UAE Trends and Developments Contributed by: Victoria Mesquita, Ganna Vlasenko and Aran Au, Curtis, Mallet-Prevost, Colt & Mosle LLP
True sale under the Factoring Law Outside of the Securitisation Law, future receiva - bles are generally recognised to be subject to a true sale under the UAE Federal Law No 16 of 2021 in relation to factoring and the assign - ment of receivables (the “Factoring Law”). How - ever, while the Factoring Law does not require registration of the sale of the receivables in the Emirates International Collateral Registry (the “EICR”), there are obvious advantages to doing so. These are as follows. • Article 7 (enforceability vis-à-vis third par - ties by registration and priority of assignee’s rights) of the Factoring Law states that the enforceability of assignments against third parties is as set out in the UAE Federal Law No 4 of 2020 on guaranteeing the rights relating to movables (the “Movables Security Law”). • Article 8 (priority among competing claimants) of the Factoring Law provides that the provi - sions of the Movables Security Law relat - ing to priority of claims over the receivables applies to the priority of claims under a sale of receivables. There are also advantages to notifying the rele - vant counterparties of the sale of the receivables to the issuer. Where a notice of assignment is sent to the receivable’s debtor, that receivable’s debtor may only effect a good discharge of the receivable if it settles the receivable in accord - ance with the notice of assignment. The notice of assignment therefore serves to ensure that the assignee receives the proceeds from the receivable’s debtor directly, even without an acknowledgement of assignment which may be operationally cumbersome to obtain, in particu - lar in securitisation structures with a reinvest - ment or accumulation period for the purchase of new assets.
As a consequence, the true sale of receivables under the Factoring Law remains rather cum - bersome insofar as both the registration of the sale in the EICR and a notice of assignment are preferable. Special purpose vehicles UAE securitisations are typically structured using a special purpose vehicle (SPV) incorporated in the Cayman Islands, and more recently in the UAE’s special economic zones: the Abu Dha - bi Global Market (the “ADGM”) and the Dubai International Financial Centre (the “DIFC”). The UAE Commercial Companies Law No 32 of 2021 introduces the concept of an onshore SPV, but issues such as non-consolidation and the appli - cation of the concept of the “trust” under UAE law will have to be considered. There is still no concept of an incorporated cell company or similar, which is a key feature of many common law jurisdictions for multi-issu - ances, under onshore UAE law. Regulated activities One of the reasons why secured loan securiti - sations structures are often used in lieu of true sale structures is the UAE regulatory environ - ment which typically requires specific licensing for the conduct of activities onshore. As a conse - quence, foreign SPVs would typically be barred from performing commercial activities in the UAE, such as leasing of equipment or vehicles or holding loans and credit card debt. In particular, financial activities, including finance leases, are heavily regulated. Regulation is, in particular, a major obstacle for retail securitisations, as only UAE Central Bank licensed financial institutions are permitted to service these portfolios.
459 CHAMBERS.COM
Powered by FlippingBook