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Leasing Final

Leasing Final

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Published by: nishadhar on Feb 08, 2010
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08/28/2010

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Leasing

Definition
Leasing is a process by which a firm can obtain the use of a certain fixed asset for which it must make a series of contractual periodic taxdeductible payments.

Essential Elements
Parties to the Contract  Asset  Ownership Separated from User  Term of Lease  Lease Rentals

WHAT CAN BE LEASED?
          

Industrial machinery and technological equipment Commercial vehicles, trucks and movers (tractors) Motorcars Production machines Printing and publishing equipment Medical equipment Road construction equipment Forestry equipment Construction machinery and equipment Rail, sea and air vehicles As well as many others

Types of Lease
Finance Lease and Operating Lease  Sale and lease back and Direct Lease  Single Investor Lease and Leveraged Lease  Domestic Lease and International Lease

Structure of Leasing in India

MAJOR PLAYERS  Independent Leasing companies  Other finance Companies  Manufacturer – Lessors  Financial Institutions  In-house Lessors  Commercial Banks

Structure of Leasing in India

PRODUCT PROFILE
Finance Lease  No transfer of ownership  Recovery of investment cost  Equated Monthly Instalments  Direct lease  Standby finance

ADVANTAGES
 TO

THE LESSEE
Financing of capital goods  Additional source of finance  Less costly  Ownership preserved  Avoid conditional ties  Flexibility in structuring of rentals  Simplicity  Tax benefits  Obsolescence risk is averted

ADVANTAGES
 TO

THE LESSOR
Full security  Tax benefit  High profitability  Trading on equity  High growth potential

LIMITATIONS
Restriction in use of equipment  Limitations of financial lease  Loss of residual value  Consequences of default  Understatement of Lessee’s Asset  Double Sales-tax
 

Liabilities of Lessee
Reasonable Care  Not to make Unauthorized use  To return the goods  Not to set up an adverse title  To pay the lease Rental  To Insure and repair the goods
 

Liabilities of Lessor
Delivery of goods  Peaceful Possession  Fitness of goods  To disclose all defects

Remedies for Breach

-TO LESSOR
Forfeiture  Damages  Repossession


-TO LESSEE
Damages

Insurance of Leased Asset and Claims
Necessity  Risks insured  Insurable Interest  Claims  Treatment of Claim Proceeds

Sub-Lease of Leased Asset
Right to Sub-lease  Effect of Sub-lease  Effect of termination of Main Lease

LEASE DOCUMENTATION AND AGREEMENT
Purposes And Essential Requirements  Lease Approvals process  Master lease and supplemental Lease agreements

CLAUSES IN LEASE AGREEMENT
Nature of lease  Description  Delivery and Re-delivery  Period  Lease Rentals  Use  Title
 

CLAUSES IN LEASE AGREEMENT
Repairs and Maintenance  Alteration  Peaceful Possession  Charges  Indemnity Clause  Inspection  Prohibition of Sub-leasing  Events of Default and Remedies  Applicable law
 

THANK YOU

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