3.3 Management of Capital Invested in Assets 35series of regular payments (including an interest charge) and, after repayment, will
become the owner.
The hire-purchase company retains a secure position regarding the insolvency
of the hiree, provided that the value of the asset at issue remains higher than the
repayment sum outstanding and does so for the duration of the agreement.^53
Hire-purchase can be governed by special provisions of law.^54 Consumers are
protected by the Consumer Credit Directive.^55
In some jurisdictions, a leasing agreement can be regarded as a hire-purchase
agreement where it is clear from the beginning that the hiree/buyer will become
the owner of the asset after making all agreed payments. A finance lease that con-
tains provision for the lessee to acquire the equipment may turn turn the transac-
tion into a hire-purchase agreement.^56
This could influence the rights of the parties. For example, Finnish hire-
purchase law provides that the buyer may claim the payment of the cash price but
not the payment of interest or fees unless the latter have been disclosed to the
buyer in a written agreement that fulfils certain requirements as to form,^57 and re-
possession of the object is subject to certain restrictions.^58
3.3.4 Sale and Lease-back
The purpose of a sale and lease-back transaction is to release capital. Sale and
lease-back enables the firm to raise funds through the sale of existing assets to a
financial intermediary but it also enables the firm to continue using those assets by
virtue of a lease. The firm thus secures funds and only has to pay rental charges
which are generally tax deductible. The access to liquidity can outweigh the obli-
gation to pay rental charges.
A wide range of assets can be sold and leased back. Sale and lease-back transactions are of-
ten used in real estate finance. HSBC, an international bank, offloaded its Canary Wharf
HQ in London to a Spanish property family for £1.1 billion in 2007. After the sale, the buy-
er received rental income from the HSBC building.^59 The playing rights of many Premier
League football players have been owned by the leasing arm of Barclays Bank plc, rather
than by the club concerned. Rio Ferdinand, a famous England defender, was leased from
Barclays Bank by Leeds United FC when he played for them.^60 Particular forms of sale and
(^53) Finch V, Corporate Insolvency Law. Perspectives and Principles. Cam U P, Cambridge
(2002) pp 111–112.
(^54) See also DCFR IV.B.–1:101(3).
(^55) Directive 2008/48/EC on credit agreements for consumers and repealing Council Direc-
tive 87/102/EEC. See, for example, § 491 BGB and § 503 BGB.
(^56) The Law Commission, Registration of Security Interests, paragraph 6.15.
(^57) Laki osamaksukaupasta (91/1966) (the Hire Purchase Act of 1966), § 2.
(^58) § 2 - § 6 of the Hire Purchase Act of 1966.
(^59) Brodie S, HSBC building hits the heights of £1.1bn, The Telegraph 1 May 2007.
(^60) McLaney E, Business Finance. Sixth edition. Pearson Education, Harlow (2003) p 238,
citing Sunday Telegraph, 14 July 2002.