The Verkhovna Rada recently adopted a new version of the Law on Financial Leasing, the first draft of which was created by the market itself in the person of a professional association of lessors of Ukraine (Association). The bill has come a long and thorny way, without waiting its turn in the hall in the previous convocation of the Council, although it was fully prepared for this year. Instead, he found support and understanding in the current parliamentary corps. The author of the bill was the Chairman of the Committee of the Verkhovna Rada of Ukraine on Finance, Tax and Customs Policy Danylo Hetmantsev. He paid great attention to leasing as a modern financial instrument of funding, which, provided the creation of favorable conditions for development, will be a powerful driver of economic modernization. This role is convincingly evidenced by the example of developed European countries,where the level of leasing penetration into capital investments sometimes reaches 40%, (while Ukraine balances at 5-7%). The market gratefully accepted such support from the legislator, as the previous, ie the current version of the law, was created in 2004 and has never been improved since then.
The relevant Verkhovna Rada Committee carried out intensive preparatory work for the second reading, which consisted of a large number of working groups, conciliation councils, expert opinions, etc. This was due to the fact that as a whole small bill was submitted as many as 528 amendments to the deputies. The Association of Lessors of Ukraine took an active part in all working groups, which consistently defended the interests of the market and modern methods of doing business, as well as argued the harmfulness of some potential innovations.
In addition to deputies, the National Bank of Ukraine, the USAID / FST project, NABU and other persons interested in the development of the leasing market also actively joined the working groups.
As a result, the bill took into account the most important needs of the industry, although several time requirements were not, unfortunately, accepted by legislators. For example, despite the long-awaited opening of the agricultural land market by the economy and the shortage of sources of funding for the purchase of such land by farmers, restrictions on leasing land transactions have not been lifted. While land plots under real estate have always been in circulation and the existing rudimentary ban on work in the legislation blocks the development of the real estate leasing segment, which is practically absent in the Ukrainian portfolio today (except for SMI operations).
At the same time, the bill addressed some of the gaps and created some new opportunities, in particular for leasing individuals.
Among the favorable moments are the following:
- The law provides clear definitions of the terms “object” and “term” of financial leasing, as well as the “financial leasing” itself, which will make it impossible to interpret them ambiguously in the future.
- Attempts to remove the supplier from the list of subjects of leasing legal relations were rejected. The new law introduces strengthening the supplier’s liability to both the customer and the lessor.
- A separate article of the Law is devoted to the acquisition of ownership of the object of leasing, according to which the basis for the acquisition of ownership is the proper full unconditional fulfillment of its obligations by the lessee, including payment of lease and other payments, penalties and more. The client has the right to acquire ownership of the leased object only if all the terms of the contract are fully met.
- Resolved the issue with the consequences of declaring the contract invalid, the non-settlement of which in the current law caused significant damage to the interests of the lessor, put the parties in an unequal position, and allowed free actual use of the leased object for a long time.
- The law finally regulates the issue of the notarial form of contracts for vehicles with physical. persons.
- At the legislative level, it is stipulated that the advance payment is not attracted by the lessor.
- Intermediary and support services for the lessor, which corresponds to the approaches laid down by the NBU in the White Paper on non-bank leasing regulation, have been identified.
In general, the market welcomes the adoption of the new law, which is more progressive than the current regulation, and thanks the author, Mr. Hetmantsev, and the developers for their contribution to improving leasing legislation. He also hopes that those points that could not be reflected in the adopted version will be able to be resolved in the near future.
Today the Association held an internal seminar for its members, where it told about all the innovations of the new normative act to the member companies of the professional association. Participants professionally discussed all the subtleties and nuances of the Law, modeled situations and exchanged views.
In the next stage, approximately in a week, the Association plans to conduct similar training for external participants and stakeholders of the leasing market in order to better understand the legislation and unify approaches to law enforcement of the updated standard.