(a) To what extent is this type of business 'finance' technique practised in this economy?

 

This has become a popular mode of acquiring the use equipment in the philippine without the concomitant financial burden involved in a purchase. This is true for companies that are in need of vehicles, heavy equipment and computers.By acquiring equipment throgh leasing, companies are saving money for their working capital purposes. There are quite a few financing companies here in the philippine and it can be expectec that more will be established since a law was recently passed allowing more foreign equity in financing companies.

(b) If default is made what are the rights of the owner of the property to recover the leased property?

 

The owner of the property may seek recourse to the remedies provided for by law such as attachment, replevin, or an injunction.

(c) Does the exercise of these rights require court process?

 

if the lessee does not return the property upon the final demand of the lessor, then the lessor is given no choice except to go to the courts to seek legal remedy.

(d) How effective in actual practice is the process of recovery (list any relevant impediments, such as the right of access to the place where the equipment is situated; the right to physically take the equipment away from the place; and so forth)?

 

There are times when the lessee actually hides the property subject of the lease so the diffculty is in finding such properties. Also another impediment is that the lessor may not just take the property on his own if the lessee refuses to surrender it. He must seek the help of the proper authorities before he can actually take possession of the financing companies, however, are almost always successful in recovering the equipment leased.

(e) What effect does the commencement of insolvency proceedings in respect of the corporate debtor have on the recovery of leased property?

 

One of the advantages of acquiring equipment through operating lessee is that equipment remains in the name of the lessor. Therefore, should insolvency proceedings be commenced against the lessee, the equipment which is subject of the operating lease should not be considered as part of the assets of the lessee which the creditors look to for satisfaction of their obligations, since the owner of the equipment is still lessor.

In the case of financial leases, there is still no jurisprudence on what happens if insolvency proceedings are initiated against the lessee. It would seem that creditors would have an interest in any equity that the lessee may have acquired in the equipment.

(f) Is it usual for an equipment lease to be supported by guarantees (sureties) for payment of lease charges; default penalties; and so forth?

 

Yes. Usually, guarantees from the stockholders and directors of the corporate lessee are taken by the lessor along with a guarantee deposit equivalent to 15-20% of the value of the equipment leased. The lease contract also provides for default penalties in case the lessee fails to pay on time.