UAE Law and Practice Contributed by: Duncan Pickering, Nicola de Sylva, Sean Cope and Marta Almeida, DLA Piper LLP
a general rule, it is possible to take security over the shares in a company, including onshore LLCs. There are restrictions on which entities can own real estate, and the process for share pledges can differ depend - ing on where a company is registered. Generally, if the SPC is incorporated in onshore UAE or in certain free zones, the share pledge would be subject to notarisa - tion and can only be granted to locally licensed banks. For cross-border financing, a foreign lender would be required to appoint a locally licensed bank that will act as a local security agent. Guarantees Guarantees are common in the UAE, including corpo - rate and/or personal guarantees given in relation to a real estate financing. These kinds of guarantees are specifically codified in the Civil Code and the Com - mercial Code. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders The UAE Central Bank’s rules and regulations provide that a party wishing to hold security over real estate must be a bank, company or financial institution that is licensed by the UAE Central Bank to provide property finance. Foreign (unlicensed) lenders will often appoint a locally licensed security agent to act on their behalf in relation to security over real estate assets. The restrictions on repayments being made to a for - eign lender under a security document or loan agree - ment include: • restrictions or measures designed to counteract money laundering and/or the funding of terrorist activities; and • transactions involving certain sanctioned countries or blacklisted entities. The UAE Central Bank may impose additional restric - tions. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security There are no specific taxes that would apply in the UAE; however, the following fees are payable in rela - tion to granting and enforcing security over real estate:
• a bank property valuation fee; • notarial fees; • a mortgage registration fee;
• notarial fees to give notice of default (Dubai); • a publication fee and a public auction fee if a secured asset is sold by public auction; and • court fees for enforcement of a security interest. 3.5 Legal Requirements Before an Entity Can Give Valid Security It is not possible for a commercial company, or any of its subsidiaries, to provide any financial aid (such as loans, security or guarantees) that will assist a buyer in acquiring its shares. Prior to the issuance of the Federal Decree Law No (32) of 2021 on Commercial Companies, the UAE Ministry of Economy issued guidance by way of Ministerial Resolution No (272) of 2016 confirming that limited liability companies are exempt from such restrictions. In any event, as a mat - ter of good practice, all companies would be advised to demonstrate that there is a corporate benefit to the company from granting any security. 3.6 Formalities When a Borrower Is in Default A lender is entitled to satisfaction of the debt from the mortgaged property when the debt falls due, provided that the mortgage has been properly registered. Upon a default in payment by the borrower, and pro - vided that the mortgage has been registered, the lender must give 30 days’ notice to the debtor by registered mail (Abu Dhabi) or through a notary public (Dubai) before commencing execution proceedings. If the payment is not made within such 30-day period, the magistrate of summary justice (in Abu Dhabi) or the execution judge (Dubai) shall, at the request of the lender, order an attachment against the mortgaged property and shall, at the request of the lender, issue a decision enabling the mortgaged property to be sold at public auction. The court may postpone the sale of the property by public auction for a period of up to 60 days if it is of the opinion that the mortgagor may be able to set - tle the debt within this period, or that the sale of the property would cause “serious damage” (Abu Dhabi) or “substantial damage” (Dubai) to the mortgagor.
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