Leasing operations are increasingly becoming a practical and sustainable option for the acquisition of assets. While, on immediate terms, only the ownership of a good is obtained, later on the option to buy or sell the asset becomes available.
While financial leasing is not expressly covered by Dominican legislation, due to the ever-increasing globalization this figure has experienced a fair share of growth, becoming a modality for businesses and companies to acquire and obtain real or personal property without having to go too deeply into their capital. That is why we must resort to general provisions within Dominican law, and the Dominican Civil Code in particular, since it establishes the required mechanisms to provide security for this sort of operations —such as the guarantees provided in a Pledge Agreement without divestment or notarial notes (awards of debt) by the Lessee.
Financial leasing is defined as «a contract by which a leasing company transfers to another —the lessee— the use of property purchased by the company as directed by the lessee, for a specific period of time, paid via installments; the lessee can exercise a purchase option at the end of the contract».
Why Should One Acquire Assets via Financial Leasing?
There are multiple reasons: some are tax-related, others pertain to the availability of capital. The use of technology and its constant evolution have determined the growth of this figure, since updating tech goods is an essential matter when it comes to competing in a market with such diverse players. With Leasing, an entity may acquire a range of modern equipment that may prove quickly outdated thanks to the same technological evolution that created it, at reduced costs. This acquisition is no longer deemed expensive and ineffective, and the entity can now enjoy the ease of using goods for a predetermined amount of time, without obligation to purchase.
Leasing is divided into phases:
First, the lessee requests the product or good from a leasing entity, which acquires it using its own resources. This operation can also be reversed —that is, the good can be acquired by the lessee to be sold to the lessor and then be provided on lease to the lessee, which is known as a “sale-and-leaseback” transaction.
Second, the lessor provides the lessee the requested goods, subject to payment of fees, insurance, guarantees and contractual terms of duration, as well as any other feature that may be deemed pertinent by the lessor.
Third, the final stage is defined by the interests of each party involved. The conclusion of the contract will depend on the decisions taken by the parties, which may include the renewal of the contract, the sale of goods or the delivery of said goods to their actual owner.