1. Legal Practitioners & Arbitrators Anatomy of the Equipment Leasing Act 2015 24th November 2015 Theophilus Emuwa

2. 2 Legal framework prior to 2015  English common law  Hire Purchase Act 1965 o Hire Purchase Regulations 1968

3. Implied terms under common law  Delivery of the equipment & redelivery  Good title to the equipment  Description of the equipment  Quality and fitness for purpose  Quiet possession  Payment of installments  Maintenance of equipment – reasonable care 3

4. Implied terms under the Hire Purchase Act Similar to those at common law ▫The Act only applies to motor vehicles and small assets <N2,000 in 1965 - now very small, but perhaps equivalent to N10million today! 4

5. Challenges existing prior to the Act  Repossession of leased equipment  Inadequate fiscal incentives – finance leases  Notice to third parties/registration of lessor’s interest  Lessee could not sue manufacturer/supplier directly 5

6. Overview of the Equipment Leasing Act  Establishment of the Equipment Leasing Authority  Restriction on operation of equipment leasing business  Requirement of registration of equipment leasing agreement  Classification of equipment leases  Implied term of legal ownership 6

7. Overview of the Act (Contd.)  Implied rights and obligations of lessees  Procedure for termination of lease  Repossession of leased equipment 7

8. Anatomy Applies to all equipment leases - s.1, s.3 ▫ Finance lease ▫ Operating lease ▫ Syndicated lease ▫ Sale and lease back ▫ Cross border lease ▫ Leveraged lease ▫ Any others 8

9. Anatomy (contd.) Agreement must be in writing – s.2, s.4 ▫If a finance lease, to indicate:  Estimated price  That manufacturer/supplier has knowledge of lessor’s intention to lease  That lessee has selected equipment with/without relying on lessor  Lessee’s acknowledgement that lease is “full pay-out non-cancellable”  That upon termination lessee shall redeliver equipment to lessor 9

10. Anatomy (contd.) All lessors must be registered – s.6 Equipment lease agreements may/must be registered? – ss.12 & 13 Minister may determine stamp duty payable? – s.11 (Stamp Duties Act??) Registration constitutes notice to third parties – s.16 10

11. Anatomy (contd.) Non-registration of “registrable lease agreement” renders it invalid – s.17 ▫Between the parties but not against third party who has no notice (but see s.21 – lessor does not prevail against purchaser under non-registered lease!!) Registration protects lessor against third parties – ss.19, 20, 21 ▫Lessor’s title shall prevail against all even where agreement says otherwise; any sale, sub-lease, pledge, charge, mortgage, loan, assignment, etc. by lessee not effective; lessor prevails over creditor 11

12. Anatomy (contd.) Lessor to inscribe or affix name on equipment – s.18 ▫No consequence for default? Rights/obligations of lessee, similar to common law – ss.22(1), 24 Lessee can sue manufacturer/supplier directly – s.22(2) ▫Finance lease only? See s.2(2) ▫Privity of contract?? 12

13. Anatomy (contd.) Where lessee relies on “skill, knowledge & expertise” of lessor in selecting equipment lessor is liable for defect or non-fitness – s.33 ▫Also, manufacturer/supplier liable to lessee – s.34 Capital allowance available only to lessor in operating lease?? – s.36(3) ▫Only owner can claim capital allowance – Companies Income Tax Act, Second Schedule, paragraphs 6 & 7 13

14. Anatomy (contd.) Lessor entitled to have information on equipment & to inspect it – ss.26, 27 ▫Location, condition, etc of leased equipment Repossession by ex parte application – s.39 ▫Pre-emptive court action by lessee?? Leased equipment not to be exported without lessor’s consent – s.42 14

15. Conclusion Some progress, but s.36(3) worrisome Also, may be helpful to link equipment lease register with ▫CAC’s charges register & ▫CBN’s collateral registry 15

16. 16 LEGAL PRACTITIONERS & ARBITRATORS www.aelex.com ACCRA Vanguard House No. 21 Independence Avenue Ridge-Accra PMB CT 72 Accra, Ghana T: (+233-302) 224828 224845-6 F: (+233-302)224824 accra@aelex.com ABUJA 4 th Floor AdamawaPlaza 1 st Avenue, Off Shehu Shagari Way Abuja, FCT, Nigeria T: (+234-9) 8704187; (0)7098808416 F: (+234-9)520276 abuja@aelex.com PORT HARCOURT 2 nd Floor, UPDC Building 26 Aba Road Port Harcourt Rivers State, Nigeria T: (+234-84) 464514,464515 F: (+234-84) 464516 portharcourt@aelex.com portharcourt@aelex.com LAGOS 7 th Floor Marble House 1 Kingsway Road Ikoyi, Lagos Nigeria T: (+234-1) 4617321-2, 2793367-8, 7406533 F: (+234-1) 4617092 lagos@aelex.com

17. 17 THANK YOU