You are on page 1of 7


r~:"f'*f t...l'.. I... '\ ~Jt qoht.(t.fl ~T-oh.h

&oY..~IA~ ;JtT ,;JltlfJ

-- - ...~ }ARIT- GAZETA

ht..""~ l}noT ct.1'C: 7:7- 41hYear No. 27

~.ctll h(}ll-ft)1:T 7:7: .,.; '-iun nh.,}r'*,r ~~ot.:1\ It lfPht..t'1.,Pp.I.T-flt\.h
~. -' .,- DDIS ABABA - 51hMarch, 19'
"" r i'h1'-f1 ,,'mt)f"":- ~ 'C: o.T mll~~T fmtlJ

p~ ~1'C (!~r./ ').~. Proclamation No.1 03/1998
rl11;:J--A b,p 11./..." '}"l,f: P' I... Capital Goods Leasing Business
1\tp~ 1X" i Proclamation.. Page 71

h'P~ ct.1'C:fif.f./Iill1 PROCLAMA nON NO.1 03/1998

nA~ A~ fh. "}ii'lI""no"},1. nolltt":- t\no"'",,~ ~I\'Jo PROCLAMA nON
WHEREAS, for those investors who have the de:
""'''''Cj oo-,r (i~m- nt)'l;;1-A kr~"'- srotn,r"" no"}",,,,,
knowledge and profession to participate in various inv
~:Fl\- 'It\U-fH.:f h"7t..trif.b f1"}1I-f1 h:"Cn..,- sro")~
ment activities but could not act due to lack of capital
~*sro fDIJ..rll"'r-AU-~:1-no~mC: hllt.I\1. If'i nno1'fi::
necessary to create an enabling environment for the establ
Ir...'L~ 11A..:" On"'u~ """au~ -~'~. ~ as.
ment of alternative sources of financing;
WHEREAS, it is believed that lessors of capital gc

.Uv1<U UlI>ULUllUIl1S,

'Jo:f f..,.",.t\- If~ID- '1t\no1'f:1-ID-: WHEREAS, the existing laws concerning capital g
ing business are found incomplete;
L.Tf"A'.r L.~t..I\~ ~quh/..II Pip .I.rollh h 1I..Tr\\lT "T'UDDDDADD :- J n.'LL A nO' . ,
1~ '!..~~,;t..,J!..t..A ".~k1' .~",f'J <~'I'C"6% ft}.t.} r;'1.4'1 !Iff:! q.9". Federal Negarit Gazeta - No. 27 51hMarch, 1998-Pagc 70X

I) "Leasing" means a financing in kind for production

?!. "flllh/..f')'" fIIIl\')' ~h/..f. ~,}Y:'} f'1"t:h~\ /JJ>
and service purpose by which a lessQr provides
U4.f.c,',}i\ \1./..f. cofJ'r {U,6L1'C'UL oPm+(lf/.1 \1./.."
lessee with the use of specified capital goods on
cof.9" U,~o. ",:"'r tw"9"'1'} oPlP/':" ,fl\9",}'" oP.f'lr
. financial or operating lease or hirepurchase agreement
Uf1'co(}'1 nC':1\ 1.JL fflll,&:I.9" ntt:.f ~f'f'+UI\ +ht,~ basis, without requirement of collateral, for a specified
l\+co(1'1 'UL 1\9"C:"c; 1\~1/.\"'1\":" oP"'mT period of time and collects in turn a certain amount of
~'}~,m+9"U:" fflll,&,+Y:U:" Uqf.'1:" fflll,Y./,'" f4.f. installment in periodical payments over the specified
c,''}'" ~:"C{1'r '1m': period;
~. "f\1./..fJ "'9"9"'1'} coJW" "'9"9"'1:"" fIIIl\:" nrlU 2) "Lease agreement" or "agreement" means financial
h tp~ (I)''''IJ' ~ ') Y."",'/."..oP(I)' f4.f.c;'}... \1./..~:
lease, operating lease or hire-purchase agreement as
defined in this Proclamation;
fh6~C 'I.IL oPm+OIUJ h./.'f. lD~9" f'&;:o. "'1': fIIIl\:"
I 3) "Financial lease" means a type of leasing by which a
f lessor provides a lessee against payment of mutually
f.' "f4.fJc,''}'" h./..f." "'/1\:" Ml/.,~: agreed installments over a specified period with the
u) +.('.9" (}./.\ f.I':" fflll,1')'m.') f'1'C"/.\ /JJ> CD"9"
use of specified capital goods which is:
1\) U'Hl/..f. oP/..6f!>'1'} ~:"/.,o. 'f'.,II\" hflll.m/..CD- (a) either already acquired by the lessor; or
OJ1'} fflll:"'(1)''} f'1'f.:t'A /J,4>: (b) purchased by the lessor from a third party,
"'h/..f. U1'co(}'1 'I.IL (I)''''IJ' ,,'hc':I\" fflll..fA:" known as the supplier, chosen and specified hy
(lf1-I\.,: (l)1ci'.}'. "'9"9"'1:" f'"co '1 tJtt:,f Uf'" (1 the lessee;
(IJ(}'1 'UL UoP&,R9" ~ '})tm+9"U:" fflll..fh/., and under which the lessor shall retain full
,f~U')': - fh./..fJ "'9"9"'11: R'}-t'. UfIII.4'> f.U:" 'UL ownership right on the capital goods during thL
.{I)'il'.' hh/.,~ u'1',::"A /J.4>m' l\fJ tID.ft-ffll\o. period of the lease agreement, and, subject to
:,,'1:" oP.,H, f.f' fflll,4'>fJU:'-c; ftL/.'f. JloP~ agreement between the two parties, the lessee
may have an option to purchase t~e capital good
(}..fU,4> U-1\":9" co11j'1- h"''''"'/lID- +h/.,f.
outright after tbe termination of the lease period
ftn:."'A /J.4>OJ"} IL1" fflll:'rAfH- ftL/.'f.
at an agreed price.
'i,fJ'1'} '1m': 4) "Hire-purchase" means a type of leasing by which a
. "f)',.U, ""Jr." OI/I\'} Ml/.,f.c; 'Nl/..fJ '11,/''''')- lessor provides a lessee with the use of a specified
"'9"9"'1'}' oP,PI.:" Ml/.,f. U'ND(}'11.IL fflll,Y,/.,? ntt:,f capital goods, against payment of mutually agreed
"f'f'h&,I\CD- ~ ') .\'.' f,,'CO(1 '1 f'1'f.:t-A /J.4>'} 'f'h/..f.. installments over a specified period under which, with
~.f,}J;,},~ ftL/..f. ntt:,f each lease payment, an equal percentage of the
~ '})tm+9"U:"fflll,&,:" .\'.'fH-:
U1',(',1.1 <J:'t'C I\nc':,f(l)' "'oPfI)fI)~ Urn oP-t"~ An ownership is transferred to the lessee and, upon
, f'\I\U.:"'1'1' . . fflll,+l\l\c,:u:"c; +h/.,f.
clD"H' effecting of the last payment, the ownership of the
foP(.I,),I.i'im''} tJc':,f ~,}f,&,RoP9" u'1'l::"/'\ /J.4>a>-l\f. capital goods shall automatically he transferred to the
Illhl\' f'll\o.:"'1')' CID'U')' (I))t,fm'." fflll..f1~U'r
5)' 'Operating lease" means a' type of leasing for a
f\1./..~ '~~'1:" '1(1)':
period of time not exceeding two years, by which a
?;. "fh~e 1.fL oPm+fIII"f tL/.'f." fIIIl\'} U~h/.,f. ~~
lessor provides a lessee against paymentof mutual:
fOl/,r~ h'}Y: f+(D(}'1 f'1'C:"A /J:J>'} +h/.,f. Uu-I\""
agreed rent with the use of specified capital goods that
(D1ci'.}'. "'9"9"""" f,,'co(1" \1./.,,, Uobn&,Ahu-l\:"
the lessor has at hand;
qoP')' l\AUl\m 'I.IL ~\'}~.m+9"UT fD'/.h/.,,.U:" 6) "Leasee" means a person who, under a lease
f\1./..~ qf.""" 'lID" agreement, obtains capital goods from a lessor and has
j' "'''h/..~'' fIIIl\:" Uh..(.,~ "'9"9".,,,,, oP,p!..), I\'ND(}'1 the right to use the capital goods, against payment of
'UL h'}Y.;1 f'1'f.:t'A /J.4> \1./.,,, ~fht.1\ l\oPm+9" rent for an agreed period of time;
hh'}.f.' oh/.." l\~ fflll,h/.,f. (}m' '1(1)': 7) "lessor" means a person who, under a lease
agreement, provides to a lessee the right to use the
1:' "htl/.'~" tryl\:" ntL/..fJ "'9"9"'1')' oP,,'!."" 1\1'co(1"
/J.4> h./.'f. ~f"'h&.l\m' ~,}f: capital goods in return for rent for an agreed period of
'UL h'}.\'."} f'1'f.:"A
1'h(,,~ ~1)t 11\1AU')' f"'l.,fh/.,~ (}a)' '1CD-:
8) ''Capital goods" means goods designated as such
~. "f\1'I::"A /J:J>" "'Il\'} Uo,'}O"':"oP'}:" J11'c; nrlu- under the Investment law and directives issued hy the
J1'" fl-l'(}mm. rAn)'} f~,,'}Ii"':"oP'}'r I1C)',. UfIII..f
Investment Board pursuant to the powers vested in it
cofl)a), (lDoP/',f oP".!..} fflll,co"',} /J.4>'1(1)':
by the Investment Law;
il' "h:"/..U," 01/1\:" hMl/.,f. mf.9" 'Hl/..f. I\.l\ rr':' 9) "Supplier" means a person, other than the lessor w
f'1'[:"/'\ /J.4>9":;''} UoPi'iIJ' '}..,,\'., P' /.' l\~ f.,. (1f111/.. the lessee, who is in the business of selling goods;
(1(1)' .,co': 10) "Investment Law" means either the Investment
y. "f~,:Hi "")'oP'}.} tn"'" '1'/1\')' fh, '} Ii "':"oP'}:" ~\tp:~ Proclamation No.37/1996, or the Ivestment Incen-
4:'I'C I!)i,!:(!jhri, cofJ9" f~" '} Ii "':"oP'}.} fIIIU!.:t-Y: tives Council of Ministers Regulations No.7/1996,
f"'/.~i\:N~"f' 9"ne U.:,. ,l-':HI <J:IJ'C;j,lnH:'j('t, (1Jf.9" or both;
0'1\ ":9" '1(I)':
1~ %fii~Y-..t.A~:MT :"'.11)<h-rCt)%fi]-f:T ?;i .,., !iifj ,.9". Federal Negarit Gazeta - No. 27 '5~'March, ',1998-Page 709

Hi' ult.u'~11 fO?f,":fA ia"''''~'''''' 117/\""U,"h..,h4C.~~'" 11) "Non-cancelable Agreement" means' a lease
m",.. Uia"''''~'''' 11:F I1AI'~ Uia.,..,.C It.uo~1I agreement that is cancelable only by the operatiO'n
fO?f,-:'''.Afb.t-f, ia"''''~'''' ~~; of the law or by mutual agreement; ,

I~' Ult~" 117/\""f.,.4C.-rc- ltm- tDf,'r Ulh.., flt~~"" 12) "Person" means any natural or juridical person;
oP11"" f.,.ltm~ hl1A ~~} 13) "Ministry" meansMinistry of Trade and Industry;
If "OI/.tia1:C" 117/\""f"''''~ It."'~ia""~ OI/.tia1:C~~;
Licensing, Featuresof Lease Agreements (lnd
hti:A v-/\..,. Rights and Obligationsof tbe Contracting
f 4C.ft'~ hltllJ-rt fh.~.f, ia'r"'~"" 'ltJ~I""'I f.,."CP f,
3. Issuance of License
m1 'i":f oP11""" ..,~:J-"":f
4.:J' ~ ia/\ oP iam"" 1) capitalgoods leasingbusiness shall be operated Qnly
by a lessor licensed by the Ministry. '
Ii' fl11:7A iJft' b.t." ..,..,~ rt. fOl/.I1~~~hOl/.t
2) The Ministry shall issue dire~ives concerning the
ia1:? 4C.ft' ~ U.,.ltm~ hht.f,'11:F ~~==
criteria to be fulfilled to obtain leasing license.
~. fhht.f,~"" ~~ 1\117"'1"" oP."I\"" 1/\'l=f~'" 4. GeneralFeaturesof Lease Agreements
oPia".C-f":f UOI/.oDI\h..,.O?tia1:? oPoP~.r fmllJlA::
Any lease agreement shall, among other things, contain:
!!. fb.t." ia"''r~-f":f hmft'l\f, 'ltJ~I""
1) a.statementof the type of leasing; .
O?"'~~'" fh.t." ia"''''~'''' n.nia fOl/.h.,.I\-""",
2) a description of the capital ,goods, sufficient to
identifyit, a statment of the full price of the capital
Ii' fb.t.f, ~"~1:'" oP"'I\65A; goods and the total leaserentpayable under the lease
~. fl11:.+A iJ:J'~'" I\oPI\f"" fOl/.lia":f1AU-t oP..,I\65At agreement;
fl11:7A iJft'~.., 00-1\- cP;J~'h'l Ub.t.f, ia"''''~1: 3) the amount of each rent,the period within which the
oPuol."" fOl/.h4C.I\~'" m:"1\1\ b.t.,,; total rent, is to. by paid, the date or the mode of
f' f'h.r..,.';..,~ b.t." oPm"'t 1n:"1\"~ b.t.f, fOl/.h4C. det~rminingthe date on w~ich each installment is
AU"" 1.11.'1'hn.';"'~ fb.I..f, ht;:.r fOl/.~~"'U"" .,..., payable and a statementthat the lessee shall pay the
mf,,.. .,..,. 'fOl/.mlt..,u..,.1I~; "'ht.(!. U~I\- oPuol."" rent on the agreed date;
U"'mlt~~ .,..., b.t.".., fOl/.ht;:A oPl'''''''; 4) a provision showing the responsibility of th~ lessee
!!. ia,..,..}1: ~"'-f UOI/..fof,U"" "ia"'~ m1'i":f
, . . for repairing damagescaused to,the capital goods by
UI11::J-A iJ:J'~ I\f, 1'.';"" n.l1.C,,"U"" "'ht." third parties during the time the agreement is in
fO?uot."" ~I\L~"" .rl\U"" oPl1''''''' fOl/..ritf, ~"';J'&.; force;, -
?;. "'ht.(!. fl11::J-A iJ:J'm. n.,.I\I\4C.I\""1.,l.h11A..,1\"-1:.., 5) a provision showing the right of the lessee to
fOl/..,...,ia l' ~/\ T l1\n"" 11''i 1111~ ia"''''~1:''' , terminat~ the agreeII;lentand return the leased capital
h*C(I1 fl11:7A iJft'm-'" foPoPI\ia oP11"" .rl\m- goods to the lessor, where, at the time of its transfer
ia/\oPl1'''' fOl/..ritf, ~.., ;J1.; to him, the capital goods is found to have a defect
~. Uhht."'1 UI11::J'A iJft' h:"t-n.m-.oPl1hA h"'~ which diminishes its usefulness to the lessee;
l.1m. f7i.r6J.1' meA fOl/.oP~'b oP..,1-f":f..,'I -r:"qo":f.., 6) a statement that the lessor undertak~s to transfer to
I\,,'ht." I\O?ia.,.I\I\t;:hht." f1qm- ft'A; the lessee the rights and benefits deriving from the
1:' "'h~." fl11:7A iJ:J' b.t.f, ia"''''~1: ~"'-f UOI/ sales contract between the lessor and the supplier of
f,U"" 1.,1. V-I\- Uia"''''~1: U"'1/\~~ v-~:J- U.,.h the capital go~ds; , fl11::J-A iJft' I\f, v-h..,. fO?f,~~"'U"" ff)I\ 7) a statement that the lessee ~hall have the right to
"":""'''' oP11"".rl\m- oPl''''''' fO?..rit" :J'IAI enjoy quiet possession of the leased capital goods

~. "'ht.(!. UI11::J-A iJft'm- It.m'''''' U"ia"'~ m1'i":f dur~ng the, ~ntire period of the lease as provided in
the agreement;
1\" I\OI/.~Cia'fP""t fhl1A 1'.';"" m",.. f"'11~""1'.';""i
8) a statement that the lessor may not, in his capacity as
hht.(!. 'h"'~hht."~": ~I\k~"" f"'I\U"" oPl1'.,.i
a lessor, be liable for death, personal injury or
f"t.ritf, ft'A::
damage to the property of third parties caused during
?;. fb.t-f, ia,..,..~*":f A (!.'lIM.r..,.
the use of the capital goods by the lessee.
Ii' f4-f,,,..,ia b.t.f, ia"''''~''''''' UOI/.oPI\h"";
5. Specific Features ?lLeas~ Agreements
U) "'ht." fb.t.f, ia"''''~-I: ~"'-f UOI/"U-f1.11.0-1\- I) In the case of a tinanciallease agreement:
, ,

fl1'l::J'A iJft'm-'" I\hht.(!. 'h"'~'ll\h~/.. 11:F 11''i

(a) the lessee shall hold the capital goods as a mere
f,f,tIA; UI11::J-AiJft'm-I\f,'" , ,,.. ~,,~..,.f'll\n. bailee of the lessor and he shall not' have any
..,.~:,. oP..,1"" h f,'i ~ m-,..;
ownership right on the capital goods during the
enti~e period of the lease; ,
5th March, ()
., ;)/..1' ;JrLtIJ <~'I'C: ?~'f. rtJ-t'-" ?;?; <1>, I!H~j '}.9'" 1998-Page 71
r 'f.(( 4..~t..A Federal Negarit Gazeta- No. 27

1\) i\?9"'''': w'A f"'1'Hl-1- 00-1\' ~;J nh.t..e (b) the agreement shall be a full pay-out and non-
.Hl'':I\'' fO?i'i&."}U'}''i'' I\.IPl1' fO'/.e"fA cancelable agreement;
il9"9"~'}- f.lfel'A: (c) the lessee may, by mutual agreement, have an
eh) fil9"9~-I: 'I.IL (U'U.'" 11-1\-1:tD1tf".f h.,.ilO'/oo- option to buy or return the capital goods to the
'H1&.f. fit'C:h~\ 6."'w'") f(/D""':" 9"C6l>1. lessor on the termination of the lease agreement
I\. (:'ltD' f.")"'I\A: I1A,,'ilO'/oo, '''ht.f. fit'C:t"A (d) a statement that the lessee undertakes to insure
6,"'w,") I\1\hl..f. f,(/DAltA: and maintain the capital goods.
(/D) 'H1&.f. I\it'C:"A 6."'w' (/Df:") f(/D"'fl-1-'i"
2) In the case of an operating lease agreement:
"'10.W'"} ftll/.r:l"l ;~I\&.~;" .fl\n:" (/D"'''' (a) the capital goods leased shall remain the property
t'/P11\;r .etfCn:"A:: of the lessor to whom the lessee shall return on
!{. f1\6f.b(: 'I.IL (/Dm.,.O'/..f h,I..f. il99"~""") nO'/.(/D the termination of the agreement\ unless
I\h:": otherwise the parties agree that the lease be
0) 'H1&.f. f'''hl..fW' fit'C:"A 6.'" f1\hl..f. "}o(}l"" further renewed or the leased capital good be
If(: fO?/i.f.'i" fil9"9"~-I: 1.fL 't.fn.'" u-I\-I: purchased by the lessee;
w1tf:f. nO'/.ilO'/oo'n-1- (/DlPl-1- il9"9"~-I: (b) the lessee or the lessor shall have the right to
~"}.e.1'i" ~"}~.I.,"9 wf.9" 'H1&.f. fit'C:J-A cancel the agreement provided that. the party
6,"'w'") ~"}~.11' itA'''ilO'/oo, nil.,..,.C 'H1&.f. causing dam~ge to the other by early ter-
fit1::t"A 6."'W'"} I\1\hl..f. fD'l.(/DA(tw, .erf'i"A: mination of the agreement shall pay compen-
1\) il9"9"H: 1\I\1.lLw' U(/D9:lm- 9t11.f-1- Ui\.I\m- sation;
OJ1"} I\.e 1'~"" .f'.l(tw, W1"} I\Y.l(tW'1.~-1- itlt (c) a statement that the lessor undertakes to insure
fO'/.htt:A If(:': 'H1&..e9" In 1\hl..f. il9"9"~-I:"} and maintain the capital goods.
ft'/P,(tl1' (/D...1-1'.e(:, 1..;t:~A: 3) In the case of a hire-purchase agreement:
eh) M1&." I\it'C:"A 6:J>W' no,r.:"} f(/D"I'I-1-'i" (a) an equal percentage ofthe ownership, with each
"..,o,w'"} "Y.1t ftll/,r:l'" ~I\&,~"" .fl\n"" (/DIn. installment payment, shall be transferred to the
e/p"I\K' f.tfcn:"A:: lessee and, upon effecting of the .last payment,
J:' f p,.n, ..,.,,: il9"9"~;"") nO'/.(/DI\h-1-1 the ownership of the capital goods shall
0) ".f"}P'"},~ fh.I...e hr.:.r O"'&'?\(/D 4:"'C I\htt:J'm- automatically be transferred to the lessee;
".(/DtI}tI}:~ Ulf~ uP.y.;-l Ah ffH\o.'}'~'}- (/D...l-1- (b) the p~rties shall provide, in the agreement, for
,,"})tu-9" f(/D(J.1.l7im- fh.t,f. hr':.f ~") ".,. the manner by which ownership rights and
&,?(/D w~..fW'~. fit-r.:"A 6."'w' (10'1\' fl}I\o. c1aims arising form the agreement shall be
;,.~,}. (/D...l"" I\'H1&.f. fO'/..,.I\I\tt:I\"" .erf'i"&\= settled between the lessor and the lessee in case
1\) il99~'f: nO'/'i":t:w'9" tD1"} nl\1.fLW' 00'/.9: l of early termination of the lease agreement by
fD'l.(/D"6f.b ffl1\n.-1-~-1- either party;
'I'U"" 'UL hil99"~":
t'/p'O'f:.f'i" 't'.fc,:sp'.r. ',Afl-1- fO?..f11"n-1-"} u-~:t" (c) a statement that the lessee undertakes to insure
and-maintain the capital goods.
(1.1\'1: w1tf'.)'. nil9"9.,-I: .fit-1-:t-I\':
(/Df;") f(/D"Ifl-1-'i"
eh) 'H1&.f. I\it'C:"A 6 m- 6. Defaults in Payment of Rent and Others
"",O,ID'"} ftll/,r:l'" ~l\k.,-1- .fl\n-1- I) Where the lessee defaults in the payment of the rent,
(/D.,I\;r .etfcn:"A:: or commits another fault which may breach the
~. h,t.f,") ill\I\t'/Pht,A'i" /\.i\"':;' ",~~.y.".'f agreement, the lessor shall grant him a period of 30
'H1&.f. h.1..f."} uw;'f>.f: fl.ehtt:&\ OJ.e9" il9"9"~-I:"} days for remedying the d~fault so far as the default
fO?:I'il /\.1\ ",~.}. n,&.?\'9" "'ht.f. f t,?\(/Dm- 't'~-1- may be remedied.
1\.(1J",f: fO?::;'A tun Oil9"9"~-I: (/DlPl-1- ~"})t 2) Where the lessee does not remedy the default within
t,?\'9" 1\hl..f. f~~ "") '1.IL I\.(tmw, .e1fIA:: the period specified in sub-Article (1) of this Article,
~. "'hl..f. (ULUt,"}",?\' "} 1\"}.,.;r (Ii) (}of.tD(t"OJ'1.fL
the lessor may rescind the agreement, repossess the
(D'il'l' 'I'ck':") '1.filw",.r.: M1&.f. il9"9"~-I:"} (/D,vl1': leased capital goods and claim related damages.
3) Where the lessee defaults in the payment of the rent,
fit'C:"A 6."'w,") w.e. f,fl:"W' (/D(/DI\il'i" I\"l(tn-1-
".p,:,. '1'''1 t'/Pmf;'f> f.',}"I\A:: the lessor may recover accrued unpaid rent together
with interest and damages, whether the default is
I:' 'H1&.f. ttl.,f.") nw;'f>.,: .fAht.I\ ,,"}'.In 't'~-I:
f.,.tW,Y. OJf.9 .rA,,'w1Y. f1.rf"}9" ~"}\\ 1\ht..e remedied or not.

w'1,4."} h.I.,f. hwl\,r:ej it..., ;JC O?ilht,&\ .e".'fl\&\:: 7. Defects on the Leased Capital Good
~, (1-I'hl..fOJ. fit1::t-A 6,'" I\.e ill\I\' ~f;I\.y.".'f I) The lessor may not warrant against a defect which
OJ;'f>-1-n.,.ht.f. I\:t"w'" was made known to the lessee on the making of the
Ii' il99.,.,: U''''.l1n.)-
fit.C:"&\ 6.'" 1.,f:I\'}' 1\hl..f. ~I\t.~.}. fl\n-1-9":: agreement.
1K' "i/I.Hi t..1.I..A .,;Jt.-1- ;Jti"l +'1'C ~ fili:'-" ?;'%.,., n!1 q.S/". Federal Negarit Gazet~ - No. 27 5[hMarch, I 998-Page 711

2) The lessor shall make good any damage which the

". "ht..~ ft}1::h~~ ".4>(1)01""'ht..~ f1it~hnn"" w:"""
.fW"'(I)o1 Wf,1JO,.dJo f"7.1'1(1)o1 .,.y:"..,. lessee has suffered owing to the defect of the capital
t\ .,.h t.. (t ".fit (1)0'"(1)0"'C.,. n t) 1:;r A :1>(1)0.,. Y:" ..,. goods where the lessor knew or should have known
" of the defect on delivering the capital goods to the
9"h1.f"" n"'ht.,~ "f.. ""7.J.'..Cit",lJT(I)o9".,.~..,. t}Pf
fooht.A ..,Yo;r ""n"":: lessee and failed to inform the latter accordingly.
3) Unless otherwise provided in the lease agreement,
f.' nh.t..~ il9"9'"'11:nl\." "\\:\1 t}A"'W(&~nit.,..,.c:
"'ht.,~ n(&m(l)ol'Cl'C foo9"~6Ii ooitt.C:" OOlP~"" the lessor shall not be liable for defects in and for
htll.',e. ftt1:;rA ,,:JoW-1 hhh1t, Y:~it ":"(1)0 ""'t. unfitness for intended use of the capital goods h~
iYIw- '}"", 1A "'.."" t\ 00 itm"" .,. Y:t\"" .t'" n"" purchases in conformity with the specifications
" given by the lessee.
W~9u f"'~h"'''' 1ft; 1l.1~ n~"&.'1"" "~mf:"9"::
4) The lessor has the right to rescind the agreement,
~. 'NIl..f. f"'ht..fw.'} ftt'C:rA ".'" (nlt..~ it9"9"'11:
.f"(1)01 FC'}"" W~9u
with prior notice, and to repossess the leased capital
oou'~,'" w~9" "''''Il~~''''
goods, where the lessee does not make use of the
"m."''''9'' nooh.,.A foa/~~t\1An"" tunr; f"'ht..~
,,~.,.~..,. flPJ..ff.Cit hln capital goods in accordance with the lease agreement
"m."''''9'' ntt1:;rA "."'(1)0
:,.Y..'lPJ..f ",itm1.,.ct.f nooitm"" or accepted norm or usage and such use entails risk
"tM.f. ""'h~.~
of irreparable damage to the capital goods leased.
it9"9u~1:1 "oou'~l,ci f"ht..f(l)o1 ftt'r;;t'A ".'" wy,
8. Bankruptcy
~t';t-W- t\oooot\it 001}"" ""(1)0::
I) The obligations and conditions of the agreement
t. itt\ooh(&C
shall continue with an organ legally subrogated to
fi' nt1.t..~ it9"9"~.t: oou'~'1' "'ht..f. 0,.e..:J'(I)o1hith the judicially bankrupt lessor as long as the lessee
.,'wn) Y..'~it hht..f. ~,~!.h(&~ nc':CY..' fl."" (lOJ(&1
performs his obligations in accordance with the
h1\\1fh(&~(1)01 "ttA nJi.., flPJ..,.tt "ttA nit9"
terms of the lease agreement.
9"')": "'Yo;r~"flJ rJ-).:r?J"f OOlP~"" ~"'ClJA::
2) The lessor shall not lose his ownership right on the
~. f.,.ht..f. ooh(&C nCJ:cY: fl."" o.W(&19" n"'ht..f(l)o
capital goods leased eventhough the lessee is
ftt1:.+A "."'",e. MIl..f. .f"(1)01 ff1"fl.""~"" 0011""
judicially bankrupt.
h!VaCIJlD-9'"ff"'mn'" 'f.rriiA::
9. Damages
it. il""'.c;:" ttPf I) Where the agreement is rescinded by the lessee, and
li' "'9"9"'1-1:
O"'ht.f. n"7.lP~lH1""lott "'ht..~ f'''ht.. the lessee does not deliver the capital goods after
f(l)o1 ft't1:;rA ".4> "hht.f. h 1JtooAit '''10.(1)0
having been given due notice to surrender the capital
"'''(&fl..f "'(&,,"'+tt"it~hn hht.f. ftt1:;rA ".4>(1)01
goods to the lessor, the lessor has the right to
WJt.ffl)o}. mY.,e.)I;rWo foPoo"itlJ "f.~(&n"" .,.~..,.
repossess the leased capital goods immediately and
ttPf foomf"" 0011"" ""(1)0::
claim damages.
~. f"'.ht..f(l)o fty1:;rA ".4> h"ht.~ wJ.'.. "'ht.~ 2) Where the lessor suffers any damage owing to
hoo"'''t\+- nk:" n'''ht.~ 1'4."" 9"h1.f"" n"ht..~ default on the part of the lessee prior to the transfer of
"f.. U'Jc.':t:(I)o9"
.,.~...,. O.J.'..Ci'l{l"'""ht".~ n:"1 A(llJ the leased capital goods from the lessor to the lessee,
hilht.RoolJ n"'ht.~ 1'.f<l: ftt1::rA ":1>(1)01
the latter shall make good such damage to the former
t\OOO","" W".l. fJ.'..~(&H"" hlUun y".~it '''ht.~ so long as the lessor acted in good faith and costs
n"ht..~ ,,~ t\J.'..~(&w..,.~..,. ttPf ooht.A "t\n"":: were incurred by him for purchase of the capital
f.' f4.~c.':1it t1.t..~1 hlJ f"6f.1'C 'Ut. oom"'''7.1 t1.t..~1 goods at the request of the lessee.
n"'l.oot\h"" "'ht..~ f"'ht..f(l)o1 ftt1:;rA ".'" fit9" 3) Where, in the case of financial lease or operating
9"'1": 'ULl1...fA:" "~OOAit f.,.t. h1.l',ln nit9"9"'11: lease agreement, the lessee fails to return the capital
(I)oitTnl\.""\\:\1ttA",w(&'1nit"''''c''h~f.f'''h~ goods on the expiry of the agreement, the lessor has
fw'1 ftt1:.+A ".'" W.l'.~tI;r(l)o foooot\itr; "J.'..~ the right to repossess the leased capital goods and
(&n"" .,.~..,. ttPf foomf:" 001H' ""(1)0::
claim related damages unless otherwise provided in
,. 001H'1 it"",it.,.""c.: the agreement.
"'ht.f. nit9"9"'1-1: CIDIJ.'~"" ntt'C.+A ".4>(1)0 n(&,,9" 10. Transfer of Right
t\oom"'9u .f"(1)01 0011"" hitttA"';14. Y..'~it "ht..~ The lessor has the unilateral right to assign his rights
nt1.t..~ it 9"9" '11: OOlP~"" .t'1'fw'1 0011"" "Y'it.,.~ w11 under the lease agreement to third parties, but without
f",it.,.""r.: f"'''mA oo.(H' ""(1)0:: infrigement of the lessee's right to the quiet enjoyment
Ili' nY'it.,.~'m1t;"f f"7."'C1) 'I'.f<l: of the capital goods leased.
ji. ntt7:;t-A ".4>m.,,~ 0011""
""~ nlPJ""" nY'it.,.~ 11. Claim by Third Parties
w11 f"7."'Cl1lPJ1~W'9" hit n"ht.~"~ 00:"~11 I) Any action by a third party claiming a right on the
""n.1':: capital goods shall be brought against the lessor.
'1~ %f(!{ &".~"t.A .,;It.} ;m,'" 'IvrC '6% f'l'f:'} ?}'j.4'1 Bin q.9". Federal Negarit Gazeta - No. 27 5lhMarch, 1998-:-page 712

~. f"'hl..('!.'} itO~/'9':')" (;1.},9(~Iblt"':;. Y'i\'f'~ m1tj~

2) The ownership right of the lessor on the capital
O'1'C;"A ":p(lJ' I'\,e hll'l..r<l>CO--r 'I'.r<l:9''1' ,eA:" goods leased under the lease agreemerit shall prevail
MII..('!. .rlt(lJ. f'lltO':""'} OD11-r r'}'tnr :,.Y:lI'l..r
at all times over claims by third parties including
,e(}mP A::
creditors of the lessee.
[. 'HII..f. O'11:;"A ":Pm- O(}I'\r ~ '}~f,m<l>r 3) The lessee shall inform the lessor of any im-
OY'it.t.~ (lJ1tj:.r. fll'l.J'.CitO"",) '~,olC: m,er u-h-r pediments or disturbances by third parties to his
lti',JM.f. lI'lltm:" itltt1."f.:: quiet enjoyment of the capital goods.
!!. tlilU i','}<I>?t. '}( it'}<I>7\' (r.) 0"'11t?tm' ODIPI.-r 4) Where the lessee fails or delays to inform the lessor
,HlI..f. ithl..f.') It.rlt(lJ':'' f<l>l. (lJ,er ffl1f ~,}'1 as provided under sub-Article (3) of this Article, he
MlI..('!. Itll'l..rmfll(lJ. (1)(;1.1.'1Itll'l.f.CitO'''' "'~-r ~I'\&. shall be responsible for any expenses or damages
f,tfCjA:: incurred by the lessor.
?;. Y'it.,.;;: m1') OMlI..('!. I'\,e Oll'l..r<l>com- tJit 5) Where the value of the capital goods has decreased as
9"tJ'}.r.}. f'1'C;"A iJ:pm. P.'J f<l>.,(} ~,}J.),tr'1 a result of legal proceedings instituted by a third
.,. hl..,e 0 (}. P.'J rID"..1.-r \1.1..('!.~ '}.it <I>
1 it It -r party against the lessor, the lessee shall have the right
(1),e9" it~9""": },}1.11 fODmf:" OD11"" itltm-:: to demand the reduction of the rent according to the
new value or the cancellation of the agreement.
I~' fttl..,e it9~""" OD*1.1'
12. Termination of Lease Agreement
/i' uan;;:(lJ-~ f\1.l..f, it9"r"-r Oit~~"1: O"'"lt?tm-
I) Any lease agreement shall terminate on the date
agreed upon by the parties.
~. 0\1.1..,e it~~"'l: Olbl'\ i',l.\:\,} '1A.t-m(}., Oit1'<I>C
2) Unless otherwise provided in the lease agreement,
O.l"tll..('!. ODqo.} m,e9 '~,It";J' III/fIl-r 9tJ'}.r-r
the agreement shall not be terminated by the death
it9"9.,1: it,e* 1.'1'90::
or incapacity of the lessee.
[. fi',6I!'C .tn ODm<l>III/..r \1.t.,e it~~o"-r flOD'}
3) Where, on the expiration of an operating lease, the
(}..rn.<p ,HlI..,e f'HlI..f(lJ'') f'11:;"A ".<p ~ '}f.,rfl
lessee remains in possession of the capital goods
OA'CCj ittil..f,9" },'}.itODltitlt-r Il,em,e:" h.,.P
leased and the lessor does not claim its return, the
Pf':': m1c;'":f'.i','}J.).;;:(lJ.it9~"": ~'}.it*I.'I' ~ithlll/. agreement shall be deemed to have extended until
mf,:" OOD:~:OD/"r f,t'1'1m- f\1.t.,e it~~"-r
such time as one of the parties demand the
},'}.()."'I..flOD ,e.y.lnl..A::
termination of the agreement.
IF.' 'HlI..f. o"n;;'-A ",<p(lJ. I'\f, '1fo;J' ODr':mC f IbltO-r 13. Lessee not to Create Charges On Capital Goods
it It ODIf ~ I) The lessee shall not create any charge or encum-
/i' 'HII..f. O'HlI..f(1)' fln:;"A iJ.<pI'\,e III/r.Tm-'}~ brance on the capitl goods leased.
ftJr.:.r (1)f,~ Ibl'\ '1,(J,,;" OD'111-r i',,e':"'A~:: 2) Any charge or encumbrance created on the capital
!{. ftl'J:.r (1)f,~ itA ualr.T(lJ-~ '1f.,;t- O'1'C;J'A iJ,<Pm- goods by the lessee shall be void.
I'\f, tH'ht.f. f"'11) },,}'1: ,e.tim. '1f.,;J' P.'J 3) Encumbrances created by the lessor and taxes
f It.l\ll). ,etfr. A:: claimed on the leased capital goods shall be borne
t. oln:;"A f"'"'1 '1f.,;t-'}
".<p(lJ' I'\J), OMlI..f. m,e~ by the lessor.
flll/.mf:" H1C'} flll/:.)'.ltm- MlI..('!. .,m-:: 14. Custody and Preservation of the Capital Goods
I9.. f'1'C;"A iJ.<p(lJ''}itltOD,r11r. itltODmO:" I) The lessee shall take care of and preserve the capital
/i' ,HM.f. f'11:;t-A iJ,<Pm'O~;r. ~it'1lt 0'l''}.<P<I: goods as long as it is in his custody.
,e ,etl A: ,em 1L<PA:: 2) The lessee may not change thti manner of
~. .I"tM.('!. .rltithl..('!. t..<pY.: f'11:;"A iJ.<Pm''} utilization of the capital goods without the consent
itm.<p<I>~ u-~;J' rlD<I>fCi',,e'1'A9:: of the lessor.
hr':A Y'it.} PART THREE
A f. A f. J~:,};J'I,9''1' Miscellaneous Provisions
If;' 111/01.;":1: 9'"1' IS. Incentives
ithl..,e ltttl..,e flll/.( f'11:;t-A iJ,<P9'~,} mf, The lessor shall be exempted from customs duties on
it',c (lJ'il1' nll'l_.rit1'Hl'}' 'UI. 0 it. ,}"iiil""OD'}"" ;,..,.r.
capital goods he imports in accordance with the
ho, tH'(}m(lJ' P'AfI)'} fi'1. ,}"iiit""OD'}"" (lC~ Investment Law and the directives issued by the
Oual..r(1)fI)(lJ' rIDOD/,.r rlD".'I.'}' tl'l'9~h <1>1.'1' .,~ Investment Board pursuant to the powers vested in it by
fODtf'} r/P1H' itlt(lJ'::
the Investment law.
'IX' 1;(0: t..Y../'.A '1:)/.:" :J//J'I '/:'I'C: 'I;''!; fl)";:,, '1,'1;""} :OH::i. '}.9"'Federal Negarit Gazeta - No. 27 5th March, I998-Page 713

)j. l\t\ ~\C:f'; ,}";'{j'; 11'1(1.I\J', l\t\tI'l.flJA "11)C

16. Depreciation Allowance and Income Tax
f!' f4.,rS'}l\ h./..W} ~\(; fi\61!'C VI. tIPmcf>"".J' I) In case of financial lease or operating lease.
h./..W} U"".tIPt\h:,' MI/..g, ft}'C:"A 11:"(1).I)t\{},'}
depreciation allowance for capital goods shall he
Uar'I1"} fll't;;"A 11."'9):': f~\C:~'I' ,},';'{j h"".1'f(l)'
deductible from the rental income received hy the
fh./..J', '1(1. I\J', "",";'{j J',,<',I.It\:"A:: l1"i9" f,~(}, - lessor, as legal owner of the leased capital goods.
"/:r,. l\9"9"'1'}'} W"/,tIPt\tM' f~\C:~:(; :"("'{j f".,.:" However, depreciation allowance shall he for the
nUw. t\'HI/..f. J',I1";A:: benefit of the lessee in case of a hire-purchase
~. Uh./."r. l\9"9"'1:" (IPII'I.'} MI/.'J', f"".,r1'f(l)' agreement.
h,/..J', ~\'H'.'Hl. J',.Y.m/.,A:: 2) The rent received by ithe lessor through the lease
t. I)-I'h/."r, f'''/.h/..A h,/..J', ~\'},<'.oPJ'.U;;: (Dt;/'1. agreement shaH be treated as income.
"'.Y.'I'(~' t\"I1)C '}l\tI'/ iH'h/..J.'. '1(1. I\J', ','cf>r,'{j 3) Rent paid by the lessee shall be treated as an
,l',I1";A:: operating expense of the lessee and is deductihle
:(:;,. f"",~l\";~, rAffJ')';
from his income for the purpose of taxation.
17. Powers and Duties at"the Ministry
The Ministry shall:
?!. flrt;;"A I1:P h,/..J'. l\9"9D'1.y.:r'} J.'.oP""II)A:
I) register lease agreements;
~, 'HI/.'f. f'HI/..f(l)"} fln;:J'A I1:P foPoPt\l\ 1J!..;J'
2) take appropriate measures in order to ensure the
elSCIH'(; ')J',(lPAl\ ft}'C:"A I1:P(I)' t\Mlt..f.
return of the leased capital goods to the lessor.
(lp(IPt\n.'} 1\'''/1.;1'''1' f"'/..rl\1.t\' i\01')1) ,rl\:':(1)''} where the lessee has the obligation to return the
~\C9":~r9):f' J.'.(I)l\,v.A: t\i\/.,X~9" ~ '}.';,I.~(I)' /.t\.l\'}
leased capital goods to the lessor but fails to return
,("IA: it and may order the police to facilitate the
!~. J'.ln ~,q):l': t\tII/l\/..X9" f"""rl\/'.A'" t\,t\,,',}",oPoP("r execution;
- 9)',r'} ,('(I)ff}A:: 3) issue other directives required for the implemen-
It;. f fbt\,,',r rn'I"',}'. "'/'.W"l.'!:" tation of this Proclamation.
lULU ~,'fJ:~: Ut\A lJ.).:,. IIA,,'m(}'1 Itil."cf>c i\"/tt1J'1'-" 18. Applicability of Other Laws
,('1\:':(1)' f(,;,h"\,I},h,C ,),''1. ~,r, f'}'1Y.: ih"l .r.''};J1.9''f Unless otherwise expressly provided by this
IUL/.'J.'. il9"9"'1')' I\J', ','1..X".,. .errr,t\-:: Proclamation, the relevant provisions of the Civil Code
m. i\ 'fJ~: f"".~ 'II} .). VI. and the Commercial Code shall apply to lease
.eu ~,'fJ:f hft}.,;:,. agreement.
?,''!; cf>'} H!f.1 Q'9'" :f.9"C: f~r,
.errr, A::
19. Effective Date
This Proclamation shall enter into force as of the 5thday
i\.ltil i\1}1): fl}.t,} ?,''!; .I''} H!f.1 Q.9'"
of March, 1998.
Done at Addis Ababa, this 5thday of March, 1998.
f.le! '1;J(t 'L~~


f ~,':"r' ,r &..J!../..I\ 'P. .';/IPh /..ft.,r'P. (, T.n t\.h