Conditions for Establishing and Operating Leasing Companies

1 / Text/ Section /2 L.F.C./ No. /1 Circ. -31-12/2023

We enclose herewith a copy of Basic Decision No. 7540 dated 2000/3/4 concerning the conditions for establishing and operating "financial leasing" companies.

Beirut, on March 4, 2000 Governor of the Central Bank of Lebanon Riad T. Salaméh Old No. 1

Basic Decision No. 7540 Conditions for Establishing and Operating "Financial Leasing" Companies

The Governor of the Central Bank of Lebanon, Pursuant to the Monetary and Loan Law, particularly Article 70 thereof, And pursuant to Law No. 160 dated 1999/12/27, particularly Articles 13 and subsequent articles thereof, And pursuant to the decision of the Central Board of the Central Bank of Lebanon adopted in its meeting held on March 1, 2000, Decrees the following:

First Section: Conditions for Establishment and Licensing

Article 1: An application for a license to establish a Lebanese "financial leasing" company shall be submitted to the Central Bank of Lebanon, signed by the founders and accompanied by one original copy and three copies of each of the following documents:

1. A document proving the identity of the founders, beneficial owners, persons who will subscribe to and capitalize the company, and persons expected to be appointed to senior executive positions (individual deregistration certificate / ID card / passport / copy of the commercial register file if any founder or shareholder is a legal entity).
2. Information signed by each of the aforementioned persons, including their biographical data (certificates and experience, as well as other material and moral information) and a precise assessment of their financial standing.
3. A criminal record extract dated no more than three months ago for each of these persons.
4. A statement specifying the subscription ratio for each subscriber to the company's capital, which must include the share class and its distribution between Lebanese and non-Lebanese, resident and non-resident.
5. A feasibility study regarding the establishment of the company covering a three-year forward period, which shall include in detail: a. Its funding sources and investment outlets. b. A statement of anticipated profits and losses. c. Anticipated balance sheets. d. Anticipated cash flow.
6. A statement clarifying, within the framework of any direct or indirect association (if any), between the company to be established and a specific institution, group, or groups of economic entities, in Lebanon and abroad.
7. Drafts of: a. The company's bylaws. b. The administrative structure to be adopted. c. The principles for organizing supervision and internal controls.

1 - This paragraph was amended by Article 40 of Interim Decision No. 13440 dated 2022/5/27 (Interim Circular No. 625).

Article 2: An application for a license to establish a branch of a foreign "financial leasing" company shall be submitted to the Central Bank of Lebanon, signed in accordance with regulations and accompanied by one original copy and three copies of each of the following documents:

1. The bylaws of the foreign company, authenticated in accordance with regulations.
2. The documents and information stipulated in paragraphs (1), (2), and (3) of Article 1 of this Decision, relating to the company's representative in Lebanon and persons expected to be appointed to senior executive positions, as appropriate.
3. A certificate of the company's registration in its country of origin or a license granted to it by the competent authorities to primarily conduct financial leasing operations, authenticated in accordance with regulations.
4. A decision, authenticated in accordance with regulations, issued by the board of directors of the foreign company, including: a. Approval to open a branch in Lebanon, with its main subject being financial leasing operations. b. Appointment of the company's representative in Lebanon and definition of his/her powers.
5. The documents and information stipulated in paragraphs (5) and (6), and sub-paragraphs (b) and (c) of paragraph (7) of Article 1 of this Decision.
6. Audited annual reports on its operations for the last three years, along with the balance sheet and profit and loss statement related to each of these years.

Article 3: A "financial leasing" company licensed for establishment by the Central Board of the Central Bank of Lebanon must complete its establishment procedures and commence actual operations within a maximum period of six months from the date it receives the licensing decision, under penalty of revocation of this license. The Central Board grants a license to establish a "financial leasing" company to the extent it deems serving the estimated public interest and after verifying the material and moral competence of the founders, beneficial owners, capital subscribers, and persons to be appointed to senior executive positions, particularly regarding the absence of any criminal or civil judgments against any of them or their partners in Lebanon and abroad for committing ordinary felonies, theft, misappropriation, fraud, money laundering, terrorist financing, or bankruptcy declaration, or regarding the listing of any of them on local or international sanctions lists.

Article 4: The capital of a "financial leasing" company and the allocations for branches of foreign companies must not be less than two billion Lebanese Lira, paid in full in cash at the Central Bank of Lebanon. It must also establish a reserve fund by deducting 10% of its net annual profits.

Article 5: The annual general assemblies of a Lebanese "financial leasing" company, convened to review the accounts of the preceding financial year, must be held before the end of the first six months of each year.

Article 6: All shares of a Lebanese "financial leasing" company must be registered shares.

Article 7: The transfer of shares in the capital of any "financial leasing" company is subject to prior approval from the Central Board of the Central Bank of Lebanon in the following cases:

• If the transfer results in one person directly or indirectly acquiring a ratio exceeding 10% (ten percent) of the total shares of this "financial leasing" company.
• If the transferor or transferee is a current or elected member of the Board of Directors, regardless of the number of shares transferred. A transfer of shares by inheritance or between spouses or between lineal descendants and ascendants is not considered a transfer under the meaning of this Article. Capital companies holding shares in the capital of a "financial leasing" company must include in their bylaws a statement that all their shares are registered and owned, directly or indirectly, entirely and continuously by natural persons or companies whose shares are registered.

Article 8: A "financial leasing" company must display the decision of its listing on the list of "financial leasing" companies issued by the Central Bank of Lebanon in a prominent public place at its headquarters and all its branches.

Article 9: 1. The opening or transfer of any branch of a "financial leasing" company, in Lebanon and abroad, is subject to prior approval from the Central Board of the Central Bank of Lebanon. 2. The Central Board conditions its approval on the fulfillment of the following conditions: a. Feasibility resulting from opening or transferring the branch. b. The company's ability to bear the costs arising from opening or transferring the branch. c. The company's compliance with prevailing laws and regulations, as well as instructions and recommendations of the Central Bank of Lebanon and the Banking Control Commission. d. The soundness of the administrative and financial status of the concerned company. 3. A "financial leasing" company is prohibited from using the phrase "branch under establishment" or any similar phrase on its documents, advertisements, statements, or any related instruments unless explicit approval has previously been granted by the Central Board of the Central Bank of Lebanon to open the concerned branch. 4. Each license granted to a "financial leasing" company to open a new branch in Lebanon or abroad remains valid for one year from the date of the Central Board's decision, and the company must consequently open the branch and commence operations with the public before this period expires; otherwise, the approval lapses automatically. 5. The Central Board may, upon the proposal of the Banking Control Commission, revoke the approval granted to open any branch of a "financial leasing" company if it is found to impose burdens on the company that seriously affect its overall status.

Article 10: First, "financial leasing" companies must comply with the provisions of the Anti-Money Laundering and Terrorist Financing Law and the regulatory texts issued by the Central Bank of Lebanon on this matter, including the definition and identification of the "beneficial owner". Second, "financial leasing" companies are prohibited from conducting any operations of any kind, financial or non-financial, recorded inside or outside their balance sheets, with companies or common investment funds whose shares or stakes are wholly or partially bearer-owned or owned directly or indirectly by companies or common investment funds whose shares or stakes are wholly or partially bearer-owned.

Second Section: Annual Statements

Article 11: Lebanese "financial leasing" companies are requested to deposit with the Legal Affairs Department of the Central Bank of Lebanon, as soon as possible after holding their annual general assemblies and no later than September 30 of each year, three copies (one original signed and authenticated in accordance with regulations) of the following documents:

1. The annual board of directors' report submitted to the ordinary annual general assembly of shareholders.
2. The annual auditors' report submitted to the same assembly, organized in accordance with Article 175 of the Commercial Code.
3. The special board of directors' report submitted to the general assembly in accordance with Article 158 of the Commercial Code, which shall include, among other things:
   • A presentation on how previous agreements with board members were executed.
   • A comprehensive presentation of the agreements requiring authorization to be concluded.
4. The special auditors' report stipulated in Article 158 of the Commercial Code.
5. The minutes of the ordinary annual general assembly and the attendance sheet, authenticated by the commercial register secretariat if board members were elected in said assembly.
6. As appropriate, the minutes of the board meeting if it includes the election or confirmation/appointment of the Chairman or Deputy General Manager, authenticated by the commercial register secretariat.
7. A list, signed by the Chairman of the Board, containing the names of the Chairman and board members for the current year, as well as the names of major shareholders, Deputy General Manager, directors, and assistant managers, containing the following information:
   • Name, surname, and nationality of each.
   • All types of companies in which any of them participate or preside, with a statement of the type of these companies and the nature of the relationship linking them (Chairman of the Board - Board Member - Director - Major Shareholder - Partner - Managing Partner - etc.).
8. A criminal record extract dated no more than three months ago for each of the members of its board, directors, and auditors.

Article 12: Foreign "financial leasing" companies are requested to deposit with the Legal Affairs Department of the Central Bank of Lebanon, no later than September 30 of each year, the following documents:

1. Two copies of the annual report issued by the company's headquarters, including the board of directors' report, balance sheet, resolutions of the general assembly, and other information.
2. Two copies of its decision appointing an auditor for its branch in Lebanon.
3. One copy of a criminal record extract for each of its representatives, directors, and auditors, dated no more than three months ago.

Article 13: The Legal Affairs Department shall deliver a copy of each of the aforementioned documents to both the Banking Control Commission and the Capital Markets Department.

Third Section: Financial Statements

Article 14: Financial leasing companies must prepare their financial statements (assets - liabilities - off-balance sheet - asset annex - liability annex) in accordance with Form 2010 attached to Basic Decision No. 7723 dated 2000/12/2 and stored on a compact disc (CD), which can be obtained from the Information Technology Department at the Central Bank of Lebanon. These statements are submitted to the Economics Department on a compact disc (CD) as follows:

• Monthly, within ten days from the date these statements are due.
• Annually, within six months from the end of the financial year.

Article 15: This Decision shall take effect upon its issuance.

Article 16: This Decision shall be published in the Official Gazette.

Beirut, on March 4, 2000 Governor of the Central Bank of Lebanon Riad T. Salaméh

1 - Added by Article 5 of Interim Decision No. 7996 dated 2001/12/4 attached to Interim Circular No. 5. 2 - Added by Interim Decision No. 7996 dated 2001/12/4 (Interim Circular No. 5), then amended by Article 6 of Interim Decision No. 12750 dated 2018/1/15 (Interim Circular No. 484), effective as of the suspended status dated 2018/2/28. 3 - The name of this department was amended to "Economics Department" instead of "Statistics and Economic Research Department" by Decision No. 13779 dated 2025/11/28. 4 - This Article number became 15 instead of 14 by Article 4 of Interim Decision No. 7996 dated 2001/12/4 attached to Interim Circular No. 5. 5 - This Article number became 16 instead of 15 by Article 4 of Interim Decision No. 7996 dated 2001/12/4 attached to Interim Circular No. 5.