Decision No. 67 of 2019 Regarding Financial Leasing and Factoring Contract Models

Financial Regulatory Authority FINANCIAL REGULATORY AUTHORITY

Chairman of the Authority

Decision No. (67) of 2019 Regarding Models of Financial Leasing and Factoring Contracts

Chairman of the Financial Regulatory Authority

Having reviewed Law No. (10) of 2009 concerning the regulation of supervision over non-banking financial markets and instruments; Having reviewed Financial Leasing and Factoring Law No. (176) of 2018; Having reviewed Presidential Decision No. (192) of 2009 issuing the Basic Statute of the Financial Regulatory Authority; Having reviewed the Authority's Board of Directors Decision No. (139) of 2018 concerning the provisions and procedures for registration in the Financial Leasing Contracts Register; Having reviewed the Authority's Board of Directors Decision No. (163) of 2018 concerning the executive controls for practicing the factoring activity; Having reviewed the memorandum from the Central Administration for Supervision and Oversight of Financing Companies dated 2019/2/12;

Decided: (Article One) Financial leasing and factoring contracts shall be drafted according to the attached models, and companies are committed to the minimum data limits stated in these contract models when practicing their activity.

(Article Two) This Decision shall be published in the Egyptian Gazette and on the Authority's website, and shall be enforced from the date of its issuance.

Chairman of the Board of Directors Financial Regulatory Authority Dr. Mohamed Omran

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Financial Leasing Contract Model

This contract is drafted on the date corresponding to: / / Contract Details Parties:

1. Financial Leasing Company Details (First Party - Lessor) Company Name: ............................................................ Registration Number in the Lessors Register at the Financial Regulatory Authority: ( ................. ) Commercial Registration Number: .................................................... Company Address: ............................................................ Authorized Signatories: Mr./Ms. .................................. in his/her capacity as ..................................
2. Lessee Details (Second Party - Lessee) Lessee Name: ............................................................ Activity: ............................................................ Legal Form: ............................................................ Commercial Registration No.: ............................................................ Tax Card No.: ............................................................ Address: ............................................................ Authorized Signatories: Mr./Ms. .................................. in his/her capacity as ..................................

Statement of Leased Assets Description The Lessor has agreed to lease the assets that he owns, or has purchased, or has the right to lease, as follows: Supplier/Seller/Contractor Name: ............................................................ Lessor's Title Deed: ............................................................ Price stated in the Title Deed: ............................................................

First Party Lessor Second Party Lessee

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Type of Leased Asset: Tangible / Intangible / Usufruct Right Name of the Bare Owner if the leased asset is a usufruct right: ............................................................ Description of Leased Asset: ............................................................ Purpose designated for the use of the Leased Asset: ............................................................ Rental Value The Parties have agreed that the rental values shall be as follows: Down Payment: .................... EGP (Only .................... No more) Rental Value: .................... EGP (Only .................... No more) Total Rental Value: .................... EGP (Only .................... No more) Rent repayment in (monthly/quarterly/semi-annual/annual) installments Rent repayment begins from date ../../..... and ends on ../../..... The Parties have also agreed that the value of returns, commissions, and expenses (if any) shall be as follows: ............................................................ ............................................................

Contract Duration, Purchase Price, and Date The contract takes effect on: / / and ends on: / / The Parties have agreed that the purchase price of the leased asset shall be: .................... EGP (The specified price for the transfer of ownership of the asset to the Lessee at the end of the lease contract) The Parties have also agreed that the date for purchasing the leased asset shall be no later than: ../../.....

Preamble Whereas the First Party practices the financial leasing activity in accordance with the provisions of Financial Leasing and Factoring Law No. 176 of 2018, and whereas the Second Party has requested the First Party to purchase the leased asset detailed in the header of this contract and its appendices, and to lease this asset to the Second Party Lessee in accordance with the provisions of this contract and Law No. 176 of 2018 and the decisions and controls issued in implementation of its provisions. And after both Parties have acknowledged their capacity and legal standing to conclude this contract, they have agreed as follows:

First Party Lessor Second Party Lessee

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Article (1) The aforementioned preamble is considered an integral part of this contract.

Article (2) In the event that the Lessee negotiates directly with the Supplier or Contractor regarding the specifications of the leased asset, the Lessee shall be responsible for any error in selecting and determining the specifications of the leased asset. The Lessor shall be responsible for his actions or conduct that lead to a mistake in selecting the leased asset or to enabling the Supplier, Contractor, or any third party to interfere with the Lessee's enjoyment of the leased assets in any manner. The Lessee shall bear civil and criminal liability from the date of receiving the leased asset for accidents and damages caused by the leased asset to third parties, as well as liability for accidents and damages affecting the leased asset resulting from its use during his possession. No recourse shall be made against the Lessor for any damages caused by the leased asset throughout the duration of the contract.

Article (3) The Lessee has the right to purchase the entire or part of the leased asset subject to the contract under the following conditions: ............................................................ Ownership of the leased asset shall not transfer to the Lessee until he fully pays the agreed purchase price and rental values, and the Lessor is obligated to draft a sales contract for the leased asset to the Lessee.

Article (4) The Lessee is committed to the following provisions:

• Using, maintaining, and repairing the leased asset in accordance with the purposes it was prepared for, recognized technical standards, and agreed instructions regarding technical specifications to be observed, whether specified by him, the Lessor, the manufacturer, the supplier, or the contractor.
• Notifying the Lessor of any defects that arise in the leased asset that prevent its use, wholly or partially, in accordance with the procedures stipulated in the contract.

First Party Lessor Second Party Lessee

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• Paying the agreed rent in the contract according to the terms and deadlines mentioned above.
• Not disposing of the leased asset, wholly or partially, without obtaining written consent from the Lessor. Any disposal or transaction carried out in violation of this shall be null and void, and the Lessor shall have the right to reclaim the leased asset from the person it was disposed to or the possessor to whom it passed in violation of this Article's provisions.
• Continuing to pay the rent or agreed purchase price at the specified deadlines, in the event of the destruction of the leased asset due to the Lessee's fault, while considering any insurance amounts the Lessor may receive.

Article (5) The Lessor is committed to the following provisions:

• Delivering the leased asset to the Lessee or authorizing the Lessee to receive it, based on a receipt signed by the Lessee and the manufacturer, supplier, or contractor, confirming the condition of the leased asset and any defects it may have, along with all its data and condition at the time of receipt. In this case, the Lessee shall be liable to the Lessor for any data regarding the asset included in the receipt.
• Not interfering with the Lessee's possession of the leased asset or enabling the manufacturer, supplier, contractor, or any third party to interfere with the Lessee's possession. The Lessor shall be responsible for his actions or conduct that prevent the Lessee from enjoying the leased asset.
• Notifying the Lessee of the entities to which the rights arising from the contract are assigned or transferred.
• Maintaining strict confidentiality of the Lessee's data and not disclosing any information about them or their transactions to third parties without their prior written consent and within the scope of this consent. Exceptions include cases where the Financial Regulatory Authority requests any data or documents related to the financial leasing contract or related to the contract, as well as regulatory or judicial authorities, rating agencies, credit information companies, and entities practicing securitization or refinancing activities, as mandated by laws.

First Party Lessor Second Party Lessee

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Article (6) The Lessor shall demonstrate his status on the leased asset and the registration number and date of the contract in the Authority's Contract Register, ensuring the statement is clear and in a prominent place. The Lessee shall not conceal or obscure this statement throughout the contract's duration. The Lessor or his representative shall have the right to periodically inspect the leased asset to verify its integrity and its use for the designated purpose, once every .................... (month/quarter/semi-year/year).

Article (7) The Lessor may assign the financial leasing contract to another lessor. This assignment shall not take effect against the Lessee until he is notified of it, and this assignment shall not result in any breach of the rights and guarantees stipulated for the Lessee under the contract. The Lessor may also transfer all or part of his rights arising from the financial leasing contract to another lessor, another entity practicing the same activity, one of the local banks registered with the Central Bank of Egypt, or one of the entities licensed to practice securitization activities. The Lessee may also, after obtaining written consent from the Lessor, assign the financial leasing contract to another lessee, in accordance with the conditions stipulated in Article 24 of Financial Leasing and Factoring Law No. 176 of 2018.

Article (8) The financial leasing contract is considered automatically terminated without the need for a notice or judicial proceedings in any of the following cases:

1. Failure of the Lessee to pay the agreed rent at the deadlines and according to the agreed contract terms, despite the Lessor's reminder to pay, and thirty days passing since the deadline's expiry, unless the contract parties agree otherwise.
2. Death of the Lessee or the joint partner in a partnership company acting as the Lessee, unless the heirs or the new joint partner agree to continue contract execution within thirty days from the date of death.

First Party Lessor Second Party Lessee

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3. Declaration of the Lessee's bankruptcy or insolvency, or the dissolution of the Lessee company for any legally prescribed reason for company dissolution. However, the bankruptcy trustee or liquidator may notify the Lessor in writing via registered mail within thirty days from the date of the judgment declaring bankruptcy, insolvency, or company dissolution, of his desire to continue the contract. In this case, the contract remains valid, provided that the Lessor's rights stipulated in the contract are not breached, particularly the payment of rent at its due dates.
4. The Parties have also agreed to terminate the contract in the case of ............................................................ Termination shall be noted in the Financial Leasing Contracts Register according to the procedures prescribed for this purpose. In all cases, the leased asset shall not be included in the general guarantee of creditors.

Article (9) Economic courts shall have jurisdiction to adjudicate all disputes arising from the breach of any clause of this contract, including temporary and substantive execution disputes. This text shall be replaced with the following if arbitration is agreed upon: Jurisdiction shall lie with arbitration bodies to adjudicate disputes arising between the parties to this contract.

Article (10) The contract parties acknowledge having chosen a domicile at the addresses specified for each of them in the header of this agreement. Both the Lessor and Lessee are obligated to notify the other party in writing via registered mail with acknowledgment of receipt in case of any change; otherwise, all notifications and correspondence sent to this address shall be considered valid and legally effective.

Article (11) This agreement is drafted in three copies, with each party holding one copy for use as needed, and the third copy shall be used to register the financial leasing contract in the dedicated register at the Financial Regulatory Authority.

First Party Lessor ..................................

Second Party Lessee ..................................

First Party Lessor Second Party Lessee

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Factoring Contract

This is on the date corresponding to: / / This contract is drafted between:

First: ............................................ Factoring Company, an Egyptian joint stock company. Its main office is located at .................... Commercial Registration No. .................... Represented in signing this contract by Mr./Ms. .................... in his/her capacity as .................... (First Party)

Second: ............................................ or ............................................ Company Its address/main office is located at ....................; practicing activity .................... Commercial Registration/Tax Card No. .................... Represented in signing this contract by Mr./Ms. .................... in his/her capacity as .................... (Second Party)

Preamble Whereas the First Party Factor practices the factoring activity and is licensed by the Financial Regulatory Authority under License No. ( ), and whereas the Second Party practices activity .................... and holds financial rights arising from commercial transactions related to the sale of goods or provision of services, and wishes to sell all or part of these rights to the Factor, and after both Parties have acknowledged their capacity and standing to contract, they have agreed as follows:

Article (1) The aforementioned preamble is considered an integral part of this contract.

Article (2) The First Party Factor has agreed to purchase the financial rights (current and/or future) subject to this contract, which are owned by the Second Party Seller and arose or accrued to him as a result of practicing the activity mentioned in the header of this contract, and the details of these rights and the conditions for factoring them and related services are as follows: ............................................................

First Party Factor Second Party Seller

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Article (3) The Parties have agreed that the factored financial rights subject to this contract shall be transferred in accordance with the Civil Code provisions and through (assignment of right or contractual subrogation) attached to this contract, and all rights and guarantees owned by the Second Party against the debtor shall transfer to the Factor.

Article (4) The Second Party guarantees the existence of the financial rights subject to the agreement at their due dates, and acknowledges in this agreement all of the following:

• The validity and integrity of all contracts, transactions, documents, and papers issued by him and the debtors.
• That the financial rights mentioned in this contract are of a commercial nature, arising from genuine commercial agreements or delivery orders, and are assignable.
• That the financial rights subject to the contract are not encumbered with any real or accessory rights in favor of the buyer or any other party, including by way of example and not limitation "right of retention, attachment, mortgage, set-off" or other forms of rights.
• That all information and documents provided or to be provided to the Factor during the contract period are accurate information, data, and documents at the time of provision.

Article (5) The Parties have agreed that the contract period shall begin from ../../..... and end on ../../....., and the contract shall be automatically renewed for similar periods unless one Party notifies the other of its desire to terminate the contract before its expiry by a period of no less than ...................., without prejudice to the termination clauses and rules stipulated in this contract's appendices, with the Factor's right to immediate termination in the following cases: ....................

First Party Factor Second Party Seller

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Article (6) The Parties have agreed that the maximum financing limit, down payment value, plus the contract service value from returns, commissions, and expenses shall be as follows: ............................................................

First Party Factor Second Party Seller

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Article (7) The Seller of the factored rights is committed to the following:

• Providing the Factor with all data and information regarding the operations that gave rise to these debts, all data related to the sold rights and their guarantees, and all data and information that provide a clear picture of the risks or obstacles that may hinder the collection process.
• Providing the Factor with all supporting documents for the sold right and its guarantees, such as purchase orders issued by the debtor, invoices, and delivery orders, as well as all means of proving this right and its guarantees, and everything necessary to enable the Factor to exercise his right. In the event of a dispute arising from the debtor at any time, the Factor shall have the right to recourse against the Seller for the outstanding balance of the disputed sold rights, in addition to the Factor's right to take all legal measures to collect the debtor's accounts and commercial papers subject to factoring.
• Acknowledging to the Factor that the sold rights have not previously been transferred to any other entity.
• Not disposing again in any manner of the financial rights that have been factored or encumbering them with any obligations without obtaining written consent from the Factor.
• Bearing responsibility towards the debtor regarding the specifications of the sold goods or services provided under the original sales contract, as well as the mutual obligations between the parties to this contract; the Factor shall not be liable for this.
• Notifying the debtor of the transfer of financial rights to the debtor via ............ If the Seller breaches this notification obligation, the Factor shall have recourse against him for the value of those rights.

Article (8) The Factor is committed to the following:

• Factoring the financial rights provided by the Seller as long as those receivables do not exceed the permitted credit limit to cover the debtor's non-payment risk, and after fulfilling all agreed conditions for the Factor's acceptance of those rights.
• Maintaining strict confidentiality of customer data and not disclosing any information about them or their transactions to third parties without their prior written consent and within the scope of this consent. Exceptions include cases where the Financial Regulatory Authority requests any data or documents related to the ............ contract or related to the contract, as well as regulatory and judicial authorities, rating agencies, credit information companies, and entities practicing securitization and financing activities, as mandated by laws.
• The Factor wishing to transfer or assign his factored rights must transfer or assign them to another factor by notifying the debtor of the transfer of those rights, ensuring the notification includes sufficient data about the other factor.

Article (9) The Factor shall have recourse against the Seller in the following cases:

• If the debtor's refusal to pay the Factor is due to the Seller's breach of his commercial or contractual obligations with the debtor.
• The extinction or lapse of the right before its transfer to the Factor, or the existence of a third-party priority over it.
• The non-assignability of the factored rights or their previous transfer to another assignee.
• In case of the Seller's breach of any of his obligations stipulated in this contract, its appendices, or attachments.
• The Factor shall also have recourse against the Seller in the following other cases: ............................................................ ............................................................ In all cases, the Seller undertakes that the debtor holds no defenses or rights to effect set-off.

Article (10) The Factor has the right to assign the factoring contract or transfer all or part of the financial rights arising from this contract to any of the following entities ...................., and this assignment shall not result in any breach of the rights and guarantees stipulated for the Seller under the contract.

Article (11) Economic courts shall have jurisdiction to adjudicate all disputes arising from the breach of any clause of this contract, including temporary and substantive execution disputes. This text shall be replaced with the following if arbitration is agreed upon: Jurisdiction shall lie with arbitration bodies to adjudicate disputes arising between the parties to this contract.

First Party Factor Second Party Seller

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Article (12) The Parties acknowledge that the address stated in this contract is their chosen domicile, and all notifications and correspondence sent to it shall produce legal effects. In case one Party changes its address, it must notify the other Party of the new address via registered mail with acknowledgment of receipt; otherwise, all notifications and correspondence sent to this address shall be considered valid and legally effective.

Article (13) This contract is drafted in two copies, with each party holding one copy for use as needed.

First Party Factor ..................................

Second Party Seller ..................................

First Party Factor Second Party Seller