Regulatory Framework for Leasing Companies in Pakistan

According to Section 2 (15A)(b) of the Companies Ordinance 1984, a leasing company is categorized as a financial institution. These companies fall under the scope of Non-Banking Finance Companies (NBFCs) and are subject to licensing, regulation, and oversight by the SECP.

The key regulatory provisions include:

• Section 282-A to 282-D of the Companies Ordinance 1984

• NBFC (Establishment and Regulation) Rules, 2003

• Leasing Companies Rules, 2000

• Prudential Regulations for NBFCs

Leasing companies must obtain prior approval from SECP for incorporation and licensing. They must maintain a minimum equity of PKR 200 million, operate as public limited companies, and meet various conditions regarding shareholding, governance, and business practices. Additionally:

• At least 15% of the paid-up share capital must be held by promoters, who are restricted from transferring their shares for a minimum of 3 years without SECP’s approval.

• Changes in Memorandum & Articles of Association, Board of Directors, or Chief Executive Officer also require SECP approval.

Definition and Types of Leasing

As per Rule 2(xxx) and Rule 2(xxix) of the NBFC Rules 2003:

• A Leasing Company is any company licensed by the SECP to conduct leasing services.

• Leasing includes financial services provided on an operating lease or finance lease basis, in accordance with International Accounting Standards (IAS).

Legal Services We Offer Under Leasing Law

Our firm offers comprehensive legal solutions for all aspects of leasing, from company incorporation to lease agreement enforcement:

1. Legal Advisory for Leasing Companies

• Licensing & incorporation under SECP guidelines

• Compliance with Prudential Regulations

• Drafting and vetting of internal company policies

• Assistance with shareholding restrictions and promoter requirements

2. Drafting & Vetting of Lease Deeds

We assist both lessors and lessees in preparing well-drafted, enforceable lease agreements that comply with Pakistani contract and property laws. Our services include:

• Drafting lease deeds for commercial, industrial, and equipment leasing

• Incorporating reciprocal covenants to protect all parties

• Legal review to avoid pitfalls and ambiguities

• Custom clauses based on industry-specific leasing (e.g., vehicles, real estate, machinery)

3. Implied Covenants of a Lessee (Under Pakistani Law):

Every lease agreement in Pakistan typically includes statutory and implied covenants, especially from the lessee’s side, such as:

• Duty to disclose material defects to the lessor

• Obligation to pay rent on time

• Maintain and return property in good condition (except for normal wear & tear)

• Allow inspections by lessor or their agents

• Repair damages caused by lessee’s own negligence or misuse

• Notify the lessor of challenges to their title

• Use property strictly for authorized purposes

• Prohibition on unauthorized construction or waste

4. Lease Dispute Resolution and Litigation

Our expert litigation team assists clients in resolving lease disputes through:

• Negotiation and out-of-court settlements

• Civil suits for enforcement or cancellation of lease agreements

• Legal notices and representation before regulatory bodies or courts

• Representation in contractual breach or recovery of possession matters