145
Figure 4.15: Types of Lease Certificates Approved by the Communiqué
Source: Communiqué on lease certificates, CMB
Note: Issuance under ownership-based lease certificates and partnership-based lease certificates require 90% of
the fair value of the assets and rights to determine the issuance limit.
Based on historical lease certificate issuances, ALCs were established by banks and financial
intermediaries. Some of the lease certificates issued by the ALCs are originated by corporates
that use the ALCs as a funding conduit. This has raised solvency questions from investors
where one ALC has several lease certificate issuances that have multiple originators. According
to the Communiqué, ALCs are allowed to purchase assets from different source companies. A
mandatory pre-emption right in favour of the source company is created in the land registry
when the assets are transferred to the ALCs. To protect the interest of investors, a provision in
the articles of association of the ALCs states if a commitment to the lease certificate holders is
not fulfilled, then the assets behind the lease certificates shall be sold and the sale proceeds
shall be distributed to lease certificate holders on a pro-rata basis according to their
investments. There are other governing restrictions imposed on the operations and activities
of the ALCs. Table 4.23 lists the number of lease certificates issued by corporates from 2010 to
August 2017.