ACTS OF GHANA

FINANCE LEASE LAW, 1993 (PNDCL 331)

ARRANGEMENT OF SECTIONS

Section

PART I—FINANCE LEASE AGREEMENT

1. Requirement for Lease Agreement.

2. Contents of a Finance Lease Agreement.

3. Rights and Obligations of Lessee.

4. Rights and Obligations of Lessor.

5. Duties of Supplier.

6. Registration of Finance Lease Agreement.

7. Repossession by Lessor.

8. Assignment of Finance Lease Agreement.

PART II—THIRD PARTY CLAIMS AND INSOLVENCY

9. Priority of Lessor's Claim against Third Party and Insolvency of Lessee.

10. Claim by Third Parties.

11. Damage Caused by Third Parties.

12. Lessee not to Create Charge.

13. Licence for Leasing Activity, Lessors to be Companies.

14. Power of Bank of Ghana.

15. Limitation of Action.

16. Lessee to Give Information.

17. Removal of Asset from Ghana.

18. Variation of Rights, Duties and Liabilities of the Parties.

19. Offence by Bodies of Persons.

20. Penalty.

21. Interpretation.

22. Application of Law.

23. Commencement.

IN pursuance of the Provisional National Defence Council (Establishment) Proclamation, 1981, this Law is hereby made:

PART I—FINANCE LEASE AGREEMENT

Section 1—Requirement for Lease Agreement.

(1) An asset for acquisition under this Law shall be made by a finance lease agreement between the lessor and the lessee in accordance with the provisions of this Law.

(2) Where the asset is to be acquired by the lessor before the finance lease agreement is finally made, the prospective lessor and lessee shall enter into a written agreement which shall cover the following—

(a) a statement to the effect that the parties have agreed to enter into a finance lease agreement;

(b) a description of the asset to be acquired under the lease, the estimated price of the asset and the total lease rentals payable by the prospective lessee;

(c) a statement that the asset is being acquired by the prospective lessor in connection with the lease agreement which, to the knowledge of the supplier, is to be made between the prospective lessor and lessee; and

(d) a statement as to whether or not the prospective lessee has selected the asset and selected the supplier without relying on the skill and judgment of the prospective lessor.

Section 2—Contents of a Finance Lease Agreement.

(1) Every finance lease agreement referred to in this Law as "the lease agreement" shall contain—

(a) a statement of the price of the asset and the total lease rentals payable under the lease agreement;

(b) the amount of each rental by which the total lease rental is to be paid and the date or the mode of determining the date on which each rental instalment is payable;

(c) a description of the asset to which the lease agreement relates sufficient to identify it;

(d) a clause that the lessee acknowledges, confirms and declares that he holds the asset as a mere bailee of the lessor and that he does not have any proprietary right, title or interest in the asset during the entire period of the lease;

(e) a clause that the lessee confirms and acknowledges that the lessee shall pay to the lessor, lease rentals as mentioned in the lease agreement;

(f) a clause that the lessee confirms and acknowledges that the finance lease agreement is a full pay-out non-cancellable agreement and that the lessee has no right to surrender the asset during the tenure of the lease agreement; and

(g) a clause that upon determination of the lease agreement by expiry of time, unless a renewal is granted or the lessor agrees to sell the asset to the lessee, the lessee shall deliver to the lessor the asset in good order and condition, ordinary wear and tear excepted.

(2) A copy of the lease agreement shall be delivered or sent to the lessee within fourteen days after the making of the agreement.

Section 3—Rights and Obligations of Lessee.

(1) The lessee shall have and enjoy quiet possession of the leased asset during the entire period of the lease as provided in the agreement.

(2) The lessee shall use the asset according to the terms and conditions of the lease agreement.

(3) The lessee shall be responsible for proper maintenance and such adequate insurance cover of the asset as may be mutually agreed upon between the parties.

(4) The lessee shall take proper care of the asset, use it in a reasonable manner consistent with that of a normal user and keep it in the condition in which it was delivered, subject to fair wear and tear and to any modification of the asset agreed upon by the parties.

(5) The lessee shall pay the rentals as stipulated in the lease agreement, and unless otherwise stipulated in the lease agreement, the lessee shall not be liable for all payments set out in the agreement if the leased asset is fully or partly destroyed or damaged by accident not of the lessee's making or force majeure.

(6) As long as the lessee performs his obligations in accordance with the terms of the lease agreement, the agreement shall not be terminated unilaterally by the lessor, even if the lessor is declared bankrupt.

(7) Subject to subsection (4) of this section, the lessee shall, at the expiration of the lease agreement, return the asset to the lessee, unless the lease is further renewed with the consent of the lessor or the lessor agrees to its purchase by the lessee.

(8) Without prejudice to the lessor's rights as against those of the lessee or the supplier, the lessee shall  have the right to take direct action against the supplier in order to hold the supplier to the satisfactory performance of the supplier's contractual obligations and to obtain from the supplier compensation for damages resulting from his default.

(9) The lessee shall have no other claim against the lessor for non-delivery, delay in delivery or delivery of a non-conforming asset except to the extent to which this results from the act or omission of the lessor.

Section 4—Rights and Obligations of Lessor.

(1) Where the leased asset is not delivered to the lessee—

(a) as a result of failure by the lessor to enter into a sales contract with the supplier on time; or

(b) as a result of failure by the lessor to make payment to the supplier on time; or

(c) for any other reason,

the lessee's obligations under the lease agreement shall be suspended except that subject to subsection (2) of this section, the lessee shall give the lessor an appropriate extension of time during which the lessor may comply with his contractual obligations.

(2) The lessee shall—

(a) request that the lease agreement be fulfilled in its entirety and that a penalty be paid, covering the actual losses that have resulted from the delay; or

(b) demand that the lease agreement be terminated with the lessor paying any damages or losses incurred by the lessee as a result of the lessor's failure to comply with contractual obligations.

(3) Where owing to default on the part of the lessee, the sales contract between the supplier and the lessor is subsequently terminated, the lessor retains the right to demand payments due from the lessee under the lease agreement so long as the lessor acted in good faith and payment was made by the lessor for purchase of the asset at the request of the lessee.

(4) Except in the cases covered by subsections (1), (2) or (3) of this section, the lessor shall not be liable to the lessee for damages except for wilful infringement or unlawful acts of the lessor which result—

(a) in damage to or defects in the leased asset; or

(b) in curtailment of the lessee's rights in relation to a third party; or

(c) in infringement of the lessee's peaceful and lawful use of the leased asset.

(5) Except otherwise provided in this Law or in the lease agreement, the lessor shall not incur any liability in respect of defects in or fitness of the leased asset for any particular purpose unless the lessee has suffered loss as a result of his reliance on the lessor's skill and judgment and as a result of the lessor's intervention in the selection of the supplier or the specifications of the asset.

(6) The lessor shall not, in his capacity as lessor, be liable to third parties for death, personal injury or any damage to property caused by the use of the asset by the lessee.

Section 5—Duties of Supplier.

(1) For the purposes of this Law, the supplier of an asset to a lessor owes to the lessee the same duties as he owes to the lessor under the sale agreement, but the supplier shall not be liable to both the lessor and the lessee in respect of the same damage.

(2) Nothing in this section shall be taken as permitting the lessee to terminate or rescind the sale agreement without the consent of the lessor.

Section 6—Registration of Finance Lease Agreement.

(1) A finance lease agreement made under this Law shall irrespective of the value of the asset, be registered by a registering authority designated by the Bank of Ghana.

(2) The registering authority shall before any registration notify the Bank of Ghana of the application to register a lease agreement.

(3) The Bank of Ghana shall issue such guidelines as it considers necessary for the purpose of implementing the provisions of this section including guidelines relating to the—

(a) stamp duty payable;

(b) registration and notarisation fees; and

(c) procedure for filing an application for registration and cancellation of a registration.

(4) Without prejudice to the other provisions of this section all non-registered finance lease agreements shall be valid as between the original parties to the contract, but shall not be valid with respect to third parties acting in good faith.

Section 7—Repossession by Lessor.

(1) Where the lessee defaults in the payment of rentals in accordance with the lease agreement, the lessor may recover accrued unpaid rents together with interest and damages.

(2) Subject to subsection (3) of this section where the lessee defaults in the payment of rentals, or commits another breach, the lessor may terminate the lease agreement and after the termination—

(a) recover possession of the asset, subject to subsection (4) of this section; and

(b) recover such damages as will place the lessor in the position in which he would have been had the lessee performed the lease agreement in accordance with its terms.

(3) The lessor shall not be entitled to exercise his right of termination under subsection (2) when he has by notice given the lessee a reasonable opportunity of remedying the default so far as the default may be remedied.

(4) Where the lessor becomes entitled to repossess the asset leased through breach of agreement by the lessee or otherwise through operation of law, and the lessee does not deliver the asset after having been given due notice to surrender the asset to the lessor, the lessor may initiate legal proceedings in a court against the lessee for the recovery of the asset.

(5) The right of the lessor to repossess shall in no way prejudice other remedies available to the lessor under any other law, including but not limited to the right to recover damages for losses caused by non-compliance with the terms of the lease agreement by the lessee.

(6) Where there is repossession under this section, the lessee shall, unless otherwise stipulated between the parties, be responsible for the immediate payment of all rents due for the remaining term of the lease agreement.

(7) The parties may, under a lease agreement, stipulate that the amount of future rents at a time of repossession shall be decreased by the fair value of the asset repossessed less any administrative costs of the lessor, including but not limited to legal and transportation costs.

(8) The lessor shall not be entitled to recover damages to the extent that it has failed to take reasonable steps to mitigate its loss.

(9) The procedure laid down in this section for the purpose of repossession by the lessor shall be applicable equally to a situation contemplated in section 9 of this Law.

Section 8—Assignment of Finance Lease Agreement.

(1) Unless otherwise stipulated, a finance lease agreement may be assigned by the lessor after he has informed the lessee of his intention in writing.

(2) The lessor has the unilateral right to assign the lease agreement to third parties, but without infringement of the lessee's right to the quiet enjoyment of the asset leased.

(3) A subsequent holder of a leasing agreement has the same rights and obligations that are specified in the lease agreement or as provided by law in relation to the lessee as the original lessor, and accordingly, the lessee shall continue to have the right to quiet enjoyment of the asset provided the lessee performs his obligations under the lease agreement.

(4) The lessee may transfer the right to the use of the asset or any other rights under the agreement only with the consent of the lessor and subject to the rights of third parties.

PART II—THIRD PARTY CLAIMS AND INSOLVENCY

Section 9—Priority of Lessor's Claim Against Third Party and Insolvency of Lessee.

(1) The title of the lessor or his assigns in the asset leased under the agreement shall prevail at all times over claims by third parties including creditors of the lessee except as against a purchaser in good faith for value of the asset under a non-registered lease.

(2) In the event of—

(a) death, bankruptcy, liquidation or dissolution of the lessee; or

(b) expiry of the lease agreement; or

(c) breach of any of the terms of the lease agreement by the lessee, including default in one rental payment of any amount, not remedied within such period as may be stipulated in the lease agreement and in the absence of any such stipulation, within a period of 30 days,

the lessor, subject to section 7 of this Law has the right to repossess the leased asset which shall not be included in the assets of any receivership or pool of assets to be disposed of by the creditors of the lessee.

Section 10—Claim by Third Parties.

(1) Any action by a third party claiming a right to the asset shall be brought against the lessor.

(2) The lessee shall inform the lessor of any impediment or disturbances by third parties to his quiet enjoyment of the asset.

(3) In the event of the lessee's failure or delay to inform the lessor as provided under subsection (2) the lessee shall be responsible for any charges or damages incurred by the lessor.

(4) Where as a result of legal proceedings initiated by a third party against the lessor, the value of the asset is decreased, the lessee shall have the right to reduction of the rent or cancellation of the agreement.

Section 11—Damage Caused by Third Parties.

(1) The lessee shall be responsible for repairing damage caused by third parties during the time the asset is in his possession.

(2) The lessee has the right to take legal action against the third parties to recover any expenses incurred as a result of his obligations to restore the condition of the asset or to pay any damages to the lessor.

Section 12—Lessee not to Create Charge.

(1) The lessee shall not create any charge or encumbrance on the asset leased in favour of any third party.

(2) In the event of creation of any charge or encumbrance, the charge or encumbrance shall be void and the creditors of the lessee shall not be entitled to enforce the charge or encumbrance on the asset leased.

Section 13—Licence for Leasing Activity, Lessors to be Companies.

(1) A lessor in a finance lease agreement shall be a body corporate incorporated as a company under the Companies Code 1963 (Act 179) and specifically licensed to engage in finance leasing.

(2) The Bank of Ghana, in consultation with the Ministry of Finance, shall by guidelines prescribe the requirements to be satisfied before a company becomes eligible for a licence to carry on the business of finance leasing.

(3) The guidelines shall, among other things, provide for—

(a) minimum paid-up capital of the company;

(b) minimum requirements regarding management expertise and administrative controls; and

(c) prohibition or otherwise of accepting deposits from the public by leasing companies.

Section 14—Power of Bank of Ghana.

(1) For the purpose of regulating the credit system of the country, the Bank of Ghana may—

(a) require finance lease companies either generally or any company in particular, to furnish the Bank in such form, and at such intervals statements and information or particulars relating to the business of the finance lease companies as may be specified by the Bank;

(b) give to finance lease companies either generally or to any such company in particular, directions relating to the conduct of their business;

(c) in consultation with the Ministry of Finance, give to finance lease companies, in general or to any particular company, directions regarding acceptance of deposits from the public; and

(d) lay down suitable guidelines for proper supervision and control of the exercise of the power to accept deposits from the public.

(2) Without prejudice to the generality of the power vested in the Bank of Ghana under subsection (1) of this section, the statements, information or particulars to be furnished by a finance lease company may relate to all or any of the following matters of the company—

(a) the paid-up capital;

(b) reserves and other liabilities;

(c) the share holding pattern;

(d) the investments if any; and

(e) the persons to whom, and the assets and periods for which leasing is provided and the terms and conditions on which it is provided.

(3) It is the duty of every finance lease company to furnish the statements, information or particulars called for and to comply with any direction given to it by the Bank of Ghana;

(4) The Bank of Ghana may, at any time, cause an inspection to be made by one or more of its officers or employees or other persons, of any finance lease company for the purpose of verifying the correctness or completeness of any statement, information or particulars furnished to the Bank of Ghana.

Section 15—Limitation of Action.

The limitation of all actions arising under this Law shall be governed by the provisions of the Limitation Decree, 1972 (N.R.C.D. 54).

Section 16—Lessee to Give Information.

(1) Where by virtue of a finance lease agreement, a lessee is under a duty to keep the asset in his possession or control, the lessee shall on receipt of a request in writing from the lessor, inform the lessor where the asset is at the time when the information is given, or if the information is sent by post, at the time of posting.

(2) If a lessee fails without reasonable cause to give the information within fourteen days of receipt of the notice, he shall be guilty of an offence and liable, on summary conviction, to a fine not exceeding ¢50,000.00.

Section 17—Removal of Asset from Ghana.

(1) The lessee under a finance lease agreement shall not remove the asset from Ghana without a written consent of the lessor.

(2) If the lessee contravenes subsection (1) of this section he shall, unless he satisfies the court that he did not intend to deprive the lessor of his ownership or to defeat the rights of the lessor to obtain payment due to him, be guilty of an offence and liable on conviction to a fine not exceeding ¢50,000.00 or to imprisonment for a term not exceeding six months or both.

(3) If the lessor believes that the asset has been removed or is being removed from Ghana without its written consent, and with intent to deprive it of its ownership or to defeat its rights to obtain any payment due to it under the agreement, it may institute an action for the return of the asset.

(4) Before instituting an action under subsection (3) of this section, or while the action is pending, the lessor may apply to the court for an order for the attachment of the asset.

(5) A court which makes an order for the attachment of asset under subsection (4) of this section may require the applicant to give security for damage resulting from the order.

(6) An order for the attachment of the asset under this section—

(a) may be discharged or varied by the court for good cause shown by any person affected by the order and on such terms as to costs as the court thinks fit; and

(b) shall be discharged upon the lessee giving security as the court may think proper taking into account the value of the asset, the amount due to the lessor and the costs of the lessor.

Section 18—Variation of Rights, Duties and Liabilities of the Parties.

Subject to the provisions of this Law, the rights, duties, and liabilities of the parties to a finance lease agreement as laid down in this Law may, as between the parties themselves, be varied by express agreement or by the course of dealing between the parties, or by a custom which the parties may be taken to have agreed to be applicable to the agreement.

Section 19—Offence by Bodies of Persons.

(1) Where an offence is committed under this Law or under regulations made under it by a body of persons—

(a) in the case of a body corporate, other than a partnership, every director or an officer of the body shall also be guilty of the offence; and

(b) in the case of a partnership every partner or officer of the body shall also be guilty of that offence.

(2) No person shall be guilty of an offence by virtue of subsection (1) of this section if he proves that the offence was committed without his knowledge or connivance and that he exercised all due care and diligence to prevent the commission of the offence having regard to all the circumstances.

Section 20—Penalty.

(1) Any person found guilty of an offence under this Law for which no penalty has been provided shall be liable, on first conviction, to a fine not exceeding ¢500,000.00 or to imprisonment for a term not exceeding one year or to both.

(2) On a second or subsequent conviction for an offence under this Law, a court may impose a penalty which does not exceed double the penalty referred to in subsection (1) of this section.

Section 21—Interpretation.

In this law, unless the context otherwise requires—

"finance lease agreement" means, a written agreement between two parties whereby one of the parties (known as the lessor) undertakes to lease to the lessee for the latter's use only and against payment of mutually agreed lease rentals over a specified non-cancellable period—

(a) either the lessor's own already acquired assets; or

(b) an asset that the lessor agrees to acquire from a third party, known as the supplier, chosen and specified by the lessee so that the lessor shall retain full title to the asset during the period of the lease.

and, under which subject to agreement by the lessor, the lessee may exercise an option to purchase the asset outright after the period of the lease at a price to be agreed upon by the parties;

"fair value" means an amount for which an asset shall be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller;

"lessor" means a person, who under a finance lease agreement, conveys to another person (the lessee,) the right to use the asset in return for rent for an agreed period of time, and includes his successors and assignees;

"lessee" means a person, who under a finance lease agreement, obtains from another person (lessor) the right to use, in return for rent, an asset for an agreed period of time and includes his successors and assignees;

"leasable asset" means any movable asset which can be legally sold in or imported into Ghana that becomes the subject matter of a finance lease agreement, whether or not the asset has become a fixture to or incorporated in land;

"non-cancellable lease" means a lease that is cancellable only—

(a) on the occurrence of some remote contingency;

(b) by mutual agreement, or

(c) by operation of law;

"residual value" means the value estimated at the inception of a lease, of the leased asset, at the expiry of the lease term;

"supplier" means a person (other than lessor or lessee) who is in the business of buying and selling goods;

"total lease rental" means the total sum payable by the lessee under a finance lease agreement, exclusive of any sum payable as management fee, service charge or as a penalty or as compensation or damages for breach of the agreement.

Section 22—Application of Law.

This Law applies to every finance lease agreement entered into after the date of the coming into force of this Law.

Section 23—Commencement.

This Law shall come into force on the 5th day of January 1993.

Made this 5th day of January 1993.

FLT.-LT. JERRY JOHN RAWLINGS

Chairman of the Provisional National Defence Council

Date of Gazette Notification: 18th June, 1993.