How Proper Financing and Refinancing Consultation Structuring Saves Millions
Perfection, covenant monitoring and maturity planning are deliverables owned by named people, not formalities to be tidied up after completion.
Security from an onshore obligor is perfected on the federal movables register, at the land department, or on the company's record with the licensing authority; a DIFC or ADGM obligor follows that jurisdiction's own register and insolvency regime, so a group financing has no single perfection step. Also: covenant definitions worth negotiating, and what to settle before a refinancing.
Reviewed by Mohamed Noureldin, Founder, Managing Partner & Senior Legal Consultant
Most of the money lost on a financing in the UAE is lost quietly, in three places: security that was granted but never perfected, covenants that nobody inside the borrower was tracking, and a refinancing conversation opened at the last possible moment instead of well ahead of maturity. None of these are exotic legal problems. They are administrative failures with financial consequences, and they are avoidable at the drafting stage.
This article sets out what has to be right in a UAE financing document, what changes when the borrower or the security sits in the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM), and how to approach a refinancing from a position of choice rather than necessity.
Related: Our financing and refinancing team reviews facility documents from the borrower's side before signature.
Security that actually works
A security interest that is validly granted between the parties but not registered where the law requires is worth very little against a liquidator or a competing creditor. Where the security is registered depends on what is being secured and where the obligor sits, and the register is not the same for each.
Security over movable assets granted by an onshore entity is recorded on the federal movables register, and it is that registration, not the security agreement, which establishes priority against third parties. Mortgages over real property are registered with the land department of the relevant emirate. Share security over an onshore company is annotated on the company's records with the relevant licensing authority. The DIFC and ADGM each operate their own security registers and their own insolvency regimes, so security granted by a DIFC or ADGM obligor follows that jurisdiction's rules, not the federal ones.
Where a financing takes security from obligors in more than one of these systems, and most group financings do, there is no single perfection step. Each obligor and each asset class needs its own filing, made within whatever period the relevant register requires, with someone responsible for confirming that each one was completed. Ask for the registration evidence at completion. A closing checklist marked "to follow" has a way of staying that way.
Two further points are worth checking in every UAE facility. Security cheques remain common in local lending practice, and the route for enforcing a dishonoured cheque has changed under the Commercial Transactions Law, Federal Decree-Law No. 50 of 2022 — so confirm that your documents reflect how enforcement now works rather than how it used to. And confirm what happens to the security on a refinancing: whether it is released and retaken, or amended and preserved, affects both priority and cost.
Covenants, and who is watching them
Financial covenants, information undertakings and events of default are negotiated hard and then, frequently, filed. The borrower's finance team never sees the schedule, the ratios are tested against definitions nobody has read, and the first indication of a problem is a notice from the lender.
Three habits prevent this. Model the covenants against the borrower's own forecast before signing, at a downside case rather than the plan, and see where the headroom disappears. Extract every reporting obligation into a calendar owned by a named person, because a missed certificate is an event of default in its own right and hands the lender leverage it did not pay for. And check the definitions: what counts as debt, what counts as EBITDA, and which group members are included are all negotiable, and are where the real covenant lives.
On the same point, the corporate tax regime introduced by Federal Decree-Law No. 47 of 2022 limits the deductibility of net interest expense. The after-tax cost of a facility is therefore not simply its margin, and a debt structure designed before that regime applied may no longer be the efficient one. That analysis belongs in the financing decision, not in the tax return.
Refinancing from choice, not necessity
A refinancing negotiated well ahead of maturity is a commercial negotiation. The same refinancing negotiated once the facility is about to fall due is a rescue, and it is priced as one. The single most valuable habit in corporate treasury is to open the conversation early.
Related: Our refinancing advisory practice works on maturity planning well before the facility falls due.
Before approaching the market, establish what is actually being refinanced and on what terms it can be moved. Check whether the existing facility carries prepayment fees or break costs, whether any hedging has to be unwound and at what cost, whether existing security can be transferred to a new lender or must be released and retaken, and whether any consents are required from other creditors, joint venture partners or regulators. Each of these has a lead time, and each is easier to price when there is time to walk away.
Where the business is refinancing because it cannot meet the current terms, say so early. Lenders in this market are generally willing to reset a covenant, extend a maturity or reschedule amortisation when they are approached before a default rather than after one. The negotiating position after an event of default has been called is materially worse, and the documents will reflect it.
Strategic considerations for UAE businesses
- Know which system each obligor sits in. Onshore, DIFC and ADGM have different security registers, different perfection rules and different insolvency regimes. A group financing usually touches more than one.
- Treat perfection as a deliverable, not a formality. Collect registration evidence for every filing at completion, and keep it with the facility documents.
- Put the covenant schedule in the hands of the people who can breach it. Finance, not legal, is where a reporting deadline is met or missed.
- Diarise maturity well in advance. Refinancing options narrow sharply as a facility approaches its final repayment date.
- Price the whole cost. Margin, fees, break costs, hedging, security retaking and the tax treatment of interest together determine what the money actually costs.
None of this depends on a clever structure. It depends on knowing where each filing went, what each covenant requires, and when the facility comes due, and on having answered all three before someone else asks.
Related Services: Explore our Financing and Refinancing Consultation and debt documentation services for practical legal support in this area.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.
Nour Attorneys Team
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