UAE Trends and Developments Contributed by: Victoria Mesquita, Ganna Vlasenko and Aran Au, Curtis, Mallet-Prevost, Colt & Mosle LLP
for reducing exposure to the UAE real estate market. Securitisations can have a transformative effect, in that they are generally used to transform an asset which is not a debt security (such as loans, credit card receivables and other receivables, rentals or mortgages) into a marketable debt security. It is this transformative feature that makes securitisations so incredibly useful at allocating capital and matching the risk-return profiles of investors with originators seeking finance. This gives companies access to a pool of investors who would otherwise be unreach - able, in particular at a time where investment funds, pension funds, insurance companies and family offices have become key investors in pub - lic and private placement issuances. Securitisations in the UAE Historically the UAE has not been an active mar - ket for securitisations. Some of the securitisa - tions that stand out include the Tamweel ABS sukuk (2005 and 2007) and Sun Finance sukuk (2009). Both issuances were public and were issued prior to the global financial crisis and since then securitisations have been predomi - nantly privately placed. However, the securitisa - tion market in the UAE remains relatively small. There are legal and tax reasons for caution. This guide will examine some of the legal obstacles to securitisation structures in the UAE. True sale True sale under the Securitisation Law True sale is one of the most important factors in a securitisation. However, the true sale of receivables has not, until now, been recognised under UAE law (and for this reason many of the UAE securitisations have been undertaken under a secured loan structure). The UAE Securities and Commodities Authority (the “SCA”) recently
issued Chairman of the Board of Directors’ Res - olution No 22/RM of 2023 regulating securitisa - tion and all parties to securitisation transactions or operations in the UAE (the “Securitisation Law”). Article 5 of the Securitisation Law expressly rec - ognises the principle of true sale of securitised assets, differentiating a sale of receivables from a financing transaction. This is a very welcome development in UAE law which should provide a more certain environment for UAE-based secu - ritisations. However, under Article 4 of the Securitisation Law, the sale of receivables must be notified to the receivables’ debtor. Failure to notify means the receivables’ debtor may discharge the debt by payment to the originator. The scope of the Securitisation Law is limited. It applies to public and private joint stock com - panies whose shares are listed on the market exchanges, where the securitised notes are to be listed in the UAE, or where the securitisation transaction is conducted through a securitisa - tion entity regulated by the SCA. The Securitisa - tion Law does not apply to internal securitisation transactions conducted by banks or financial institutions, which are regulated by the UAE Cen - tral Bank when the securitised notes are issued on a private placement basis, or securitisation transactions conducted by government entities and fully government-owned companies. In addition, the Securitisation Law requires reg - istration with the SCA, which is time-consum - ing and requires lengthy disclosure. Privately placed securitisations will therefore fall outside the application of the Securitisation Law and the concept of true sale advanced under it.
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