Verhovna Rada approved a new law on financial leasing

The Verkhovna Rada approved the law on financial leasing exactly one year after its adoption as a basis.

 279 people’s deputies voted for the corresponding bill  №1111 in the second reading and in total.

Note that this law is a new version of the law “On Financial Leasing”.

The law stipulates that financial leasing is a type of legal relationship under which the lessor undertakes in accordance with the contract for a term and for a fee to transfer to the lessee in possession and use as an object of financial leasing:

• property owned by the lessor and acquired by him without prior agreement with the lessee,

• property specially purchased by the lessor from the seller (supplier) in accordance with the specifications and conditions established by the lessee.

State regulation and supervision of the financial leasing market is carried out by the National Bank.

The law defines the features of financial leasing.

Leasing is considered financial if the lessee transfers all risks and rewards (benefits) for the use and possession of the object of financial leasing and at least one of the following features (conditions):

• the object of financial leasing is transferred for a period during which at least 75% of its original value is depreciated, and the lessee is obliged on the basis of a financial leasing agreement or other agreement specified in the financial leasing agreement, during the term of the financial leasing agreement to purchase the object of financial leasing with the subsequent transfer of ownership from the lessor to the lessee at the price and on the terms provided by such financial leasing agreement or other agreement specified in the financial leasing agreement;

• the amount of lease payments at the time of concluding the financial leasing agreement is equal to or exceeds the initial cost of the object of financial leasing;

• the book (residual) value of the object of financial leasing at the time of expiration of the financial leasing agreement provided by such agreement is not more than 25% of the initial value (price) of such object of financial leasing as of the beginning of the financial lease agreement, etc. .

The law also defines the objects of financial leasing. Such an object may be property defined by individual characteristics and meeting the criteria of fixed assets in accordance with the law, not prohibited by law for free circulation in the market and in respect of which the law does not set restrictions on its lease.

At the same time, land plots and other natural objects, as well as objects defined by part two of Article 3 of the Law “On Lease of State and Communal Property” may not be objects of financial leasing.

The law prescribes a single procedure for regulating relations related to financial leasing and its individual types and forms. There are clear requirements for the form of a financial leasing agreement and the essential terms of a financial leasing agreement.

At the same time, only those entities that have acquired the appropriate status in accordance with the procedure established by law will be able to provide financial leasing services.

The adoption of the law will significantly expand the use of leasing as an alternative to long-term financing the purchase of transport, equipment, other machinery and real estate.

On February 4, 2020, the Verkhovna Rada approved this bill as a basis in the first reading.

Last year, the volume of the financial leasing market decreased by 33% and amounted to UAH 21.2 billion. At the same time, in the third quarter, the financial leasing market grew by 62% compared to the second quarter and by 41% compared to the first quarter of 2020 and amounted to UAH 9.131 billion.