The Strategic Guide to Financing and Refinancing Consultation in the UAE
A lender that misses one registration is left holding a contractual promise instead of a proprietary right, which is why a UAE financing has to be mapped asset by asset before the term sheet is agreed.
Security over a UAE asset is created and perfected where the asset sits, not under the law chosen in the facility agreement, and it is registration, not the security agreement, that fixes priority against other creditors. The guide covers perfection onshore and in the DIFC and ADGM, sequencing releases and re-registrations so a refinancing keeps its place, and drafting for enforcement day.
Reviewed by Mohamed Noureldin, Founder, Managing Partner & Senior Legal Consultant
Financing in the UAE is straightforward to document and easy to enforce badly. The credit terms are usually settled quickly; what determines whether a lender recovers, and whether a borrower keeps control of its business through a downturn, is the security package, the registrations that perfect it, and the forum in which it has to be enforced. Refinancing compounds the point, because it asks whether existing security can be released, re-taken and re-registered without losing priority.
The complication is jurisdictional. A UAE group typically holds assets across onshore emirates and one or more free zones, including the DIFC and ADGM, which are separate common-law jurisdictions with their own courts and their own financial regulators, the DFSA and the FSRA. Security over each asset is created and perfected under the law of the place where that asset sits, not under the law chosen in the facility agreement.
Related: Our legal consultation services cover cross-border financing questions for companies and individuals in the UAE.
The legal framework for financing in the UAE
Onshore, the core commercial statute is Federal Decree-Law No. 50 of 2022 on commercial transactions, which replaced Federal Law No. 18 of 1993. It sits alongside the Civil Code, which governs contract formation, interpretation and the general law of obligations. Banks and finance companies lending onshore are licensed and supervised by the Central Bank of the UAE.
Security is created asset by asset. A mortgage over land or a unit is registered with the land department of the relevant emirate. Security over movable assets — receivables, inventory, plant, bank accounts — is registered in the federal register for security rights over movables, and it is registration, not the security agreement, that fixes priority against competing creditors. A pledge over shares in an onshore company is recorded with the licensing authority and reflected in the company's register. Missing any one of these registrations leaves a lender holding a contractual promise rather than a proprietary right.
Related: See our financing and refinancing consultation services, and our UAE labour law guidance where a transaction affects staff.
In the DIFC and ADGM the position differs in kind. Both operate common-law security regimes with their own registers of security interests, both allow floating security over a company's assets, and both give their courts jurisdiction over enforcement. Security taken in those jurisdictions is generally quicker to enforce, because remedies such as the appointment of a receiver or sale by the secured party are available where the documents provide for them, rather than requiring a court-supervised sale.
Related: Explore our financing and refinancing advisory for facilities documented across onshore and free zone entities.
Refinancing: what breaks, and how to avoid it
A refinancing is not a new facility on old paper. Four issues account for most of the difficulty.
- Priority on release and re-take. If existing security is discharged before replacement security is registered, any intervening registration by another creditor takes priority. Sequence the releases and the registrations, and where the incoming and outgoing lenders differ, document the mechanics in a release timed to completion.
- Prepayment terms. Break costs, prepayment fees and make-whole provisions in the outgoing facility should be quantified before the refinancing is priced, not discovered at payoff.
- Consents. Change-of-control clauses in leases, licences, offtake contracts and joint venture agreements are frequently triggered by a refinancing or a new share pledge. Collect the consents before signing.
- Amend-and-restate against new money. Amending an existing facility preserves the security chain but limits how far the terms can move; a wholly new facility gives freedom but restarts registration and perfection. Choose deliberately.
Where the borrower is under real financial stress the analysis changes again: directors need to consider their duties under the applicable insolvency regime before agreeing new security or preferential payments, because transactions entered into in the run-up to a formal insolvency can be challenged.
Document for the enforcement day
Events of default should be objectively verifiable rather than dependent on the lender's opinion, because a court asked to enforce will want the breach evidenced. Financial covenants should be tied to a defined accounting basis and a stated testing date. Where the security includes an assignment of receivables or of insurance proceeds, notice to the counterparty or the insurer is what makes the assignment effective against them.
Language and forum matter practically. Onshore court proceedings are conducted in Arabic and documents must be translated by a sworn translator, so preparing an Arabic execution version of the key security documents avoids delay and arguments about the translation. Where arbitration is chosen, Federal Law No. 6 of 2018 governs arbitrations seated onshore, and the parties should confirm that any institution named in the clause still exists and administers cases.
Shari'ah-compliant structures — murabaha, ijara, wakala, sukuk — add a further layer. The security and enforcement analysis is the same, but the profit and default provisions must be consistent with the approved structure, and the relevant Shari'ah supervisory approval should be obtained before, not after, the documents are agreed.
Practical steps for UAE businesses
Map the group before the term sheet. Identify which entity owns each material asset, which jurisdiction it sits in, and what registration is needed to perfect security over it. That map drives the cost and timetable of the financing more than the margin does.
Model the tax position. Corporate tax applies under Federal Decree-Law No. 47 of 2022 for financial years starting on or after 1 June 2023, with 0% on taxable income up to AED 375,000 and 9% above that, and the regime restricts the deductibility of financing costs. A structure that works before tax may not after it, and free zone entities should confirm whether their income remains qualifying.
Keep the registers current. Security registrations, corporate registers and ultimate beneficial ownership filings should be updated whenever the financing changes; a lender's due diligence on the next transaction will start there.
Finally, build the exit in at the outset. Facilities that anticipate refinancing — with clean prepayment mechanics, a defined release procedure, and security documents capable of assignment to an incoming lender — refinance quickly and cheaply. Those that do not turn every maturity into a negotiation conducted under time pressure.
Related Services: Explore our financing and refinancing consultation and refinancing advisory 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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