Law on financial leasing

The recently adopted Law on Financial Leasing (the Law) defines
financial leasing, specifies certain contractual requirements,
outlines the rights and obligations of the parties
and creates a financial leasing registry.

Published in the Official Herald of RS no. 55/2003 of 27 May 2003

The recently adopted law on Financial Leasing (the Law) defines financial leasing, specifies certain contractual requirements, outlines the rights and obligations of the parties and creates a financial leasing registry.

Definition of Financial Leasing

Financial leasing is a transaction involving three parties - a Supplier of a good (Supplier), a recipient of the good (Lessee) and the payer of the cost of the goods (Lessor). A financial lease arrangement is composed of two documents:

1. A supply contract between the Lessor and the Supplier.
2. A contract on financial leasing between the Lessor and Lessee.

Compulsory Elements of a Financial Leasing Contract

The contract on financial leasing must be in writing and for a minimum period of two (2) years. Mandatory elements of the contract include:

1. Precise specification of the subject of lease,
2. Amount of the lease fee,
3. Amount of each instalment, their number, when due and
4. The length of the contract.

Other elements of the contract may include place, time and manner of delivery, title of ownership, insurance and purchase option or contract extension option.

Parties to Financial Leasing

The Lessor must be a company registered to undertake financial leasing, with minimum basic capital of € 100,000.

The Lessee may be any physical or legal person.

The Supplier cannot be the Lessor.
 

Compulsory Rights and Obligations

The Lessor must:

Secure the subject of the lease in accordance with the Lessee’s specifications
Have the right to request separation of the subject of the lease from the assets to be liquidated in the event of the Lessee’s bankruptcy
be responsible for legal defects of the subject of lease
not be responsible for material defects and damage caused by material defects of the subject of lease.¹⁾
Have the right to assign ownership of the subject of the lease to a third person under conditions that do not disturb the Lessee
Have the right to terminate the contract if lease instalments are not paid by the Lessee

The Lessee shall:

Receive the subject of lease
Have the right to terminate the contract for the reason of non-delivery
Have the right to use the subject of lease with due care
Pay the lease fee
Return the subject of the lease on expiry of the lease
Insure the subject of lease

The Supplier shall:

Deliver the subject of the lease to the Lessee
Be responsible to the Lessee for delay in delivery, non-delivery, and material defects of the subject of lease in accordance with the general contract rules.

Repossession

The law allows for efficient repossession of the good in the event of default. The law foresees the signing of a judicial settlement by the parties (Lessee and Lessor) on the basis of which the court can issue a decision transferring the subject of the lease to Lessor

upon default within 3 days of a petition to the Court consistent with the Law on Enforcement Procedure.

Registry

The Law introduces a financial leasing registry. The Registry is a public register of all relevant data including a description of the leased good(s) and the parties to the agreement. The Financial Leasing Registry shall become effective on 1 January 2004.
 

¹⁾ Responsibility of the Lessor of material defect may exist in specific cases.

Source: Ministry of International Economic Relations