Abu Dhabi
Members of the Federal National Council on Tuesday approved a draft law on finance leases — a type of lease in which banks and finance companies are typically the legal owners of assets for the duration of the lease, while the lessees not only have operating control over the assets, but also have a substantial share of the economic risks and returns from the change in the valuation of the underlying assets.
The new law regulates commercial arrangement where the lessee (customer or borrower) will select an asset (equipment, vehicle, software); the lessor (finance company) will purchase that asset; the lessee will have use of that asset during the lease; the lessee will pay a series of rentals or instalments for the use of that asset; the lessor will recover a large part or all of the cost of the asset plus earn interest from the rentals paid by the lessee; the lessee has the option to acquire ownership of the asset (e.g. paying the last rental, or bargain option purchase price).
Under the new bill, which requires signing into a law by President His Highness Shaikh Khalifa Bin Zayed Al Nahyan, offenders will face fines of up to Dh10 million.
This law shall enter into force immediately from the date of publication in the Official Gazette. But it will provide for a grace period of one year for the people and businesses involved in finance lease to adjust their legal status.
