legal practitioners & arbitrators anatomy of the equipment leasing act 2015 24th november 2015...
TRANSCRIPT
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Legal Practitioners & Arbitrators
Anatomy of theEquipment Leasing Act 2015
24th November 201524th November 2015
Theophilus Emuwa Theophilus Emuwa
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Legal framework prior to 2015
English common law
Hire Purchase Act 1965o Hire Purchase Regulations 1968
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Implied terms under common law
Delivery of the equipment & redelivery
Good title to the equipment
Description of the equipment
Quality and fitness for purpose
Quiet possession
Payment of installments
Maintenance of equipment – reasonable care
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Implied terms under the Hire Purchase Act
• Similar to those at common law
▫ The Act only applies to motor vehicles and small assets <N2,000 in 1965 - now very small, but perhaps equivalent to N10million today!
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Challenges existing prior to the Act
Repossession of leased equipment
Inadequate fiscal incentives – finance leases
Notice to third parties/registration of lessor’s interest
Lessee could not sue manufacturer/supplier directly
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Overview of the Equipment Leasing Act
Establishment of the Equipment Leasing Authority
Restriction on operation of equipment leasing business
Requirement of registration of equipment leasing agreement
Classification of equipment leases
Implied term of legal ownership
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Overview of the Act (Contd.)
Implied rights and obligations of lessees
Procedure for termination of lease
Repossession of leased equipment
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Anatomy
•Applies to all equipment leases - s.1, s.3▫ Finance lease
▫ Operating lease
▫ Syndicated lease
▫ Sale and lease back
▫ Cross border lease
▫ Leveraged lease
▫ Any others
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Anatomy (contd.)
•Agreement must be in writing – s.2, s.4▫If a finance lease, to indicate:
Estimated price
That manufacturer/supplier has knowledge of lessor’s intention to
lease
That lessee has selected equipment with/without relying on lessor
Lessee’s acknowledgement that lease is “full pay-out non-cancellable”
That upon termination lessee shall redeliver equipment to lessor
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Anatomy (contd.)
• All lessors must be registered – s.6
• Equipment lease agreements may/must be
registered? – ss.12 & 13
• Minister may determine stamp duty payable?
– s.11 (Stamp Duties Act??)
• Registration constitutes notice to third
parties – s.16
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Anatomy (contd.)• Non-registration of “registrable lease
agreement” renders it invalid – s.17▫ Between the parties but not against third party who has
no notice (but see s.21 – lessor does not prevail against purchaser under non-registered lease!!)
• Registration protects lessor against third parties – ss.19, 20, 21▫ Lessor’s title shall prevail against all even where
agreement says otherwise; any sale, sub-lease, pledge, charge, mortgage, loan, assignment, etc. by lessee not effective; lessor prevails over creditor
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Anatomy (contd.)• Lessor to inscribe or affix name on
equipment – s.18▫ No consequence for default?
• Rights/obligations of lessee, similar to common law – ss.22(1), 24
• Lessee can sue manufacturer/supplier directly – s.22(2)▫ Finance lease only? See s.2(2)▫ Privity of contract??
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Anatomy (contd.)• Where lessee relies on “skill, knowledge &
expertise” of lessor in selecting equipment lessor is liable for defect or non-fitness – s.33
▫ Also, manufacturer/supplier liable to lessee – s.34
• Capital allowance available only to lessor in operating lease?? – s.36(3)
▫ Only owner can claim capital allowance – Companies Income Tax Act, Second Schedule, paragraphs 6 & 7
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Anatomy (contd.)
•Lessor entitled to have information on equipment & to inspect it – ss.26, 27▫Location, condition, etc of leased equipment
•Repossession by ex parte application – s.39▫Pre-emptive court action by lessee??
•Leased equipment not to be exported without lessor’s consent – s.42
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Conclusion
•Some progress, but s.36(3) worrisome
•Also, may be helpful to link equipment lease register with▫CAC’s charges register &▫CBN’s collateral registry
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LEGAL PRACTITIONERS & ARBITRATORSwww.aelex.com
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Nigeria T: (+234-1) 4617321-2,2793367-8, 7406533 F: (+234-1) 4617092
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THANK YOU