Equipment Leasing Act, 2015 – What To Note.

The Equipment Leasing Act, 2015 (“the Act”) is the pioneer legislation on equipment leasing and related matters in Nigeria. The Act Established the Equipment Leasing Registration Authority (“ELRA”) which has the responsibility of registering an equipment lease agreement. The ELRA is also responsible for the registration (not incorporation) of companies carrying on the business of equipment leasing in Nigeria. Participation in equipment leasing business in Nigeria is restricted to companies incorporated in Nigeria. To qualify, equipment leasing must be one of the business objects of the company as indicated in its Memorandum of Association. The classifies equipment leasing agreements under the following types, finance lease, operating lease; and variants of both finance and operating leases. o Finance lease being defined as a lease involving rental payment over an obligatory period sufficient in total to amortize the capital outlay of the lessor and give the lessor some benefits. o Operating lease involves rental payment over an obligatory period but the equipment is not wholly amortized during the non-cancellable period (if any) and the lessor does not rely for his profit on the rentals in the cancellable period. § Under the Act, there is a mandatory requirement of registration for every equipment lease agreement, irrespective of the value of the leased equipment. This requirement must be met within 14 days of the execution of the equipment lease agreement. § Non-registration of a registrable lease agreement renders it invalid and unenforceable. § Under the Act, the title or interest of the lessor in a leased equipment under a registered lease agreement prevails against claims by third parties including a creditor of the lessee. § An equipment leased under this Act cannot be removed outside Nigeria without the consent of the lessor. § The Act makes it mandatory for a registered lease equipment to be insured. Under a finance lease agreement, it is the Lessee that has the responsibility for insurance of the registered lease equipment, while under an operating lease agreement, the Lessor has the insurance responsibility. § Under the Act, for tax purposes, the lessor is entitled to all capital allowance tax provided under applicable law.