The Leasing Law (72(I)/2016) entered into force on 28 April 2016. The purpose of this Law is to regulate and supervise the provision of financial leasing services to the public, in order to provide consumers and enterprises with alternative ways of financing.
Financial leasing is an alternative to traditional credit financing through which medium to long-term financing can be granted, thus enabling the public to acquire assets. Specifically, a leasing company (Lessor) buys an asset at the request of a client (Lessee). The asset will be made available to the client for a specific period of time, in exchange for frequent payments. In accordance with the Law, the agreement between the leasing company and the client must be in a written form. For more information, contact one of our Cyprus lawyers.
The Lessor has legal ownership of the asset for the duration of the agreement. The Lessee has the right to use the asset and benefit from the usage of it. However, the Lessee must bear all risks and costs associated with the usage of the leased asset.
According to Section 3(2), the Leasing Law does not apply to the provision of financial leasing services:
- Within a group of companies to which the legal entity belongs;
- By physical or legal persons whose primary business activity is the sales of movable property and which provide leasing services for the sale of movable property up to the amount of €5.000 per object, and exclusively to the extent required for the exercise of their main business purposes;
- For which the agreement provides a credit for a total period of less than three months;
Pursuant to Section 4, financial leasing services can be provided by:
- Authorised credit institutions established in the Republic of Cyprus and having obtained the relevant license by the Central Bank of Cyprus;
- Credit institutions licensed by the Central Bank of Cyprus, provided that the relevant license includes the provision of financial leasing services;
- Credit institutions established in an EU/EEA member state and having obtained the relevant license by the regulatory authority of another EU/EEA member state, provided that the license includes the provision of financial leasing services, and which provide such services in the Republic of Cyprus through a branch or on a cross-border basis;
- Financial leasing companies which are subsidiaries of credit institutions established in an EU/EEA member state and provide such services in the Republic of Cyprus through a branch or on a cross-border basis;
Furthermore, the Leasing Law defines the supervisory and regulatory framework of the Central Bank of Cyprus as the regulatory authority in Cyprus is the Central Bank of Cyprus.
The Leasing Law determines the procedures for simple financial leasing, hire purchase, participatory lease, reverse lease, syndicated lease, lease with a sublease, a.o. Ships are excluded as they are covered by the Merchant Shipping Law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.