Law No. 176 of 2018

Issuing the Law Regulating Financial Leasing and Factoring Activities

In the Name of the People

President of the Republic

The Parliament of the Republic has decided the following law, which we hereby issue:

(Article One)

The provisions of the accompanying law shall apply to the financial leasing and factoring activities. Law No. 95 of 1995 concerning financial leasing is hereby repealed, as is Prime Ministerial Decision No. 1446 of 2003 concerning the controls and provisions specific to the factoring activity, and any provision conflicting with the provisions of the accompanying law.

(Article Two)

Except for disputes and lawsuits under the jurisdiction of the State Council, economic courts shall have jurisdiction to adjudicate disputes and lawsuits arising from the application of the provisions of the accompanying law, including pending and filed execution disputes, as well as criminal lawsuits arising from crimes stipulated in the accompanying law. The provisions of the Law Establishing Economic Courts issued by Law No. 12 of 2008, the Civil and Commercial Procedures Law, the Penal Code, the Criminal Procedures Law, the Civil Code, and the Evidence Law in Civil and Commercial Matters shall apply, insofar as no special provision exists in the accompanying law.

(Article Three)

Companies operating on the date of implementation of the accompanying law that engage in either financial leasing or factoring activities shall organize their status in accordance with its provisions within six months from the date of its implementation. The Board of Directors of the Financial Regulatory Authority may, by decision, extend this period for another period not exceeding two years.

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(Article Four)

In the event of non-compliance with the preceding paragraph, the license to practice the activity shall be revoked, and the companies shall be obligated to liquidate their financing portfolio or transfer it to another entity licensed to practice the activity in accordance with the provisions of the accompanying law, within a period determined by the Board of Directors of the Financial Regulatory Authority. The same rules and provisions established at the time of conclusion shall apply to contracts concluded before the date of implementation of this law, until their expiration.

(Article Five)

This law shall be published in the Official Gazette and shall take effect from the day following its publication. This law shall be sealed with the State seal and executed as one of its laws. Issued at the Presidency of the Republic on 3 Dhu al-Hijjah 1439 AH (Corresponding to 14 August 2018 AD) Abdel Fattah El-Sisi

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Law Regulating Financial Leasing and Factoring Activities

Chapter One

General Provisions

Article (1)

For the application of the provisions of this law, the following words and expressions shall have the meanings indicated below:

• 1- Financial Leasing: A financing activity whereby the lessor grants the lessee the right to possess and use a leased asset for a specified period in exchange for lease payments, in accordance with the financial lease contract, and the lessee shall have the right to choose to purchase the entire or part of the leased asset at the time and price specified in the contract.
• 2- Factoring: The purchase of current and future financial rights arising from sales and service provision operations.
• 3- Competent Minister: The Minister responsible for applying the provisions of Law No. 10 of 2009 regulating supervision over markets and non-banking financial instruments.
• 4- Competent Administrative Authority: The Financial Regulatory Authority.
• 5- The Authority: The Financial Regulatory Authority.
• 6- Board of Directors: The Board of Directors of the Financial Regulatory Authority.
• 7- Financial Lease Contract: A financing contract concluded between the lessor and the lessee, whereby the lessor undertakes to transfer the leased asset owned by him or obtained from the supplier to the possession of the lessee, or whereby an asset purchased by the lessor from the lessee under a contract whose effectiveness is contingent upon the conclusion of a financial lease contract for the purpose of using it in conducting productive economic or service activities is transferred, for a specified period and for a specific rent, and in all cases, the lessee shall have the right to choose to purchase the entire or part of the leased asset at the time and price specified in the contract.

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Article (8)

The Entity: The entity licensed to practice financial leasing activities in accordance with the provisions of this law and according to the rules and procedures issued by a decision of the Board of Directors of the Authority. Lessors may commit to the same financial lease contract.

Article (9)

Lessee: The natural or legal person who has the right to possess and use the leased asset pursuant to the financial lease contract, and lessees may be considered jointly liable for all obligations arising from the contract.

Article (10)

Leased Asset: Any tangible or intangible property or usufruct right subject to a financial lease contract, provided it is necessary for conducting productive economic or service activities, and the financing of the usufruct right through financial leasing must allow the contract to transfer this right to a third party.

Article (11)

Lease Value: The value agreed upon in the contract, which the lessee undertakes to pay to the lessor in exchange for the right to use the leased asset through financial leasing.

Article (12)

Lease Term: The period during which the leased asset remains in the possession of the lessee in accordance with the lease contract conditions.

Article (13)

Supplier or Property Owner: The person who transfers ownership of the leased asset subject to the financial lease contract to the lessor.

Article (14)

Contractor: The party that constructs facilities that are the subject of a financial lease contract.

Article (15)

Contracts Register: A register held by the Authority dedicated to recording financial lease contracts and sales contracts concluded based on them, and any modifications to such contracts.

Article (16)

Purchase Option: A clause that must be included in the financial lease contract, allowing the lessee to choose to purchase the leased asset upon expiration of the lease term or during it, in accordance with what is agreed upon in the financial lease contract.

Article (17)

Factor: Any entity licensed to practice factoring activities in accordance with the provisions of this law.

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Article (18)

Seller: The seller of goods or provider of services from which financial rights arise.

Article (19)

Debtor: The purchaser of goods or recipient of services.

Article (20)

Factoring Contract: A financing contract concluded between the factor and the seller, whereby the factor undertakes to purchase the current and future financial rights arising from the sale of goods and provision of services in accordance with the provisions of this law.

Article (21)

Sales Contract: The original contract concluded between the debtor and the seller regarding the sale of goods or provision of services.

Article (22)

Current Rights: Rights arising upon the conclusion of the factoring contract.

Article (23)

Future Rights: Rights that arise after the conclusion of the factoring contract.

Article (2)

The practice of financial leasing and factoring activities shall be in accordance with the provisions stipulated in this law and the conditions, controls, and criteria issued by a decision of the Board of Directors of the Authority according to the nature of each activity.

Article (3)

The Authority, exclusively, shall be responsible for granting licenses to practice the activity to companies subject to the provisions of this law. It shall also be responsible for licensing companies, associations, and civil society institutions that engage in microfinance activities in accordance with Law No. 141 of 2014 regulating microfinance activities, under the conditions stipulated in this law and other conditions and rules issued by the Board of Directors of the Authority. Entities other than those mentioned shall not be permitted to practice financial leasing or factoring activities. Entities licensed by the Authority to practice financial leasing or factoring activities shall be considered entities providing services in the field of non-banking financial markets in accordance with the provisions of Law No. 10 of 2009 regulating supervision over markets and non-banking financial instruments.

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Chapter Two

Financial Leasing Activity

(Chapter One)

Provisions on the Practice of the Activity

Article (4)

The following shall not be considered financial leasing for the application of the provisions of this law:

• 1- Operating lease contracts, meaning lease contracts that do not include a purchase option for the leased asset at the end of the contract term.
• 2- Lease contracts related to agreements on the exploration or exploitation of natural resources, such as oil, gas, minerals, and other exploration and mining rights.
• 3- Lease contracts concerning an asset that is not directly related to a productive, service, or commercial activity of the lessee, in accordance with rules issued by a decision of the Chairman of the Board of Directors of the Authority.

Article (5)

The Authority shall maintain a register for recording financial lease contracts concluded between the licensed lessor and the lessee in accordance with the provisions of this law, whenever the contract is concluded in the Arab Republic of Egypt or its execution takes place therein, and sales contracts linked to these contracts and concluded based on them, as well as any modifications to these contracts. The registration must specify the leased asset, the parties to the contract and their status regarding this asset, and the contract duration. The Board of Directors of the Authority shall determine by decision the procedures for registration in the aforementioned register, the documents, papers, and data required for registration, and the procedures for modifying or deleting the registration, without prejudice to the lessor's right to advertise movable guarantees subject to financial lease contracts in the Movable Guarantees Register in accordance with the provisions of the Law Regulating Movable Guarantees issued by Law No. 115 of 2015.

Article (6)

The Authority shall review applications for registration in this register, the contracts to be registered, all detailed documents pertaining to them, and any modifications submitted to them in accordance with the provisions of this law and decisions issued by the Board of Directors of the Authority implementing it. The Authority may enlist the expertise of persons it deems qualified for this purpose.

Article (7)

The registration fee for the financial lease contracts register shall be determined by a decision of the Board of Directors of the Authority at an amount not exceeding five Egyptian pounds, and the fees for requesting a copy of the registration in the aforementioned register and modifications thereto shall not exceed two hundred Egyptian pounds. Any interested party may request to obtain an extract, data certificate, or negative certificate from the financial lease contracts registration register or a list of licensed companies. The request must be submitted accompanied by a receipt proving payment of the fee determined by the Board of Directors of the Authority at an amount not exceeding two hundred Egyptian pounds. Fees shall be paid through the payment methods established by the Authority.

Article (8)

The lessor shall have the right to register in the Importers Register in accordance with the provisions of Law No. 121 of 1982 concerning the Importers Register for assets imported for financial leasing purposes, regardless of the size of the business of the registering company, the period during which the licensed activity was suspended, or the nationality of the shareholders in the capital or the nationality of the company director responsible for imports.

Article (9)

Without prejudice to the provisions of laws governing the registration of constructed properties and lands, the lessee shall have the right to choose to purchase the entire or part of the leased asset at the time and price specified in the contract, taking into account in determining the price the lease value paid by the lessee. In the event of the lessee's failure to choose to purchase the leased asset, he may return it to the lessor or renew the contract under the terms agreed upon by both parties. The contract shall not be renewed implicitly nor shall it automatically extend, whether the lessee is notified of the expiration of the contract term or not.

Article (10)

Without prejudice to the rights of the State, the lessor or any third party shall not, from the date of registration, assert against the lessor any right conflicting with the data of the financial lease contract registered in accordance with the provisions of Article (5) of this law.

Article (11)

The lessee is prohibited from disposing of the leased asset, in whole or in part, or exchanging it without obtaining written consent from the lessor. Any disposal or transaction carried out in violation of this provision shall be null and void. The lessor shall have the right to recover the leased asset from the party to whom it was disposed or the possessor to whom it passed in violation of the provisions of this article.

(Chapter Two)

Financial Lease Contracts

Article (12)

The financial lease contract shall be drafted according to the model provided by the Authority for this purpose, and must include at least the following:

• 1- Detailed data of the contract parties.