FINANCE LEASING ACT

Arrangement of Sections

1. Short Title.

2. Finance leasing business to be carried on a certificate of registration.

3. Qualifications for registration.

4. Application for registration.

5. Certificate of registration.

6. Annual registration fee.

7. Operating manual.

8. Alteration of certain documents only with approval.

9. Cancellation or suspension of registration.

10. Procedure for suspension or cancellation of a registration.

11. Rights to undisturbed possession.

12. Use of equipment.

13. Non-delivery, late delivery and non-conformity of equipment.

14. Lessee's acceptance of equipment.

15. Return of equipment.

16. Termination or variation of conditions of a supply agreement.

17. Supply agreement.

18. Supplier's obligations to a lessee.

19. Non-liability of lessor for loss in relation to equipment.

20. Default by lessees.

21. Accelerated payments or termination with notice to lessee.

22. Computation of damages.

23. Due diligence of the lessor.

24. Transfer or assignment of lessor's right.

25. Transfer of lessee's right in the equipment.

26. Lessee's trustees in bankruptcy or creditors.

27. Recovery of possession if resistance is not offered.

28. Recovery of possession through court.

29. Recovery of money due under the finance lease.

30. Savings of other remedies.

31. Non-applicability of certain provisions of this Part.

32. Effect of carrying on finance leasing business without registration.

33. Powers of examination of registered establishment.

34. Power to issue directions.

34A. Certain registered finance leasing establishments to borrow money by the issue of debt instruments.

35. Regulations.

36. Protection from suit.

37. Non-disclosure of information.

38. A registered establishment and special purpose vehicle deemed to be a lending institution.

39. Offences.

40. Willful act or omission in relation to records and books.

41. Penalty for offence.

42. Compounding of offences.

43. Interpretation.

44. Persons engaged in finance leasing business on the appointed date.

44A. Registration of persons who failed to register under section 44 of the principal enactment.

45. Sinhala text to prevail in case of inconsistency.

SCHEDULE

56 of 2000,

24 of 2005,

33 of 2007.

AN ACT to provide for the regulation and monitoring of Finance Leasing businesses; to specify the rights and duties of lessors and lessees and suppliers of equipment: and for matters connected therewith or incidental thereto.

[Date of Commencement: 18th August, 2000]

1. Short Title.

This Act may be cited as the Finance Leasing Act.

PART I

Registration of Finance Leasing Businesses

2. Finance leasing business to be carried on a certificate of registration.

Subject to the provisions of section 44 from and after the appointed date, no person shall carry on finance leasing business, except under the authority of a certificate of registration issued in that behalf under the provisions of this Act.

3. Qualifications for registration.

A person shall not be eligible to be registered under this Act, unless such person—

(a) is a licensed commercial Bank or a licensed specialised Bank within the meaning of the Banking Act, No. 30 of 1988;

(b) a finance company within the meaning of the Finance Companies Act, No. 78 of 1988; or

(c) a public company incorporated under the Companies Act, No. 17 of 1982 having such minimum issued and paid up capital as may be prescribed.

4. Application for registration.

(1) An application for registration under this Act shall be made to the Director in such form as may be provided for that purpose by the Director, and shall be accompanied by—

(a) in the case of a licensed commercial Bank or a licensed specialised Bank, a certified copy of the licence issued to such Bank by the Monetary Board under the Banking Act, No. 30 of 1988 and in force on the date of making the application;

(b) in the case of a finance company, a certified copy of the licence issued by the Monetary Board under the Finance Companies Act, No. 78 of 1988 and in force on the date of making the application;

(c) case of a public company, other than those referred to in paragraph (a) and (b) of section 3—

(i) a certified copy of the Memorandum and Articles of Association of the Company; and

(ii) a certified copy of the Certificate of Incorporation of the Company;

[S 4(1)(c) am by s 2 of Act 24 of 2005.]

(d) a certified copy of the operating manual containing the particulars specified in section 7;

(e) the application fee as prescribed; and

(f) certified copies of such other documents as may be prescribed.

(2) The Director may where he considers it necessary, require an applicant to furnish such further information or particulars for the determination of the application.

(3) A person who makes any statement in an application made or in any document submitted under subsection (1), or any information or particulars furnished under subsection (2), which to the person's knowledge is false or misleading in any material particular, shall be guilty of an offence under this Act.

5. Certificate of registration.

(1) Where the Director, on a consideration of the information contained in an application made and the documents, information and particulars furnished under section 4 and after such investigation, as the Director may deem necessary, is satisfied that the applicant is fit and competent to carry on finance leasing business, the Director may having regard to the interests of the national economy—

(a) register the applicant; and

(b) issue a certificate of registration to the applicant.

(2) Every person registered under subsection (1) shall be referred to as a "registered finance leasing establishment” (hereinafter referred to as a "registered establishment”).

(3) Every registered establishment shall exhibit the certificate of registration issued to it in a conspicuous place at the principal place of business of such establishment.

(4) The Director shall keep and maintain in the prescribed form a register of every registered establishment.

6. Annual registration fee.

Every registered establishment shall pay the Director an annual registration fee as may be prescribed, within two months of the end of each calendar year.

7. Operating manual.

The operating manual to be submitted under paragraph (d) of subsection (1) of section 4, shall contain particulars relating to—

(a) the period of duration of a finance lease:

(b) the method of recovery of the payments due on the finance lease;

(c) the protection by the lessor of the right of the lessee against claims in respect of the equipment provided under the finance lease;

(d) the disposal of such equipment after the expiration of the finance lease; and

(e) such other particulars as may be prescribed.

8. Alteration of certain documents only with approval.

Except with the prior written approval of the Director, a registered establishment shall not—

(a) alter or deviate from the particulars contained in the operating manual submitted under paragraph (d) of subsection (1) of section 4; or

(b) where such establishment is a company, alter its Memorandum and Articles of Association.

9. Cancellation or suspension of registration.

(1) The registration of a registered establishment may be suspended or cancelled by the Director on any one or more of the following grounds—

(a) failure to commence business within twelve months after registration;

(b) ceasing to carry on finance leasing business;

(c) proposing to make, or making any composition or arrangement with its creditors or going into liquidation or being wound up or otherwise dissolved;

(d) carrying on its business in a manner likely to be detrimental to the interests of its lessees;

(e) inability to meet its obligations to its lessees, creditors or suppliers, as the case may be;

(f) acting in contravention of any provisions of this Act or any regulations made thereunder, or any condition imposed or any directions given by the Director under this Act or such regulation;

(g) furnishing false, misleading or inaccurate information or concealing or failing to disclose material facts, in its application for registration; or

(h) where such establishment is a licensed commercial Bank, licensed specialised Bank or a licensed finance company, the licence issued to such establishment has been revoked by the authority issuing the same, under the Banking Act, No. 30 of 1988 or the Finance Companies Act. No. 78 of 1988. as the case may be.

(2) The Director may for one or more of the grounds specified in subsection (1)—

(a) suspend the registration of a registered establishment for such period as may be specified, which shall not exceed three months, and the establishment shall not during the period of suspension enter into any finance lease; or

(b) cancel the registration of registered establishment and the establishment shall not thereafter carry on any finance leasing business except such business as it had entered into before the date on which the cancellation takes effect, and the establishment shall for the purpose of completing such business be deemed to be a registered establishment.

10. Procedure for suspension or cancellation of a registration.

(1) The Director shall, before suspending or cancelling the registration of a registered establishment on any one or more of the grounds specified in section 9, serve a notice in writing on the establishment, informing it of such fact and specifying the ground for the proposed suspension or cancellation.

(2) A registered establishment may, within fourteen days of receipt of a notice under subsection (1), show cause as to why its registration should not be cancelled or suspended.

(3) Where a registered establishment fails to show cause within the period specified in subsection (2), the Director may suspend or cancel, as the case may be, the registration.

(4) Where the registered establishment in compliance with notice issued to it under subsection (1) show cause within the specified period, the Director may after considering the reasons submitted—

(a) refrain from suspending or cancelling the registration, if he is satisfied that the establishment has shown sufficient cause as to why its registration should not be suspended or cancelled; or

(b) suspend or cancel the registration, if he is satisfied that the establishment has not shown sufficient cause as to why its registration should not be suspended or cancelled.

(5) The decision of the Director under subsection (3) or subsection (4), shall be served on the registered establishment and shall take effect on the date on which such decision is served on the establishment.

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