UAE Law and Practice Contributed by: Duncan Pickering, Nicola de Sylva, Sean Cope and Marta Almeida, DLA Piper Middle East LLP
Security Over Shares Where a special purpose company (SPC) has been established for the purposes of a real estate investment or development, it may be possible for the financiers to take security over the shares of that SPC. As 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 depending 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 notarisation and can only be grant - ed 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 corporate 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 Commercial 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 finan - cial institution that is licensed by the UAE Cen - tral 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 foreign lender under a security document or loan agreement include:
objective is to invest in strategic real estate in the UAE (and/or the wider GCC area) and to grow a real estate portfolio for the fund’s investors. Another alternative is to access the debt capi - tal markets, through either bonds or sukuk (also known as Islamic bonds). 3.2 Typical Security Created by Commercial Investors Security over real estate and real estate interests (such as usufruct or musataha) can be taken by way of a mortgage that is registered at the rel - evant land department. Each Emirate (and free zones) have specific laws dealing with mortgag - es, and mortgages are generally governed by the Civil Code. Generally speaking, mortgages over real estate may only be granted in favour of a bank that is licensed by the UAE Central Bank. Movable Property In 2020, the UAE issued a new Federal Law No 4 of 2020 (the “Movable Assets Mortgage Law” ) as a regulatory regime, which provides that a wide variety of assets (such as accounts, trade payables or receivables, or equipment including future property) can be secured without demon - strating possession – provided that the security is registered on the applicable security register. The Movable Assets Mortgage Law provides a greater level of certainty than before in the con - text of real estate financing transactions and also enables security to be taken over movable property that is similar in effect to a debenture or “floating charge” . In terms of registration, the current applicable security register where such security over movable property is to be regis - tered is the Emirates Integrated Registries Com - pany.
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