Articles

New coordinates for leasing activities

10 August 2006 (Invest Romania)

The change of the legal framework applicable to financial leasing companies, initiated by their acknowledgment as IFNs, continued with the passing of Law no. 287/2006 amending the GO no. 51/1997 on leasing operations and activities (“Law no. 287/2006”).

Without insisting on the entire set of amendments brought on by the legislator, we shall make a brief review of certain unclear provisions of the new enactment that maintain the controversial character of the legal rules in this field, failing to clarify at last the legal regime applicable to leasing activities.

Mention should be made of the inconsistency in transposing the legal obligation of financial leasing companies to increase their share capital up to the minimum amount of 200,000 Euro, as provided by GO no. 28/2006. In this respect, although GO no. 28/2006 deals only with the financial leasing companies, the general wording of Law no. 287/2006 suggests an extension thereof encompassing the operational leasing companies, without however bringing any additional clarifications to this end.

Another practical difficulty upheld by the new form of GO no. 51/1997 is the determination of the main scope of business based on which a legal entity may be deemed as an operational leasing company, albeit that the main consequence of this operation should be the establishment of the legal regime applicable to the respective company.

In the same context, we note the newly introduced possibility to conclude subsequent leasing agreements between the user of goods leased under a leasing agreement (as lessor/financer) and another user (acting as an end user).

Although this provision may be deemed favorable, as it extends the situations in which the recourse to financing through leasing is legally allowed, its legal structure contains certain inconsistencies. Thus, the legal text does not indicate whether the two requirements essential in a leasing agreement, i.e. (i) ownership of the good by the lessor/financer and (ii) observance of the user’s right to choose between the acquisition of the respective good before or after the expiry of the leasing period, continue to apply between the initial and the end user, as long as the owner of the leased good is the initial financer.

The same confusion is preserved by the new legal provisions according to which the competent court deciding with respect to the financer’s refuse to observe the user’s right to choose may render a decision in lieu of a sale and purchase agreement. Likewise, the applicability of this provision in the relationships between the initial and the end user has not been clarified.

Other legal provisions subject to interpretation are those pursuant to which in case a leasing agreement terminates because of the user’s fault or because of the complete disappearance of the good less than a year after the coming into force of the leasing agreement, the leasing agreement preserves its nature and the missing good continues to be treated fiscally as a good leased under a leasing agreement – conflicting provisions which regulate simultaneously the survival and termination of the leasing agreement.

Another example of unclear legal concerns the user’s obligation not to change the place declared in the agreement unless previous approval is granted by the financer. In the absence of additional clarifications, it is difficult to determine whether the place referred by the above mentioned legal text is the place where the parties should perform their contractual obligations, the place where the leased good is delivered to the user, or the user’s main office/secondary headquarters.

Considering the recurrence of such inconsistencies, the clarification of the legal regime applicable to leasing companies will require a further review of the provisions of GO no. 51/1997, or at least the streamlining of the legal provisions subject to interpretation through the passing of secondary enactments.