a document to Nikolay (the holder of the bill) in the amount of 500 thousand rubles. But Nikolai transfers only 450 thousand rubles to Alexey. The amount to be repaid later will still be 500 thousand rubles. The difference is Nikolai’s income.
- The interest note also has a face value, but the income to the holder of the note is paid as a percentage.
By debt repayment period:
- indicating a specific date;
- with redemption immediately upon presentation of the security or after a specific time.
Payment guarantee:
- avalized, i.e. when a third party (for example, a bank) guarantees for the debtor that he will pay the debt on time and in full, in this case they are jointly and severally liable;
- not avalized - without guarantee.
Aval is a bill of exchange guarantee under which a third party assumes responsibility for the obligations of the drawer.
By right of transfer:
- by endorsement - the first holder of the bill can transfer the bill of exchange right to another person;
- personal – no right of transfer to another person;
- bearer - a document can change hands an unlimited number of times.
Sberbank's website clearly states that it does not honor bills issued by third-party issuers with which it has partnerships.
Bills of exchange can be issued by legally capable individuals or legal companies, except for state executive authorities. Banks often issue these securities, mainly to raise capital.
The bank bill does not participate in the deposit insurance program, therefore, in the event of license revocation or bankruptcy, the bill holder will be able to return his money only after the sale of the bank’s assets. In addition, he acts not only as an issuer of securities, but also as a bill holder, buying them from other persons.
Features of the bill
Who can issue a bill of exchange
The main concept in this matter is bill capacity. That is, absolutely everyone will not be able to issue bills. According to the legislation of the Russian Federation, there are two groups of factors that determine bill capacity:
- The bill can be issued by adult individuals
- Can be issued by a legal entity
State executive authorities do not receive such a right!
That is why promissory notes are most often found in use by private traders, or government organizations that are not related to the authorities.
Difference from other debt documents
The main distinguishing feature of a promissory note compared to other debt securities is that it does not state the reason why one party is obligated to transfer money to the other party. If the paper is filled out correctly, then the terms of the transaction are not discussed or contested in court. They just have to be done. In essence, a bill of exchange is a confirmation of the existence of the debt itself, no matter what.
Distinctive characteristics:
- It is issued only on paper. Mainly on a special form with security elements containing the necessary details.
- There is joint liability for all persons who signed the document.
- Regulated by international law (Geneva Convention).
- The holder of the bill may change.
- Used in various fields of activity.
- Simplified collection procedure in case of refusal of the drawer to pay the debt. A protest is filed with the notary. The court then issues a foreclosure order without a hearing. Enforcement proceedings begin.
- Does not require state registration.
Where are bills used?
Essentially, a promissory note is a written confirmation of a debt. It is not affected in any way by the circumstances under which it is issued and the characteristics of the transaction. If you need to specify additional conditions - for example, the sale of goods, the provision of a loan, and so on, then an additional agreement is concluded between the parties.
Basically, bills of exchange are used in:
- In lending. Any person can act as a lender or borrower. This could be a private owner, a credit organization, any legal entity - everything except the state! As we said at the beginning of the article, authorities do not have the right to issue such papers. Moreover, as before, a loan on a bill of exchange will be regarded as more reliable for the one who issues it. In fact, they pay off their own debts using bills of exchange and sell the debts to others.
- Entrepreneurship. Basically, sellers thus give the client the opportunity to defer payment. Typically, such transactions are carried out without interest.
- Raising capital. This is mainly done by banking organizations. But, unlike the first option, we are not talking about lending. Because in this case, bill obligations are similar to bank deposits. In addition to banks, large companies and investors can also increase turnover in this way.
- Monetary sphere. In other words, sometimes bills act as a substitute for money. These papers are used to pay off the debt. And this can be done in front of almost anyone. First of all, we are talking about business niches. You are unlikely to see bills of exchange in everyday life of ordinary citizens.
Payment terms
There are different types of bills:
- Upon presentation - paid upon presentation, which must occur within 1 year after drawing up. A specific period may be agreed upon before which the document for payment will not be presented.
- At some time from presentation. For example, after 15 days, 2 months, etc.
- At some time from compilation.
- On a certain day.
The holder of the bill must present the document for payment either on the same day as stated, or within two business days after the specified date. When transferring money, the drawer may require a receipt.
Trading bill system
The circulation of a bill consists of its transfer from one holder to another. This freedom is due to the fact that it is the right to receive a specific amount without any reservations, which can be transferred on market conditions.
The bill system allows the transfer of this security using an endorsement (endorsement) containing the corresponding order of the owner. The transfer of a bill implies the transfer of the right to receive a specific amount. The holder writes “pay to order” on the back of the paper or allonge with the name of the recipient. The person in whose favor the document is transferred is called the endorser, and the person transferring it by endorsement is called the endorser.
Partial transfer of the amount by signature is not possible. The endorser makes the endorsement in person. He is responsible for payment and acceptance, but the clause “without recourse to me” can remove it, excluding him from the circle of obligated persons.
Subsequent transfer can be excluded by indicating “not to order”.
Areas of application
Why do you need a bill:
- when lending to individuals and legal entities, it is considered reliable collateral for the loan, the borrower issues it to his lender;
- to attract capital, for example, banks and enterprises do not need to go through a complex procedure for issuing shares or bonds if funds are needed for development;
- for mutual settlements between enterprises with the possibility of offsetting mutual claims;
- to pay for transactions by non-cash means;
- acts as an independent object of purchase and sale;
- To defer payment, the buyer issues a document to the seller of goods and services.
Are there any analogues
Eat. But these will be different instruments with their own characteristics.
For example, to raise funds, a bank may issue bonds. But for this it is necessary to carry out serious preparatory work, which is not always advisable. In addition, not all potential investors have the opportunity to trade on the stock exchange.
Another option is a bank deposit. However, investments in it do not have liquidity. They cannot, for example, be sold. And with early withdrawal of funds, the investor loses almost all profits.
Mandatory details and exceptions to the rules
Let's look at how to properly draw up a bill of exchange. The Regulations of 1937 indicate that the details of a promissory note are:
Translated contains:
The only difference is in the point about indicating the payer. In the first case it is absent, in the second it is a mandatory element.
There are exceptions to the rules:
- The due date may not be specified, in which case the debt must be paid upon presentation.
- If the place of payment is not specified, it is considered that this must be done at the place of drawing up the document at the place of residence of the drawer.
A transferable security may carry interest if it is issued with a maturity date at sight or with payment after some time from sight.
The two main types of bills are as follows:
Aval
Payment can be guaranteed by the aval of any person for any person obligated under the document.
It is issued with a special inscription on the front of the paper or its continuation - allonge. The aval must contain information for whom, where and when the guarantee was issued, 2 signatures of officials and the seal of the organization.
The avalist is liable together with the person for whom he vouched. Payment of the bill gives him all the rights that flow from it.
Aval improves the reliability of this paper and develops its circulation system.
The need for such a guarantee arises, for example, when the creditor does not trust the debtor, and therefore insists on additional guarantees for the fulfillment of the obligation by a person whom he trusts more.
Partial aval is possible.
Sample filling
Bills of exchange are conventionally divided into 2 types: simple and transferable. Regardless of the type of securities, registration should only be on paper.
Downtime involves two participants in the payment process - the debtor and the recipient of the money. The translation requires three participants:
- drawer;
- paper holder;
- payer.
The drawer gives a written order to pay the specified amount. The procedure is called acceptance (an obligation to pay a bill of exchange at the direction of a third party).
Where and
You can use our forms:
- Simple form No. 1
- Simple form No. 2
- Simple with interest accrual
- Bill of exchange
There are many sources on the Internet where you can and different types:
- https://www.ablank.ru/
- https://veksel-spb.ru/
Still, I would advise using official sources, for example https://prostoiveksel.ru/. If you plan to cooperate with a bank (aval, bill of exchange), then I would recommend requesting the form there.
Usage examples on "Secret"
“The second place in the number of complaints was taken by the sale of bills of exchange (about 400 complaints, or 22.8%). This is an atypical problem for recent years - such a large percentage of complaints came from holders of bills of exchange from the company FTK LLC, which is recognized as a “bill pyramid.” Depositors who purchased FTC bills under the guise of deposits actually paid interest on the old bills. The volume of the pyramid amounted to 4.5 billion rubles, and its victims were more than 2,500 people.”
(From the news about complaints from Russians to the Central Bank in 2022.)
“The bank noted that the dates of issuance of guarantees on bills raise doubts. One guarantee was issued by the director, who was on sick leave at that time, and the other by someone who was on vacation.”
(From the news about the seizure of the property of a State Duma deputy due to a dispute over bills.)
