Anew regulatory regime for financial leasing companies was approved in broad terms by the Macau Legislative Assembly on May 31, 2018. The new law proposes to repeal and redefine the previous regime (determined by the Decree-Law no. 51/93/M of September 20, enacted in January 1, 1994) , promote the stable development of this industry in the Macau Special Administrative Region (MSAR), and attract more foreign companies (from Mainland China especially).
The draft law defines financial leasing companies as financial institutions that work in this area. Under the current law these companies are considered credit institutions, which are more strictly regulated. Subsidiaries of credit institutions engaged in financial leasing are defined as financial institutions whose share capital is wholly owned by banks or leasing companies authorised to carry out business in the MSAR and whose corporate purpose is the holding of and management of leasing projects. Both financial leasing companies and subsidiaries engaged in financial leasing continue to be subject to the financial supervision of the Monetary Authority of Macau (AMCM).
According to the draft law, the activity of the companies and subsidiaries indicated above can only encompass the following: financial leasing; disposal and acceptance of the assignment of the leased asset; management of the leased asset; sale and treatment of the leased asset; foreign exchange transactions; foreign exchange swaps and currency swaps required to carry on the business; and other operations authorised by the AMCM. As financial leasing companies and subsidiaries with financial leasing activites are not credit institutions, they are not allowed to receive deposits or other funds repayable by the public.
Financial leasing companies must be incorporated as a public limited company (sociedade anónima) or as a private limited company (sociedade por quotas), and their incorporation depends on prior authorisation of the Chief Executive, to be granted by executive order and after consultation with the AMCM.
The changes in the legal regime for financial leasing companies includes the reduction of the mandatory minimum share capital of said to MUPP10 million (instead of MUP30 million), and the requirement that the administrative body be composed of at least one member (who is expected to reside in the MSAR and have appropriate capacities, qualities and experience for the role). The draft law also stipulates as a rule that any holding of over 10% of the share capital or of voting rights are subject to the prior approval of the AMCM, and the supervising authority can oppose the acquisition or the increase in share capital if it deems the shareholder not to have adequate conditions for the sound and prudent management of the financial leasing company.
The proposed penalty regime varies according to the seriousness of the administrative offence, which can range from a fine of MUP10,000 to MUP500,000 (for minor violations), to fines of up to MUP5 million (for the unauthorised practice in the MSAR of operations reserved for leasing companies).
The legal regime of financial leasing companies was approved more than 20 years ago, and its review is appropriate given the changes in the MSAR economy and the proposed integration with the Pearl River Delta Region.
The new draft law on the legal regime for financial leasing companies is a welcome proposal for energising the local economy. The reduction in requirements on the composition of the administrative body of financial leasing companies and the lack of clarity of certain legal requirements, such as the residence of said administrator in the MSAR, however, must be debated at the Macau Legislative Assembly.
Although the version analysed herein is, at the date of the article, solely a proposal for the law and the new regime is yet to be approved in specialty, its final version is most likely to be in accordance with the proposal.