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--

}ARIT- GAZETA

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OF THE FEDERAL DEMO(

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ATIC REPUBLIC OF ETHIOPIA

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Proclamation No.1 03/1998

Capital Goods Leasing Business
Proclamation..

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Page 71

PROCLAMA nON NO.1 03/1998

CAPITAL GOODS LEASING BUSINESS
PROCLAMA nON
WHEREAS, for those investors who have the de:
knowledge and profession to participate in various inv
ment activities but could not act due to lack of capital
necessary to create an enabling environment for the establ
ment of alternative sources of financing;
WHEREAS, it is believed that lessors of capital gc
.Uv1<U

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19'

CONTENTS

p~ ~1'C (!~r./lv.tj ').~.

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41hYear No. 27
DDIS ABABA - 51hMarch,

It lfPht..t'1.,Pp.I.T-flt\.h

UlI>ULUllUIl1S,

WHEREAS, the existing laws concerning capital g

ing business are found incomplete;
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Federal Negarit Gazeta -

I)

No. 27 51hMarch, 1998-Pagc

70X

"Leasing" means a financing in kind for production

and service purpose by which a lessQr provides
lessee with the use of specified capital goods on
. financial or operating lease or hirepurchase agreement

basis, without requirement of collateral, for a specified

period of time and collects in turn a certain amount of
installment in periodical payments over the specified
~'}~,m+9"U:"
fflll,&,+Y:U:" Uqf.'1:" fflll,Y./,'" f4.f.
period;
c,''}'" ~:"C{1'r '1m':
2)
"Lease agreement" or "agreement" means financial
fIIIl\:"
nrlU
"'9"9"'1'} coJW" "'9"9"'1:""
~. "f\1./..fJ
lease, operating lease or hire-purchase agreement as
h tp~
(I)''''IJ' ~ ') Y."",'/."..oP(I)'
f4.f.c;'}...
\1./..~:
defined
in this Proclamation;
fh6~C 'I.IL oPm+OIUJ h./.'f. lD~9" f'&;:o. "'1': fIIIl\:"
3) "Financial lease" means a type of leasing by which a
'1(lJ-:
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
/J,4>:
OJ1'}
fflll:"'(1)''}
f'1'f.:t'A
(b) purchased by the lessor from a third party,
Y''''+~
"'h/..f.
U1'co(}'1 'I.IL (I)''''IJ' ,,'hc':I\" fflll..fA:"
known as the supplier, chosen and specified hy
(1
(lf1-I\.,: (l)1ci'.}'. "'9"9"'1:" f'"co '1 tJtt:,f Uf'"
the lessee;
(IJ(}'1 'UL UoP&,R9" ~ '})tm+9"U:"
and under which the lessor shall retain full
fflll..fh/.,
ownership right on the capital goods during thL
f.U:" 'UL
,f~U')': - fh./..fJ "'9"9"'11: R'}-t'. UfIII.4'>
period of the lease agreement, and, subject to
.{I)'il'.' hh/.,~ u'1',::"A /J.4>m' l\fJ tID.ft-ffll\o.
agreement between the two parties, the lessee
:,,'1:" oP.,H, f.f' fflll,4'>fJU:'-c; ftL/.'f. JloP~
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
oP,PI.:"
Ml/.,f.
U'ND(}'11.IL
fflll,Y,/.,?
ntt:,f
"'9"9"'1'}'
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-:
ownership is transferred to the lessee and, upon
U1',(',1.1 <J:'t'C I\nc':,f(l)' "'oPfI)fI)~ Urn oP-t"~ An
effecting of the last payment, the ownership of the
I\'f'h/.,f.
f'\I\U.:"'1'1'
clD"H'
. . fflll,+l\l\c,:u:"c; +h/.,f.
capital goods shall automatically he transferred to the
foP(.I,),I.i'im''} tJc':,f ~,}f,&,RoP9" u'1'l::"/'\ /J.4>a>-l\f.
lessee;
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
fIIIl\:" Uh..(.,~ "'9"9".,,,,, oP,p!..), I\'ND(}'1
the right to use the capital goods, against payment of
j' "'''h/..~''
rent for an agreed period of time;
/J.4> \1./.,,, ~fht.1\
l\oPm+9"
'UL h'}Y.;1 f'1'f.:t'A
7)
"lessor"
means a person who, under a lease
hh'}.f.' oh/.." l\~ fflll,h/.,f. (}m' '1(1)':
agreement, provides to a lessee the right to use the
tryl\:" ntL/..fJ "'9"9"'1')' oP,,'!."" 1\1'co(1"
1:' "htl/.'~"
~,}f:
capital goods in return for rent for an agreed period of
/J.4> h./.'f. ~f"'h&.l\m'
'UL h'}.\'."} f'1'f.:"A
time;
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; nrluunder the Investment law and directives issued hy the
f~,,'}Ii"':"oP'}'r
I1C)',. UfIII..f
J1'" fl-l'(}mm. rAn)'}
Investment Board pursuant to the powers vested in it
cofl)a), (lDoP/',f oP".!..} fflll,co"',} /J.4>'1(1)':
by the Investment Law;
"h:"/..U,"
01/1\:"
hMl/.,f.
mf.9"
'Hl/..f.
I\.l\
rr':'
9)
"Supplier" means a person, other than the lessor w
il'
/J.4>9":;''}
UoPi'iIJ'
'}..,,\'.,
P' /.' l\~ f.,. (1f111/..
the lessee, who is in the business of selling goods;
f'1'[:"/'\
(1(1)' .,co':
10) "Investment Law" means either the Investment
Proclamation No.37/1996, or the Ivestment Inceny. "f~,:Hi "")'oP'}.} tn"'" '1'/1\')' fh, '} Ii "':"oP'}:" ~\tp:~
tives Council of Ministers Regulations No.7/1996,
4:'I'C I!)i,!:(!jhri,
cofJ9" f~" '} Ii "':"oP'}.} fIIIU!.:t-Y:
or both;
f"'/.~i\:N~"f'
9"ne U.:,. ,l-':HI <J:IJ'C;j,lnH:'j('t, (1Jf.9"
l\+co(1'1 'UL 1\9"C:"c;

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If

Federal Negarit Gazeta -

"OI/.tia1:C" 117/\""f"''''~

It."'~ia""~ OI/.tia1:C~~;

hti:A v-/\..,.
f 4C.ft'
~ hltllJ-rt fh.~.f, ia'r"'~"" 'ltJ~I""'I f.,."CP f,
m1 'i":f oP11""" ..,~:J-"":f
4.:J' ~ ia/\ oP iam""

709

11) "Non-cancelable Agreement" means' a lease

agreement that is cancelable only by the operatiO'n

ult.u'~11 fO?f,":fA ia"''''~'''''' 117/\""U,"h..,h4C.~~'"

m",.. Uia"''''~'''' 11:F I1AI'~ Uia.,..,.C It.uo~1I
fO?f,-:'''.Afb.t-f, ia"''''~'''' ~~;
Ult~" 117/\""f.,.4C.-rc- ltm- tDf,'r Ulh.., flt~~""
oP11"" f.,.ltm~ hl1A ~~}

No. 27 '5~'March, ',1998-Page

of the law or by mutual agreement;

12) "Person" means any natural or juridical person;

13) "Ministry" meansMinistry of Trade and Industry;
PART TWO
Licensing, Featuresof Lease Agreements (lnd
Rights and Obligationsof tbe Contracting
Parties
3. Issuance of License

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
"f,tIA:
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""1.lt~ia-r "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

f'

force;,

fO?uot."" ~I\L~"" .rl\U"" oPl1''''''' fOl/..ritf, ~"';J'&.;

?;.

~.

"'ht.(!. fl11::J-A iJ:J'm. n.,.I\I\4C.I\""1.,l.h11A..,1\"-1:..,

fOl/..,...,ia l' ~/\ T l1\n"" 11''i 1111~ ia"''''~1:'''
h*C(I1 fl11:7A iJft'm-'" foPoPI\ia oP11"" .rl\mia/\oPl1'''' fOl/..ritf, ~.., ;J1.;
Uhht."'1

UI11::J'A iJft' h:"t-n.m-.oPl1hA

I\,,'ht."
1:'

ft'A::

?;. fb.t-f, ia,..,..~*":f A (!.'lIM.r..,.

Ii'
U)

6)

f4-f,,,..,ia b.t.f, ia"''''~''''''' UOI/.oPI\h"";

5.
"'ht." fb.t.f, ia"''''~-I: ~"'-f UOI/..fo"U-f1.11.0-1\fl1'l::J'A iJft'm-'" I\hht.(!. 'h"'~'ll\h~/.. 11:F 11''i

f,f,tIA; UI11::J-AiJft'm-I\f,'" , ,,.. ~,,~..,.f'll\n.

..,.~:,. oP..,1"" h f,'i ~ m-,..;

terminat~ the agreeII;lentand return the leased capital

goods to the lessor, where, at the time of its transfer
to him, the capital goods is found to have a defect
which diminishes its usefulness to the lessee;
a statement that the lessor undertak~s to transfer to
the lessee the rights and benefits deriving from the
sales contract between the lessor and the supplier of
the capital go~ds;
a statement that the lessee ~hall have the right to
enjoy quiet possession of the leased capital goods
,

7)

oP11"".rl\m- oPl''''''' fO?..rit" :J'IAI

"'ht.(!. UI11::J-A iJft'm- It.m'''''' U"ia"'~ m1'i":f

1\" I\OI/.~Cia'fP""t fhl1A 1'.';"" m",.. f"'11~""1'.';""i
hht.(!. 'h"'~hht."~":
~I\k~"" f"'I\U"" oPl1'.,.i
f"t.ritf,

f1qm- ft'A;

"'h~." fl11:7A iJ:J' b.t.f, ia"''''~1: ~"'-f UOI/..fo

f,U"" 1.,1. V-I\- Uia"''''~1: U"'1/\~~ v-~:J- U.,.h
t.fm- fl11::J-A iJft' I\f, v-h..,. fO?f,~~"'U"" ff)I\
"":""''''

~.

I\O?ia.,.I\I\t;:hht."

5) a provision showing the right of the lessee to

h"'~

l.1m. f7i.r6J.1' meA fOl/.oP~'b oP..,1-f":f..,'I -r:"qo":f..,

8)

dur~ng the, ~ntire period of the lease as provided in

the agreement;
a statement that the lessor may not, in his capacity as
a lessor, be liable for death, personal injury or
damage to the property of third parties caused during
the use of the capital goods by the lessee.

Specific Features ?lLeas~ Agreements

I) In the case of a tinanciallease agreement:
,

(a)

the lessee shall hold the capital goods as a mere

bailee of the lessor and he shall not' have any
ownership right on the capital goods during the
enti~e period of the lease; ,

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(1-I'hl..fOJ. fit1::t-A 6,'" I\.e ill\I\' ~f;I\.y.".'f
OJ;'f>-1-n.,.ht.f.
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Ii' il99.,.,: U''''.l1n.)fit.C:"&\ 6.'" 1.,f:I\'}' 1\hl..f. ~I\t.~.}. fl\n-1-9"::

7.

5th March,

1998-Page

71

()

the agreement shall be a full pay-out and noncancelable agreement;

the lessee may, by mutual agreement, have an
option to buy or return the capital goods to the
lessor on the termination of the lease agreement
a statement that the lessee undertakes to insure
and maintain the capital goods.

In the case of an operating lease agreement:

(a) the capital goods leased shall remain the property
of the lessor to whom the lessee shall return on
the termination of the agreement\ unless
otherwise the parties agree that the lease be
further renewed or the leased capital good be
purchased by the lessee;
(b) the lessee or the lessor shall have the right to
cancel the agreement provided that. the party
causing dam~ge to the other by early termination of the agreement shall pay compensation;
(c) a statement that the lessor undertakes to insure
and maintain the capital goods.

"'10.W'"} ~Y.lt ftll/.r:l"l ;~I\&.~;" .fl\n:" (/D"''''

t'/P11\;r .etfCn:"A::
f1\6f.b(: 'I.IL (/Dm.,.O'/..f h,I..f. il99"~""") nO'/.(/D

!{.

No. 27

In the case of a hire-purchase agreement:

(a) an equal percentage ofthe ownership, with each
installment payment, shall be transferred to the
lessee and, upon effecting of the .last payment,
the ownership of the capital goods shall
automatically be transferred to the lessee;
(b) the p~rties shall provide, in the agreement, for
the manner by which ownership rights and
c1aims arising form the agreement shall be
settled between the lessor and the lessee in case
of early termination of the lease agreement by
either party;
(c) a statement that the lessee undertakes to insure
and-maintain the capital goods.

Defaults in Payment of Rent and Others

I) Where the lessee defaults in the payment of the rent,
or commits another fault which may breach the
agreement, the lessor shall grant him a period of 30
days for remedying the d~fault so far as the default
may be remedied.
2) Where the lessee does not remedy the default within
the period specified in sub-Article (1) of this Article,
the lessor may rescind the agreement, repossess the
leased capital goods and claim related damages.
3) Where the lessee defaults in the payment of the rent,
the lessor may recover accrued unpaid rent together
with interest and damages, whether the default is
remedied or not.
Defects on the Leased Capital Good
I) The lessor may not warrant against a defect which
was made known to the lessee on the making of the
agreement.

.,;Jt.-1- ;Jti"l +'1'C ~

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fili:'-" ?;'%.,., n!1 q.S/". Federal Negarit Gazet~

"ht..~ ft}1::h~~ ".4>(1)01""'ht..~ f1it~hnn"" w:"""

".

"'ht.,~ n(&m(l)ol'Cl'C foo9"~6Ii ooitt.C:" OOlP~""

htll.',e. ftt1:;rA ,,:JoW-1 hhh1t, Y:~it ":"(1)0 ""'t.
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1A "'.."" t\ 00 itm"" .,. Y:t\"" .t'" n""
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,,~.,.~..,. flPJ..ff.Cit hln
"m."''''9'' ntt1:;rA "."'(1)0
:,.Y..'lPJ..f ",itm1.,.ct.f
nooitm""
"tM.f. ""'h~.~
it9"9u~1:1 "oou'~l,ci f"ht..f(l)o1 ftt'r;;t'A ".'" wy,
~t';t-W-

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8.

itt\ooh(&C
fi' nt1.t..~ it9"9"~.t: oou'~'1' "'ht..f. 0,.e..:J'(I)o1hith

~.

.,'wn) Y..'~it hht..f. ~,~!.h(&~ nc':CY..' fl."" (lOJ(&1

h1\\1fh(&~(1)01
"ttA nJi.., flPJ..,.tt "ttA nit9"
9"')": "'Yo;r~"flJ rJ-).:r?J"f OOlP~"" ~"'ClJA::
f.,.ht..f. ooh(&C nCJ:cY: fl."" o.W(&19" n"'ht..f(l)o
ftt1:.+A "."'",e. MIl..f. .f"(1)01 ff1"fl.""~"" 0011""
h!VaCIJlD-9'"ff"'mn'" 'f.rriiA::

it. il""'.c;:" ttPf

3)

lessee has suffered owing to the defect of the capital

goods where the lessor knew or should have known
of the defect on delivering the capital goods to the
lessee and failed to inform the latter accordingly.
Unless otherwise provided in the lease agreement,

4)

the lessor shall not be liable for defects in and for

unfitness for intended use of the capital goods h~
purchases in conformity with the specifications
given by the lessee.
The lessor has the right to rescind the agreement,

li'

ft't1:;rA

".4> "hht.f.

h 1JtooAit

"'''(&fl..f "'(&,,"'+tt"it~hn
hht.f.
WJt.ffl)o}. mY.,e.)I;rWo foPoo"itlJ
ttPf foomf""

f"'.ht..f(l)o

2)

the lessee does not deliver the capital goods after

having been given due notice to surrender the capital
goods to the lessor, the lessor has the right to
repossess the leased capital goods immediately and
claim damages.
Where the lessor suffers any damage owing to

3)

default on the part of the lessee prior to the transfer of

the leased capital goods from the lessor to the lessee,
the latter shall make good such damage to the former
so long as the lessor acted in good faith and costs
were incurred by him for purchase of the capital
goods at the request of the lessee.
Where, in the case of financial lease or operating

'''10.(1)0

ftt1:;rA
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0011"" ""(1)0::

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.,.~...,. O.J.'..Ci'l{l"'""ht".~ n:"1 A(llJ
hilht.RoolJ
n"'ht.~
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t\OOO","" W".l. fJ.'..~(&H"" hlUun
n"ht..~
f.'

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,,~ t\J.'..~(&w..,.~..,. ttPf ooht.A

"t\n""::

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n"'l.oot\h"" "'ht..~ f"'ht..f(l)o1 ftt1:;rA ".'" fit9"
9"'1": 'ULl1...fA:" "~OOAit f.,.t. h1.l',ln nit9"9"'11:
(I)oitTnl\.""\\:\1ttA",w(&'1nit"''''c''h~f.f'''h~
fw'1 ftt1:.+A ".'" W.l'.~tI;r(l)o foooot\itr; "J.'..~
(&n"" .,.~..,. ttPf foomf:"

,.

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001H'1 it"",it.,.""c.:
"'ht.f.
t\oom"'9u
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0011""

hitttA"';14.

it 9"9" '11: OOlP~"" .t'1'fw'1

f"'''mA

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10.

Y..'~it "ht..~

0011"" "Y'it.,.~

w11

oo.(H' ""(1)0::

nY'it.,.~'m1t;"f f"7."'C1) 'I'.f<l:

ji. ntt7:;t-A ".4>m.,,~ 0011""
""~ nlPJ""" nY'it.,.~
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00:"~11
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11.

shall continue with an organ legally subrogated to

the judicially bankrupt lessor as long as the lessee
performs his obligations in accordance with the
terms of the lease agreement.
The lessor shall not lose his ownership right on the

capital goods leased eventhough the lessee is

judicially bankrupt.
Damages
I) Where the agreement is rescinded by the lessee, and

"'9"9"'1-1:
O"'ht.f. n"7.lP~lH1""lott "'ht..~ f'''ht..
f(l)o1

~.

with prior notice, and to repossess the leased capital

goods, where the lessee does not make use of the
capital goods in accordance with the lease agreement
or accepted norm or usage and such use entails risk
of irreparable damage to the capital goods leased.
Bankruptcy
I) The obligations and conditions of the agreement

2)

9.

711

The lessor shall make good any damage which the

Wf,1JO ft..fm..,.dJo f"7.1'1(1)o1 .,.y:"..,.

t\ .,.h t.. (t ".fit (1)0'"(1)0"'C.,. n t) 1:;r A :1>(1)0.,. Y:" ..,.
"

f.'

No. 27 5[hMarch, I 998-Page

2)

.fW"'(I)o1

9"h1.f"" n"'ht.,~ "f.. ""7.J.'..Cit",lJT(I)o9".,.~..,. t}Pf

fooht.A ..,Yo;r ""n""::
nh.t..~ il9"9'"'11:nl\." "\\:\1 t}A"'W(&~nit.,..,.c:

lease agreement, the lessee fails to return the capital

goods on the expiry of the agreement, the lessor has
the right to repossess the leased capital goods and
claim related damages unless otherwise provided in
the agreement.
Transfer of Right
The lessor has the unilateral right to assign his rights
under the lease agreement to third parties, but without
infrigement of the lessee's right to the quiet enjoyment
of the capital goods leased.
Claim by Third Parties
I) Any action by a third party claiming a right on the
capital goods shall be brought against the lessor.

r
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q.9". Federal Negarit Gazeta -

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:"

:,.Y:lI'l..r
OD11-r r'}'tnr
MII..('!. .rlt(lJ. f'lltO':""'}
,e(}mP A::

[.

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O'11:;"A

":Pm-

O(}I'\r

OY'it.t.~

(lJ1tj:.r. fll'l.J'.CitO"",)

goods leased under the lease agreemerit shall prevail

at all times over claims by third parties including

~ '}~f,m<l>r

'~,olC: m,er

creditors of the lessee.

The lessee shall inform the lessor of any im-

3)

u-h-r

pediments or disturbances

lti',JM.f. lI'lltm:" itltt1."f.::

!!.

tlilU

i','}<I>?t. '}(J.it

,HlI..f. ithl..f.')

it'}<I>7\'

(r.) 0"'11t?tm'

ODIPI.-r

4)

as provided under sub-Article (3) of this Article, he

"'~-r ~I'\&.

shall be responsible for any expenses or damages

f,tfCjA::

?;.

Y'it.,.;;:

m1')

9"tJ'}.r.}.
.,. hl..,e

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Oll'l..r<l>com-

tJit

},1.it(}1.11 fODmf:"

5)

a result of legal proceedings instituted by a third

party against the lessor, the lessee shall have the right

OD11"" itltm-::

to demand the reduction of the rent according to the

new value or the cancellation of the agreement.

fttl..,e it9~""" OD*1.1'

/i' uan;;:(lJ-~ f\1.l..f, it9"r"-r

Oit~~"1:

O"'"lt?tm-

12.

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~.

0\1.1..,e it~~"'l:

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O.l"tll..('!. ODqo.} m,e9

it9"9.,1:
[.

incurred by the lessor.

Where the value of the capital goods has decreased as

iJ:pm. P.'J f<l>.,(} ~,}J.),tr'1

f'1'C;"A
0 it.it (}. P.'J rID"..1.-r \1.1..('!.~ '}.it <I>
1 it It -r

(1),e9" it~9""":

I~'

I'\,e

'~,It";J'

Termination of Lease Agreement

I) Any lease agreement shall terminate on the date
2)

III/fIl-r 9tJ'}.r-r

.tn

ODm<l>III/..r \1.t.,e

(}..rn.<p ,HlI..,e

f'HlI..f(lJ'')

OA'CCj ittil..f,9"

it~~o"-r

f'11:;"A

},'}.itODltitlt-r

Pf':':

m1c;'":f'.i','}J.).;;:(lJ.it9~"":

mf,:"

J~:l.it OOD:~:OD/"r f,t'1'1m-

flOD'}

3)

".<p ~ '}f.,rfl

Il,em,e:"
~'}.it*I.'I'
f\1.t.,e

IF.'

o"n;;'-A

leased and the lessor does not claim its return, the

~ithlll/.

agreement shall be deemed to have extended until

it~~"-r

such time as one of the parties

'HII..f.

O'HlI..f(1)'

ftJr.:.r (1)f,~
!{.

ftl'J:.r

ODr':mC f IbltO-r

13.

fln:;"A

iJ.<pI'\,e III/r.Tm-'}~

Ibl'\ '1,(J,,;" OD'111-r i',,e':"'A~::

f"'11)

2)

brance on the capitl goods leased.

Any charge or encumbrance created on the capital

3)

goods by the lessee shall be void.

Encumbrances created by the lessor and taxes

},,}f.tr'1:

,e.tim.

'1f.,;J'

P.'J

f It.l\ll). ,etfr. A::

t.

f"'"'1 '1f.,;t-'}
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oln:;"A

".<p(lJ' I'\J), OMlI..f.

flll/.mf:"

I9..

claimed on the leased capital goods shall be borne

by the lessor.

m,e~

14.

f'1'C;"A iJ.<p(lJ''}itltOD,r11r. itltODmO:"

,HM.f. f'11:;t-A iJ,<Pm'O~;r. ~it'1lt Y:l.it 0'l''}.<P<I:
/i'
.I"tM.('!.

.rltithl..('!.

t..<pY.:

f'11:;"A

goods as long as it is in his custody.

The lessee may not change thti manner
of the lessor.
PART THREE

Y'it.}

Miscellaneous Provisions

A f. A f. J~:,};J'I,9''1'

If;'

IS.

111/01.;":1: 9'"1'
ithl..,e
it',c

ltttl..,e
(lJ'il1'

OllU'

nll'l_.rit1'Hl'}'

ho, tH'(}m(lJ'

Oual..r(1)fI)(lJ'
fODtf'}

flll/.(lJ.lt-

"''1'1C

r/P1H'

rIDOD/,.r
itlt(lJ'::

'UI.

P'AfI)'}
rlD".'I.'}'

of

utilization of the capital goods without the consent

iJ.<Pm''}

itm.<p<I>~ u-~;J' rlD<I>fCi',,e'1'A9::

hr':A

Custody and Preservation of the Capital Goods

I) The lessee shall take care of and preserve the capital
2)

,e ,etl A: ,em 1L<PA::

~.

the

Lessee not to Create Charges On Capital Goods

I) The lessee shall not create any charge or encum-

(1)f,~ itA ualr.T(lJ-~ '1f.,;t- O'1'C;J'A iJ,<Pm-

I'\f, tH'ht.f.

demand

termination of the agreement.

",<p(lJ. I'\f, '1fo;J'

it It ODIf ~
/i'

or incapacity of the lessee.

Where, on the expiration of an operating lease, the
lessee remains in possession of the capital goods

h.,.P

},'}.()."'I..flOD ,e.y.lnl..A::
'HlI..f.

agreed upon by the parties.

Unless otherwise provided in the lease agreement,
the agreement shall not be terminated by the death

it,e* 1.'1'90::

fi',6I!'C

by third parties to his

quiet enjoyment of the capital goods.

Where the lessee fails or delays to inform the lessor

It.rlt(lJ':'' f<l>l. (lJ,er ffl1f ~,}f.tr'1

MlI..('!. Itll'l..rmfll(lJ. (1)(;1.1.'1Itll'l.f.CitO''''

No. 27 5lhMarch, 1998-:-page 712

f'11:;t-A

iJ,<P9'~,} mf,

0 it. ,}"iiil""OD'}""

;,..,.r.

fi'1. ,}"iiit""OD'}""

(lC~

tl'l'9~h

<1>1.'1' .,~

Incentives
The lessor shall be exempted from customs duties on
capital goods he imports in accordance with the
Investment

Law and the directives

issued by the

Investment Board pursuant to the powers vested in it by

the Investment law.

'IX'

1;(0: t..Y../'.A

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f!'

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h./..W} U"".tIPt\h:,'

16.

VI.

tIPmcf>"".J'
11:"(1).I)t\{},'}

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Negarit Gazeta -

nUw. t\'HI/..f.
~.

Uh./."r.

W"/,tIPt\tM'

2)
3)

agreement shaH be treated as income.

Rent paid by the lessee shall be treated as an

f~\C:~:(; :"("'{j f".,.:"

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l\9"9"'1:"

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t.

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:(:;,.

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')J',(lPAl\

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ft}'C:"A

1J!..;J'

operating expense of the lessee and is deductihle

from his income for the purpose of taxation.
17. Powers and Duties at"the Ministry
The Ministry shall:
I) register lease agreements;
2) take appropriate measures in order to ensure the

I1:P(I)' t\Mlt..f.

(lp(IPt\n.'}

1\'''/1.;1'''1' f"'/..rl\1.t\'
i\01')1) ,rl\:':(1)''}
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,("IA:
!~.

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f fbt\,,',r rn'I"',}'. "'/'.W"l.'!:"

lULU ~,'fJ:~: Ut\A lJ.).:,. IIA,,'m(}'1
,('1\:':(1)' f(,;,h"\,I},h,C

m.

t\,t\,,',}",oPoP("r

~,q):l': t\tII/l\/..X9" f"""rl\/'.A'"

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.eu

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i\.ltil i\1}1): fl}.t,}

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

T /0' L.V.') .).

lease.

depreciation allowance for capital goods shall he

deductible from the rental income received hy the
lessor, as legal owner of the leased capital goods.
However, depreciation allowance shall he for the
benefit of the lessee in case of a hire-purchase
agreement.
The rent received by ithe lessor through the lease

11."'9):': f~\C:~'I' ,},';'{j h"".1'f(l)'

'1(1. I\J', "",";'{j J',,<',I.It\:"A:: l1"i9" f,~(}, -

"/:r,. l\9"9"'1'}'}

713

Depreciation Allowance and Income Tax

I) In case of financial lease or operating

Uar'I1"} fll't;;"A
fh./..J',

No. 27 5th March, I998-Page

return of the leased capital goods to the lessor.

where the lessee has the obligation to return the
leased capital goods to the lessor but fails to return
it and may order the police to facilitate the
execution;
issue other directives required for the implemen-

tation of this Proclamation.

18. Applicability of Other Laws
Unless otherwise
expressly
provided
by this
Proclamation, the relevant provisions of the Civil Code
and the Commercial Code shall apply to lease
agreement.
19. Effective Date
This Proclamation shall enter into force as of the 5thday
of March, 1998.
Done at Addis Ababa, this 5thday of March, 1998.

NEGASO GIDADA (DR.)

PRESIDENT OF mE FEDERAL DEMOCRATIC
REPUBLIC OF ETHIOPIA