The most fundamental consideration for developing cross-border financial leasing business is to analyze the local legal environment, and it is always necessary to consult local experienced lawyers. Factors that need to be considered in related financial leasing business include.
First, restrictions on foreign ownership and corporate governance;
Second, local licensing regulations;
Third, the target country restricts the types of financing products that may be provided to customers;
Fourthly, whether the clause of unconditional rent payment by the lessee is feasible in local laws;
Fifth, the lessor's ability to protect and exercise the ownership of the leased equipment, or the lessor's ability to realize the first security interest on the leased equipment for the third party or lessee;
Fifth, the employment and labor laws of the target country;
Sixth, privacy protection law;
Seventh, abide by domestic export control and related laws and regulations;
Eighth, other relevant laws (restricting usury, anti-money laundering, whether the contract is in local language, etc.). ).
The specific development is as follows, but it should be noted that in some countries, such as Australia and Canada, the laws of different provinces or States may vary greatly.
I. foreign ownership and corporate governance restrictions
In some countries, local laws prohibit foreign investors from holding 0/00% shares in the leasing company/KLOC. Therefore, foreign companies must cooperate with local companies or individuals to operate financial leasing, and joint ventures are the most common. For example, India (local stocks account for at least 25%), Indonesia (local stocks account for at least 25%) and the Philippines (local stocks account for at least 40%). These local share laws and regulations are sometimes vague, and in some cases, their impact on corporate finance and governance can be completely weakened.
In some countries, although there is no provision for local shares, there are provisions requiring local governance. For example, in some countries (including Austria, Australia, India, Japan, Korea, Malaysia, Singapore and Thailand), one or two directors must be local residents or citizens. In other countries, half or most directors must be local (including Argentina and Brunei).
2. Licensing requirements
In some countries, it is necessary to apply for a license from government agencies to carry out leasing business. For example, in Brazil, you need to apply for a lease license from the Central Bank of Brazil. Other countries (or regions) that require licenses include Hong Kong and Puerto Rico. Sometimes these regulations are perfunctory, just fill in the form, update it on time, and pay the fee. Sometimes, obtaining and maintaining a license plate is expensive and strict. For example, in Brazil, leasing companies must meet minimum registered capital requirements, strict operating standards and numerous reporting obligations.
In other countries, whether a leasing company needs a license depends on the financial products it provides. For example, non-regulated companies in Mexico can operate business leasing, which is called "pure leasing" locally, which is different from "financial leasing". An important difference between pure lease and financial lease is the lessee's option at the end of the term. In Mexico, pure leasing includes options purchased at fair market value at the end of the term, but it will not be options purchased at a fixed price (whether it is nominal price or including market factors). Most legal experts believe that including any fixed-price purchase option will lead to the lease becoming a financial lease, which may only be provided by licensed and regulated financial leasing companies. The same licensing norms also apply to other Latin American countries (such as Colombia, Peru and Venezuela).
Similar licensing systems exist in many European countries, especially in southern Europe. For example, in France, operating leasing is usually an unregulated activity. However, the lease (called credit-bail in French when the leased property is used for business, and location avec option d'achat when it is used for consumption) containing the lessee's fixed-price purchase option can only be provided by the concessionaire supervised by "Bank of France". In other countries, the licensing systems in Belgium, Spain and Italy are more or less unbalanced. Unfortunately, although both countries are members of the European Union, financial leasing companies with legal licenses in one country may not be exempted from licenses in other EU countries. In some of these countries, strict licensing regulations and penalties for violations should not be underestimated.
Because many countries in the European Union have different regulations on license plates, how can we meet the different regulations of many countries? One solution is to operate within the EU through a bank supervised by the central banks of EU member states. According to the EU Banking Directive No.2, banks supervised by the central banks of EU member states can "issue passports" for financing services (including leasing) in most other EU countries as long as they meet the requirements, without complying with the regulations of other EU countries (that is, cross-border operations). The details of this "issuing pass" model will not be discussed in this paper, but there are several points to be pointed out. First of all, as a licensed bank, there are many regulations involved, which is generally much more troublesome than getting another lease license. Any violation may be severely punished. Secondly, it is not easy to meet the regulatory requirements of the second bank of the European Union, and sometimes another problem (namely, tax payment) will arise.
Three. Other restrictions on the provision of financial products.
In some countries, foreign-funded leasing companies cannot legally provide certain financial products, or they are prohibited because of the products themselves, or it is impossible for foreign-funded leasing companies to obtain the required licenses or status.
Four. The problem of enforceability.
In many countries, the statute law does not stipulate the lease of personal property like Chapter 2A of the Uniform Commercial Code of the United States. In most cases, the local court refers to the contract law or the real estate lease law to interpret the lease agreement and determine its enforceability. In many countries, the unconditional payment of rent by the lessee is either unenforceable or decided by the court on a case-by-case basis. This is common in civil law countries, including most Latin American countries and Germany. In these countries, if the lessor violates the contract, or (more importantly) if the leased property is defective or does not meet the quality standards set by the manufacturer or the seller, the court will allow the lessee to stop paying the rent and/or terminate the lease, even if the lease contains a clause that the lessee pays the rent unconditionally. This kind of risk is difficult to control, and it is worthy of careful measurement by the lessor when expanding its business.
In some countries, the clause that the lessee pays the rent unconditionally (hell or high water level) is only enforceable in some leases. For example, in Australia, New Zealand and several other Asia-Pacific countries with a long history of Anglo-American law, if a lease contains the lessee's option clause (in most cases, even the fair market option), the lease will be regarded as a hire-purchase contract. In some of these countries, the unconditional payment of rent by the lessee is enforceable in the lease contract, but not in the lease purchase contract. For this reason, in these Asia-Pacific countries, the lease contract generally does not contain the option clause of the lessee.
In addition, compensation clauses, free transfer clauses, contract renewal clauses, breach of contract and compensation clauses may not be implemented in some countries. Therefore, when doing international leasing business, it is best to let local lawyers review the lease contract to find out which terms cannot be implemented locally, so as to assess the risks.
Verb (abbreviation of verb) mortgage guarantee and related problems.
Just as many countries lack the legislation of chattel leasing stipulated in Chapter 2A of the Uniform Commercial Code, many countries also lack the secured transactions stipulated in Chapter 9 of the Uniform Commercial Code. In the international expansion decision of leasing business, it is very important to know to what extent the lessor can protect and exercise its ownership of the leased property, and to what extent it can obtain and exercise the first mortgage or other security rights.
The legal systems of many countries are similar to those of the United States. The law generally recognizes and protects the lessor's ownership of the leased property and/or allows the lessor to exercise the first mortgage on the financing property. For example, Canada's personal property safety law is almost based on Chapter 9 of the United States Uniform Commercial Code.
However, in some countries, either due to the lack of effective chattel security laws or the nature of the local legal system, it is impossible to obtain an enforceable first security interest in the leased chattel. Sometimes it depends on the type of property involved. For example, the only way to get the first security interest in Mexico is pledge, and pledge can only be achieved by possessing collateral, which is obviously not feasible for the leased property. Except for airplanes and ships, the mortgage registration system shall be implemented. For pure leasing in Mexico, if the lessee breaches the contract, the lessor must recover the ownership of the leased property through ordinary legal procedures, which are long and expensive, and recovery of ownership rarely guarantees success.
In some countries, due to the lack of effective chattel security laws, local laws and practices can sometimes partially reduce this risk. Let's take Mexico for example. Under normal circumstances, the lessee will sign a promissory note for each installment payment according to the lessor's instructions. If the first installment of the rent is unpaid, the lessor can start a simple legal procedure (different from the long ordinary legal procedure) to collect the rent from the lessee. Under the summary legal procedure, the lessor has the right to obtain the lessee's property.
Finally, the local bankruptcy or insolvency law should be considered when evaluating the chattel security law relief and other related remedies available to the lessor when the lessee breaches the contract according to the laws of the target country. As we all know, the laws of different countries are very different, which will make the lessor face additional credit and guarantee risks.
The intransitive verb employment and labor law
It is very important to fully understand the nature and consequences of local employment and labor laws. Before hiring local employees, we should discuss and communicate with local lawyers in detail the legal obligations of hiring and firing local employees. In many cases, these obligations are quite different from those of China, which is likely to increase the cost of the company. For example, in many countries, hiring employees means that employers are obliged to pay for retirement/pension plans issued by the government. These regulations vary widely and may result in unexpected expenses.
In some countries (such as the Netherlands, France and Germany), once the number of employees reaches a certain standard (50 in France), local laws stipulate the establishment of trade unions. In these countries, almost all employers want to implement any change in the employment environment, which requires prior consultation with trade unions (including changes in employers, business nature, salary and benefits caused by layoffs and restructuring, etc.). Although the regulations vary from country to country, it is difficult for employers to change anything at a certain time without the consent of the trade union.
Another consideration is the provisions of local laws on termination of employment relationship. Although the United States has some restrictions on dismissing employees (such as anti-discrimination laws), the United States is basically a country with "free" employment contracts. But in many other countries, the situation is very different. In some countries, employers often demand compensation for "unfair dismissal" (such as Ireland). In these countries with similar regulations, labor courts or similar institutions can examine the reasons for employers' dismissal (employee performance, etc.). ) and may require employers to pay very high severance pay. In some countries (such as Japan), even an employee with poor performance is not easy to be fired.
Seven. Privacy/data protection law
You should consult your local lawyer about the scope and application of local privacy or data protection. These laws generally regulate the collection, processing, storage, transmission, sharing and/or use of confidential information about customers and/or employees. For example, the data protection law specifically prohibits the cross-border transmission of customers' and employees' information to countries without the same data protection law (even if the receiver is an affiliated company of the transmitting party). Because there is basically no data protection law in the United States similar to that in the European Union countries, the trouble is coming, because leasing companies headquartered in the United States generally want to receive this information from their European subsidiaries, so that they can audit the global credit risk and evaluate their employees.
In order to support American companies in this respect, the US government negotiated with the EU and signed the so-called safeharbor. In this agreement, American companies can voluntarily adopt and publish privacy policies that comply with EU privacy laws and register with the US Department of Commerce. Under compliance conditions, European companies are also allowed to share confidential information of customers and employees with American "safe harbor" companies.
Privacy/data protection laws are becoming more and more popular around the world. In addition to almost every EU country, Argentina and Australia also implement similar laws.
8. Domestic export control and related laws and regulations (export control and related laws and regulations).
This includes: (1) Some laws require foreign subsidiaries to obtain a domestic export license; (2) Trade with some countries is prohibited by law (such as Iran and Cuba). ); (3) Laws to prevent the proliferation of military weapons technology.
IX. Other Legal consideration
In addition to the legal considerations of appeal, financial leasing companies planning to expand their business abroad should discuss with local lawyers the scope of application of a large number of other local laws that may affect local financial leasing business. For example, the laws of some countries directly or indirectly require that financing contracts (or other documents) should be in local languages (such as Indonesia and Quebec, Canada). In some countries (or regions), local business practices require documents to be written in local languages (for example, Japan, South Korea, Taiwan Province Province, People's Republic of China (PRC), most Latin American countries and many European countries).
It is worth noting that in some non-English-speaking countries, English books can be used for documents, and sometimes they are often used. However, it is best to use the local language, because in litigation, judges rely on court-appointed translators to understand the agreement. However, the quality of this kind of translation is often uneven, and the legal provisions are likely to be translated beyond recognition, resulting in the deviation of the judge's understanding. But obviously, documents written in local languages, whether legal or not, will increase additional business costs.