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What is leasing
The leasing deals according to the Russian Law "On Leasing" and the Civil Code take the following form:
Equipment (an asset) is purchased from a supplier by a lessor on behalf of a lessee. The lessor remains the owner of the equipment, while the lessee has usage rights to the equipment in return for lease payments. At the end of the specified term, the lessee may acquire ownership as agreed between the lessee and the lessor. In general, the parties have considerable freedom of contract to establish other aspects governing their relationships either through supplementary agreements or in the lease contract itself, limited primarily by the Civil Code and other regulatory acts.
Financial Leasing is according to The Civil Code of the Russian Federation (Article 665):
"Under a financial rent (leasing) agreement, the lessor shall be obliged to acquire the property specified by the lessee from the seller and transfer that property to the lessee for temporary possession and for a fee on the condition that said property will be used for entrepreneurial purposes. In this case, the lessor shall not bear any responsibility for the choice of the item to be leased or the seller."
LEASING DEAL
| Three Parties
| All Russian leases include three (3) parties: a Supplier, a Lessor, and a Lessee. This element serves to ensure that the lessee retains the essential rights of a consumer with respect to the supplier (i.e., the lessee may pursue resolution directly with the supplier if the equipment is deficient in some way). The supplier has few other obligations unless otherwise stipulated. |
| Ownership | The lessor retains ownership of (ownership rights to) the equipment. In contrast to a loan, in case of default the owner is simply enforcing ownership rights to a specific piece of equipment, and is not subject to debt seniority or other covenants. This right extends only to the equipment that is the subject of the lease, not to any other monies owed |
| Usage rights | In return for regular payments, the lessee obtains only usage rights, not ownership, for the term of the lease. This right is surrendered if lease payments are not kept current. |
| Payments | The parties agree to a specific payment schedule, which is part of the lease agreement. There are few restrictions on how the lease payments may be structured. |
| Specified term | The lease deal is subject to a specified term. At the end of the term, the lessee surrenders the usage rights (and hence possession of the equipment) to the lessor - subject to any supplementary agreements. At this point, neither side has any further obligations to the other unless otherwise stipulated. |
Suppliementary agreement
- Sale Contract
- Buy-back Agreement
- Other
| With some exceptions, the parties to the agreement have considerable freedom to conclude supplementary agreements or specify other terms or conditions in the body of the lease agreement itself. Specifically, most leases in Russia provide for sale of the equipment (that is, transfer of ownership rights) to the lessee at the end of the lease term for a specified sum, usually in a separate sales contract. Other agreements might include a buy-back agreement with the supplier or other agreements to apportion financial obligations or risk. Supplementary agreements may include additional guarantees, restrictions on use of equipment, or any number of other details as agreed by the parties. All supplementary agreements or additional contract stipulations are subject to the Civil Code and to Russian law and procedures, as would any other legal contract. |
| Other Details | Entrepreneurial use Equipment must be used for entrepreneurial purposes. Taxes The lease agreement specifies important details with respect to taxes (for example, whether the leased asset is carried on the balance sheet of the lessor or the lessee). |
For detailed information regarding the Russian Leasing legislation, please refer to the Leasing Development Group IFC
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