Bills of exchange are debt securities, the circulation of which is carried out in accordance with the rules of bill of exchange. All bills of exchange can be conditionally divided into simple and transferable, and, the fundamental difference between these securities is the number of persons involved in the registration and transfer of the bill.
The use of bills in settlements makes it easier to obtain a commercial loan, increases the degree of trust between counterparties, and speeds up settlements and offsetting. In addition, it can be used as collateral for obtaining a loan from a bank or for performing other financial transactions.
Features of different types of bills
The Geneva Bill of Exchange Convention, adopted back in 1930, provides for the division of all promissory notes into simple and transferable. Promissory notes (solo promissory notes) are securities that contain an unconditional obligation of the debtor to pay the amount specified in the promissory note to the bearer at a certain time in a specific place.
A promissory note arose simultaneously with a commodity credit. In other words, if at the time of the transaction the buyer did not have enough funds to pay the seller, he would give him an IOU. Over time, the form of such receipts was unified, and their circulation began to obey certain rules. The issuance of a promissory note provides for the participation of two persons. First, the drawer or payer of the bill, and second, the holder of the bill or creditor, who owns the right to receive money. In the promissory note, the name of the recipient of the funds must be indicated.
Bills of exchange or drafts are securities that provide, in addition to the obligations that are indicated in promissory notes, the possibility of payment of the bill of exchange both to the holder of a bill and to any other person on his order. Execution of a bill of exchange involves the participation of three persons: the drawer (drawer), the drawer and the payer of the bill (drawee).
The transformation of promissory notes into bills of exchange is associated with the occurrence of situations when the debtor could not pay on the bill of exchange, and therefore asked another person to pay for himself. In addition, many trading companies are both debtors and creditors. In this case, the bill of exchange becomes a convenient way of offsetting between business entities.
Rules for drawing up bills
In today's conditions, the popularity of bill settlements has noticeably decreased. First of all, this is due to the introduction of non-cash electronic payments, as well as the increased availability of bank loans. At the same time, bills of exchange continue to play a significant role in international settlements, since they successfully combine credit and settlement functions.
Like other securities, bearer bills can be transferred to a new holder by simple delivery. At the same time, registered bills of exchange are transferred to new holders of bills by making a transfer inscription or endorsement on them. There are several types of endorsement, which differ in the completeness of the transfer of rights of claim, additional clauses regarding the terms of payment of the bill, as well as the presence of pledges or sureties.
