The New Law (as defined below) was issued on 28 May 2020, came into effect in June 2020 and replaces the Old Law (as defined below). This memorandum is the second in a series of four memoranda and summarises the positive changes brought in by the New Law. Our previous memorandum covered a summary of issues that have not changed and our subsequent memoranda will cover key issues for financiers and (for those wanting to get into the detail) a more detailed summary of the New Law.
UAE federal law No.20 of 2016 in relation to the charging or pledging of movables as security for indebtedness (the Old Law) was a significant development in the UAE banking and finance legal landscape. It gave rise to a significant change in the practice of taking security over movable property in UAE banking and finance transactions.
UAE federal law No.4 of 2020 in relation to securing the rights in movables (the New Law) repealed the Old Law (as amended by UAE federal law No.24 of 2019 (the Old Amendment Law)). It makes further positive changes to the Old Law including:
- confirmation of the ability to take security over future property;
- the ability to take security to secure future liabilities and potential all-moneys security up to a specified cap;
- the ability to take security over insurance proceeds (and not just insurance proceeds that relate to assets that are subject to a security right);
- the provision of an additional self-help remedy for receivables, bonds and accounts in credit;
- the potential ability to take security over foreign bank accounts (although there remain questions as to how this will work in practice);
- the removal of certain automatic cancellation of registration events and reduced liability for security agents for failure to cancel any registration; and
- clarification that any security right remains effective following the commencement of any process under UAE federal law No.9 of 2016 in relation to bankruptcy (as amended) (the Bankruptcy Law).
The rest of this memorandum sets out the positive changes brought in by the New Law. To download the full article, click here.