Trust Deed

In invoice finance arrangements, a trust deed is sometimes used to formalise the handling of customer payments received by the client before they are passed to the finance provider. Under a trust deed, the client acknowledges that any payments received from customers whose invoices have been assigned to the finance provider are held on trust for that provider and must be remitted promptly.

This is particularly relevant in confidential invoice discounting, where customers continue to pay the client directly rather than the lender. The trust deed creates a legal obligation to transfer those funds to the lender's designated account, typically within one to two business days of receipt.

Failure to comply with the trust deed, by using customer payments for other purposes rather than remitting them to the lender, constitutes a serious breach of the facility agreement and can be treated as fraud in some circumstances.

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