Union of the Comoros Decree Promulgating Law No. 12-011/AU on the Regulation and Organization of Leasing

UNION OF THE COMOROS

Unity - Solidarity - Development

President of the Union

DECREE No. 12-15K/PR

Moroni, August 2, 2012

Promulgating Law No. 12-011/AU of June 28, 2012, on the Regulation and Organization of Leasing in the Union of the Comoros.

THE PRESIDENT OF THE UNION,

HAVING REGARD TO the Constitution of the Union of the Comoros of December 23, 2001, as revised, particularly Article 17;

HEREBY DECREES:

ARTICLE 1: Law No. 12-011/AU on the Regulation and Organization of Leasing in the Union of the Comoros, adopted on June 28, 2012, by the Assembly of the Union of the Comoros, is promulgated, the text of which follows:

" CHAPTER I:
GENERAL PROVISIONS

Article 1. - This law organizes leasing in the Union of the Comoros.

Article 2. - This law governs leasing or credit-leasing operations, the credit-leasing contract, the rights and obligations of the parties involved, as well as collective proceedings in a credit-leasing operation.

Article 3. - For the purposes of this provision and its implementing texts, the following definitions are accepted:

Credit-Leasing: Credit-leasing is a form of credit intended for the financing of the acquisition or use of movable or immovable assets for professional use. It consists of the leasing of equipment, tooling material, or immovable assets for professional use, specifically purchased or constructed for this purpose by the lessor, who remains the owner. These leasing operations, regardless of their denomination, must give the lessee the option to acquire all or part of the leased assets for an agreed price, taking into account, at least in part, the payments made as rent.

By way of derogation from the above, real estate credit-leasing may cover immovable assets intended for residential use.

Lessor: Any credit institution, financial institution, or microfinance institution that finances credit-leasing operations. This provision applies to all entities exercising a credit-leasing activity. They are subject to the prevailing banking and financial regulations. In the case where a company exercising multiple activities has a specialized credit-leasing branch, only this business branch has the right to borrow funds from national or foreign banks or financial institutions or raise funds on the national or international financial market to exercise the credit-leasing activity in accordance with the provisions of this law.

Lessee: Any natural or legal person who uses the leased assets for the needs of their professional activity or also for residential use within the framework of a real estate credit-leasing contract.

Movable Credit-Leasing: A credit-leasing operation covering movable assets consisting of equipment, materials, and/or tooling necessary for the lessee's activity.

Real Estate Credit-Leasing: The real estate credit-leasing contract is a contract covering immovable assets for professional or residential use purchased or constructed for the account of the lessee. With the possibility for him, at the latest upon expiration of the lease, to acquire ownership of all or part of the leased assets in one of the following forms:

• by transfer, in execution of a unilateral promise of sale;
• or, by automatic transfer of ownership of the buildings erected on land belonging to the lessee.
• or, by transfer of ownership rights of the buildings erected on the land where the leased building(s) were erected;

Credit-Leasing Contract: Any agreement in which the lessor leases for a fixed term and against payment of rent by the lessee, assets acquired by the lessor at the request of the lessee. To this end, the latter is given the possibility to acquire at the end of the contract all or part of the leased assets at an agreed price, taking into account, at least in part, the payments made as rent.

Asset: Any thing for professional use of a movable or immovable nature, existing or future, including the thing to be transformed and animals capable of being registered or recorded in special registers, Business assets and artisanal establishments or any of their intangible elements, including industrial property rights. Residential use is admitted in real estate credit-leasing. The following cannot be the subject of credit-leasing: bonds, shares,

currency and any financial value, stock exchange and government securities as well as any natural resource or assets considered strategic, copyright and other "moral" rights on intellectual property and other categories of movable and immovable assets for which the law imposes limitations on free circulation.

Center of Main Interests: The place where a person usually manages their interests. Unless proven otherwise, it is the registered office or, in the case of an individual, their usual residence.

Supplier: Any natural or legal person who makes available, for commercial reasons, an asset chosen and specified by the lessee and which will be the subject of a credit-leasing contract, under a purchase/sale or construction agreement according to a specification sheet established with a lessor at the request of the lessee.

Supply Contract: The contract by which the lessor acquires the asset or the right of possession and enjoyment of the asset, object of the credit-leasing contract.

Purchase Option: Refers to the right conferred on the lessee at the end of the credit-leasing contract to become the owner of the asset(s) which are its object, by virtue of a unilateral promise of sale whose realization remains subject to the payment of the price fixed in advance.

Residual Value: Refers to the transfer price of the leased asset at the end of the lease period, fixed in advance in the credit-leasing contract and which takes into account the rent regularly paid.

CHAPTER II-
OF THE CREDIT-LEASING CONTRACT

Section 1.
Of the form and content of the credit-leasing contract

Article 4. - 4-1 The movable credit-leasing contract is established in writing, either by private deed or by notarial or authentic deed.

4-2 When the credit-leasing contract is made by notarial deed, either party may request the issuance of an original copy (grosse).

4-3 The credit-leasing contract may provide for an irrevocable period equal to or less than the duration of the lease, during which the parties cannot revise the terms of the contract.

Article 5: Under penalty of nullity, the credit-leasing contract must mention:

• the description of the assets subject to the contract, with all characteristics that could allow their perfect identification;

• the party having chosen the asset and the Supplier;
• the purchase price of the asset subject to the credit-leasing;
• the duration of the credit-leasing;
• the amount and number of rents;
• the payment schedule for rents;
• the purchase option offered to the lessee at the end of the contract;
• The price of exercising the purchase option for the leased asset at or before term.

Article 6:
6-1 The credit-leasing contract may, according to the will of the parties, contain all clauses relating to:

• The lessee's commitment to provide the lessor with real or personal guarantees or securities;
• The exemption of the lessor from civil liability towards the lessee or towards third parties,
• The exemption of the lessor from obligations generally imposed on the owner of the leased asset; and
• Any arbitration clause or jurisdiction clause.

6-2 Generally, any clause imposing on the lessee the installation of the leased asset at their expense, risk, and peril, the obligation of maintenance and repair of this asset, as well as the obligation of insurance, is deemed valid.

Article 7: The credit-leasing contract binds the parties, the purchasers of the leased assets, the creditors of the parties, and the bodies of collective proceedings.

Section 2:
Of the registration and publication of credit-leasing contracts

Article 8. -
8-1 When the credit-leasing contract concerns a movable asset, each of the parties may proceed with the registration of the contract in the commercial register and movable credit register under the conditions provided for in Article 35 of the new OHADA Uniform Act on General Commercial Law.

8-2 When the credit-leasing contract concerns an immovable asset, the lessor must proceed with the registration of the contract on the land register of the location of the immovable asset.

8-3 The cancellation of this registration is consequent to the publication of the deed confirming the end of the contract.

8-4 The registration provided for in Article 8 above does not exempt the parties from other publicity obligations specific to any operation involving all assets subject to the credit-leasing.

Article 9. - Credit-leasing companies may also, as needed, publish the registrations taken in the interprofessional bulletin or on any other support.

CHAPTER III
OF THE RIGHTS AND OBLIGATIONS OF THE PARTIES
TO THE CREDIT-LEASING CONTRACT

Section 1:
Of the rights and obligations of the lessor

Article 10. - In a credit-leasing operation, the obligations of the lessee and the lessor are irrevocable from the date of the conclusion of the contract or the agreed effective date, unless there is a contrary contractual stipulation.

Article 11. - The lessor remains the owner of the asset for the entire duration of the credit-leasing contract. Their right of ownership continues after the extinction of the contract, unless the lessee exercises the purchase option.

Article 12. - During the duration of the credit-leasing, the lessor enjoys all legal rights attached to the right of ownership, but the lessee bears all legal obligations imposed on the owner, under the conditions and limits fixed in the credit-leasing contract.

Article 13. - The lessor's right of ownership over the leased asset suffers no restriction or limitation of any kind because the asset is used by the lessee or because the contract allows the lessee to act as the owner's agent in legal or commercial operations with third parties related to the credit-leasing operation.

Article 14. - During the duration of the credit-leasing, the lessor benefits from a right of visit, the modalities of which are determined by the contract.

Article 15. - The lessor may assign all or part of their privileges, rights, and obligations arising from the credit-leasing contract without requiring the consent of the lessee, provided they inform the lessee by any means. However, the assignee must guarantee the lessee the peaceful enjoyment of the leased asset as well as the respect of the provisions provided for in Articles 4 and 5 above.

Article 16. : In addition to the rights enumerated above, the lessor enjoys all other rights that will be conferred upon them by the credit-leasing contract.

Article 17: The lessor is bound to:

• At the time of purchasing the asset, inform the supplier in writing that the asset will be given in credit-leasing to a lessee or sub-lessee, whose name and address they must communicate;
• Pay the supplier the agreed price for the acquisition of the asset and this only after receiving the receipt of the asset duly signed by the supplier and the lessee;
• Guarantee the lessee peaceful enjoyment of the leased asset. This obligation covers only disturbances of enjoyment arising from their act, or from the act of their successors or agents.

Article 18. - In the event of the lessor's failure to fulfill their legal or contractual obligations, the lessee has the right to take action for damages against the lessor.

Article 19. -
19-1 The lessee has no other action against the lessor due to non-delivery, late delivery, or delivery of a non-conforming asset, except to the extent that it results from an act, omission, or fault of the lessor.

19-2 However, if the non-performance by the supplier results from the lessor's failure to respect their obligations, the lessee may withhold the rents stipulated in the credit-leasing contract.

Section 2:
Of the guarantees and privileges of the lessor

Article 20: In addition to any conventional securities possibly granted, the lessor has, for the recovery of their claim arising from the credit-leasing contract in principal and accessories, up to the amount in dispute, a general privilege on all movable and immovable assets, claims, and account balances of the lessee, ranking immediately after the privilege established by Article 107 of the OHADA Uniform Act on the Organization of Securities.

Article 21:
21-1 The privilege mentioned in Article 20 above may be exercised at any time during and after the duration of the credit-leasing contract. This privilege only has effect if it is registered within six (06) months following the end of the contract in the commercial register and movable credit register or on the Land Register.

21-2- The registration preserves the privilege for three (03) years from the day it was taken. Its effect ceases, unless renewal is requested, before the expiration of this period.

Article 22. - The lessor may, to safeguard their claim against the lessee, take any conservatory seizure measures on the movable or immovable assets of the lessee.

Article 23. - The right of preference conferred on the lessor by the general privilege is exercised after the seizure of the movable and immovable assets, claims, and account balances of the lessee.

Article 24: In the event of partial or total loss of the leased asset, the lessor alone is entitled to receive insurance indemnities relating to the leased asset, notwithstanding the lessee's assumption of the insurance premiums paid, and without the need for a special delegation offered for this purpose.

Article 25. -
25-1 When the leased asset is accompanied by a certificate of ownership, this title will only be transferred to the benefit of the lessee when they become the owner of the asset.

25-2 In order to secure the leased asset by the lessee during the duration of the credit-leasing contract, at the request of the lessor, a special stamp is affixed to said certificate indicating that the asset is leased.

Section 3:
Of the rights and obligations of the lessee

Article 26: Subject to the execution of their legal and conventional obligations, the lessee has the right to enjoy and use the leased asset from the date of delivery and all other rights that will be conferred upon them by the credit-leasing contract and by law.

Article 27: The lessee has the right to assign all or part of their rights arising from the credit-leasing contract. However, they must previously obtain the written consent of the lessor.

Article 28: The lessee is bound to pay the rents under the conditions fixed by the contract.

Article 29. -
29-1 The lessee must exploit the leased asset as a good father of a family. They ensure the good conservation of the asset, exploit it under normal conditions for assets of this nature, and maintain it in the state in which it was delivered, taking into account wear and tear resulting from normal use.

29-2 When the credit-leasing contract obliges the lessee to maintain the leased asset, or when the manufacturer or supplier of the asset gives technical instructions for its operation, the lessee satisfies the conditions of paragraph 1 above by respecting said provisions of the contract or said instructions.

Article 30.- The lessee may, at the expiration of the fixed lease term and at their sole discretion, either:

• Exercise the option by purchasing the leased asset for its option value as fixed in the contract;
• Renew the lease for a period and at a rent to be agreed upon between the parties;
• Return the leased asset to the lessor in the state in which it was leased, taking into account wear and tear resulting from normal use.

Article 31. -
31-1 The lessee is responsible for loss and damage caused to third parties due to the possession or operation of the leased asset. To this end, the parties may mutually agree according to the terms of the credit-leasing contract that such risk will be covered by an insurance policy contracted with an insurance company accepted by the lessor.

31-2 This responsibility does not cover damage caused by defects that engage the liability of the Supplier or the manufacturer.

Article 32. - The lessee who provides, within the framework of a credit-leasing contract, information to the lessor or the Supplier, guarantees them against any action based on the violation of an intellectual property right that arises from the respect or implementation of this information.

The lessor and the supplier who take knowledge of this information are bound to respect the same intellectual property rights.

Article 33. - The lessee cannot sell, nor constitute a security in their favor on the leased asset.

The lessee who usurps the quality of owner of the asset, sells it, diverts it, or refuses to return it or represent it exposes themselves to the sanctions provided for in Articles 377 of the Penal Code on fraud for the sale or pledge of another's property and 381 on abuse of confidence.

Article 34. - The products and profits derived from the use of the asset given in credit-leasing as well as any improvements made to this asset, with the express consent of the lessor, remain the property of the lessee, unless there are contrary provisions in the contract.

Improvements made by the lessee without the consent of the lessor will not be compensated to them, unless there is a contrary contractual provision.

In the case where the lessee, at their own expense and with the written consent of the lessor, has made improvements to assets that are inseparable from them without damaging them, the lessee has the right to receive compensation after the end of the contract, unless there are contrary provisions in the contract.

Section 4:
Of the rights and obligations of the supplier

Article 35- (1) The supplier is obligated to deliver to the lessee the purchased and leased assets conforming to and within the time limits set in the supply contract.

(2) There is acceptance of the asset when the supplier has returned to the lessor the delivery note approved by the lessee, who may be assisted by an expert in the matter.

Article 36. - In the event of failure to deliver the leased asset, partial delivery, late delivery, or delivery non-conforming to the supply contract, the lessee or the lessor has the right to demand from the Supplier the delivery of a conforming asset and to implement all measures provided for by common law to oblige them to perform and to repair any prejudice resulting from it.

Article 37. - The Supplier is exempted from the obligations provided for in Article 36 above only if they prove that the failure to deliver, partial delivery, late delivery, or non-conforming delivery of the asset subject to their contract results either from the act of the lessor, or from the act of the lessee, or from an accidental event or force majeure.

CHAPTER IV-
SPECIFIC RULES
FOR REAL ESTATE CREDIT-LEASING

Article 38. - In a real estate credit-leasing, the reciprocal obligations and rights of the lessee and the lessor are those defined in the credit-leasing contract and by this law.

Article 39.- Notwithstanding the lessor's right of ownership over the leased immovable asset during the lease period and unless there is a contrary agreement between the parties, the lessee is bound to:

• pay taxes, duties, and other charges of this nature burdening the leased asset;
• not make any change to the leased asset and its dependencies that would diminish its enjoyment;
• make at their own expense all repairs falling to the lessor in the premises given in credit-leasing.

Article 40. -
40-1 In the framework of a real estate credit-leasing contract, the immovable asset cannot, during the duration of the contract, be the subject of the constitution of a business asset (fonds de commerce).

40-2 At the expiration of the fixed lease term fixed in the credit-leasing contract, and in the event of non-exercise of the purchase option, the lessee cannot claim a right to stay in the leased premises, nor can they claim commercial property rights on the immovable asset put in credit-leasing.

Article 41. - When the credit-leasing contract concerns an immovable asset, it must meet the conditions provided for by legislative and regulatory texts relating to the land and estate regime.

CHAPTER V-
TERMINATION, RESCISSION
AND REMEDIES

Article 42. - The credit-leasing contract ends upon the arrival of the agreed term.

Article 43. The parties must obligatorily mention in the credit-leasing contract that upon the arrival of the term or the extinction of the credit-leasing, in the event of non-exercise of the purchase option, the return of the asset is made to the lessor amicably by spontaneous performance by the lessee at the request of the lessor or, failing that, in accordance with the articles below.

Article 44. - The credit-leasing contract may also end in accordance with common law in the event of material impossibility to continue the execution of the contract, notably in the event of total loss or destruction of the leased asset, proven insolvency of the lessee, accidental event and force majeure, simply by mutual agreement.

Article 45. - Unless cases of force majeure or cases of judicial settlement or bankruptcy or early dissolution of the lessee involving their liquidation, when it is a legal person, and generally, unless cases of proven insolvency of the lessee, whether a natural or legal person, the termination of the credit-leasing contract entails, if it is the fault of the lessee, the payment to the lessor of compensation damages, the minimum amount of which cannot be less than that of the rents remaining due, unless the parties have agreed otherwise in the contract.

In the cases referred to in the previous paragraph, the lessor's right on the rents is exercisable on the realizable assets of the lessee, and if applicable, on their own patrimony for the recovery of past due unpaid rents, and those to fall due.

Article 46. . - If the credit-leasing contract is established by authentic deed and bears the enforceable formula, the lessor provided with the original copy delivered by the notary may, when the lessee has not paid one or several rent terms and is not subject to

any judicial collective proceedings, proceed without further formalities to recover the leased asset from the lessee, their successors, agents, or subcontractors.

Article 47. - If the credit-leasing contract is under private deed, the lessor may, for the purpose of returning their asset and after having put the lessee on notice by means of a bailiff with a payment deadline of 15 days, act either:

• in summary proceedings of common law;
• in accordance with Articles 19 and following on the injunction to deliver from the OHADA Uniform Act on the Organization of Simplified Recovery Procedures.

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