The Law regulating Financial Leasing and the activities of Financial Leasing Companies of 2016 (L.72 (I) / 2016) (the “Law”) came into force on April 28th, 2016.
The Central Bank of Cyprus (“CBC”) will be the regulatory authority for financial leasing companies, whereby any company wishing to provide financial leasing will have to obtain the relevant licence and be regulated accordingly. The purpose of the Law is to regulate the provision of leasing services to the public, as well as the supervision of the leasing services providers’ activities, thereby facilitating the smooth operation of leasing institutions.
Financial leasing is an alternative to traditional credit financing whereby medium to long term financing may be granted. As this will be licensed and regulated by the CBC, a leasing company will be able to acquire an asset on the request of the client. The asset will be made available to the client for a certain period of time in exchange for frequent payments. Certain formalities are needed in order for the agreement to be valid between the company and the client. The agreement must be concluded in writing. Accordingly the client as the lessee will take exclusive possession of the asset from the company (the lessor). The agreement must also expressly provide to the lessee the right of the property purchase during the term of a contract or its renewal.
The Law provides the situation whereby financial leasing activities may be offered to the public in the following instances:
Certainly certain exceptions are applicable.
The Law does not apply to:
The content of this article intends to provide a general guide to the subject matter. Specialist advice should be sought on your specific circumstances. For further information, please contact Ioanna Solomou.
