UAE Law and Practice Contributed by: Arsalan Tariq, Nil Acar and Ahmed Kamran, BSA LAW
2. Authorisation 2.1 Providing Financing to a Company Under the Federal Law No 14 of 2018, namely the Banking Law, only institutions licensed by the UAE Central Bank may engage in commercial lending onshore. Licensed institutions include commer- cial banks, Islamic banks, finance companies and exchange houses. These entities are authorised to provide loans, accept deposits and engage in related banking activities. Foreign lenders may provide loans to UAE corporates on a cross-border basis without a licence, provided they do not establish a local presence, actively solicit the public, engage in promotional activities or accept deposits. In practice, many international banks oper- ate through representative offices or use DIFC/ADGM platforms for regional coverage. Within the DIFC and ADGM, the DFSA and FSRA respectively license firms to provide “credit” or “pro- viding finance”. Both regimes operate under common law principles and allow both bank and non-bank institutions to extend financing to corporate borrow- ers. Intercompany loans within corporate groups are not regulated, provided they do not amount to carry- ing on a lending business. 3. Structuring and Documentation 3.1 Restrictions on Foreign Lenders Providing Loans Foreign banks may lend to UAE borrowers without triggering a local licence requirement. A local licence is required in order to maintain an ongoing pres- ence and to carry out active promotion or solicitation towards the UAE residents. 3.2 Restrictions on Foreign Lenders Receiving Security There is no prohibition for foreign lenders to receive guarantees, although these must be in writing and specify the secured obligations.
Security Interests The status changes depending on the type of the security. Under the Federal Law No 4 of 2020 on Securing the Rights in Moveables (the “Moveables Security Law”), security over movable assets can be granted directly to foreign creditors. Such movable assets include receivables, accounts, equipment and work tools, inventory and any other movable assets. Perfection is achieved through the Emirates Integrated Registries Company (EIRC). Real Estate Mortgages Only locally licensed banks may be registered as mortgagees, so foreign lenders typically appoint a local security agent to hold real estate security. A business/commercial mortgage (over the entirety or defined parts of a commercial enterprise) may only be granted in favour of locally licensed banks. Share Pledges Whether foreign lenders can hold the share pledge directly changes as depending on whether the con- cerned company is incorporated onshore or in a free zone. The rules in free zones change depending on the free zone. In DIFC and ADGM, it is possible for for- eign lenders to hold share pledges directly. In onshore UAE, the share pledges will need to be held by local security agents. 3.3 Restrictions and Controls on Foreign Currency Exchange There are no foreign exchange restrictions in the UAE. The dirham (AED) is freely convertible and is maintained at a long-standing fixed exchange rate against the US dollar (AED 3.6725). Capital and cur- rent account transfers can be made in and out of the country without regulatory approvals. 3.4 Restrictions on the Borrower’s Use of Proceeds Borrowers are not subject to statutory restrictions on how loan or bond proceeds are applied, unless the financing is structured under Islamic principles. In such cases, the application of funds must comply with Sharia requirements, meaning that the proceeds
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