Mortgage of Movable Assets

timthumb

In a move that will be welcomed by financial institutions across the UAE, Federal Law No. 20 of 2016 concerning the Mortgage of Movable Assets to Secure a Debt (“Law”) has been passed. We are not aware as yet when the Law will be published (if not already), however the Law will come into force 90 days from publication. The Law fundamentally changes the ability of lenders to take effective security over move-able assets, a problem both lenders and debtors have struggled with for some time.

The Law introduces direct enforcement procedures through the summary judge meaning streamlined and quicker enforcement remedies for secured parties.

The enforcement provisions in the Law also give the court wide powers to either permit the mortgagee to sell the mortgaged assets at a price of not less than the market price without following the sale procedures under the Civil Transaction Law (i.e.no public auction required) or to allow the mortgagor to sell the mortgaged assets if it is proven that the mortgagor can obtain a better price (under the supervision of the court).

The Law penalizes the mortgagor, the mortgagee, the debtor or the possessor of the mortgaged assets in case of the disposal or damaging the mortgaged assets contrary to the mortgage agreement. The penalty is the imprisonment and fine of not less than AED 30,000. If such criminal actions are committed by a corporate entity, the penalty shall be applied to the board members, the joint shareholders and appointed employees at the corporate entity committing such acts.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s