Draft Law of Ukraine

"On Amendment of the Law of Ukraine "On Leasing" (with Respect to Expanding Use of Financial Leasing for Capital Assets)"

The draft determines leasing as a type of economic activity aimed at transfer of property to the lessee under a leasing agreement into term-limited payable use.

According to the draft, the following can not be subject of a leasing agreement:

• integral property compounds of state (communal) enterprises, their structural sub-divisions;
• land plots and other natural objects.

The draft determines the concept of sub-leasing and its basic principles of application:

• transfer of the subject of a leasing agreement (its part) into sub-leasing may be performed by the lessee only upon consent of the lessor;
• a sub-leasing agreement may be concluded for the term not exceeding validity term of the leasing agreement;
• conditions of sub-leasing agreement should not conflict with the leasing agreement;
• it is prohibited to conclude sub-leasing agreement with respect to the subject of leasing (its part), which is already in sub-leasing.

During the validity term of a financial leasing agreement the draft envisages the possibility of buying out the object of leasing by the lessee after the end or before the end of the agreement’s validity term regardless of amortization cost of the object of leasing.

The draft also determines the duty of the lessor to compensate to the lessee expenditures on improvement and liquidation of defects of the subject of a leasing agreement in case the lessor gives their respective consent thereto.

The lessee shall provide the lessor with access to the subject of a leasing agreement and ensure the possibility for examining conditions of its use and maintenance according to the leasing agreement.

The draft envisages that expenditures on insuring the subject of a leasing agreement under financial leasing agreement should be paid by the lessee and in case of operational leasing agreement - by the lessor, unless otherwise is stipulated by the agreement.

The draft, if approved, will create better conditions for business entities in order to expand use of transactions on leasing and sub-leasing, as well as improve the system of legal regulation for leasing relations.