Abu Dhabi: The UAE has passed a draft law on securing movable assets, which will now apply to tangible and intangible assets. The scope of the law also extends to existing and future assets as well.
The law covers rights to claim payments on funds deposited with financial institutions and the right to enforce obligations of counterparties under a contract.
The draft scraps Law No. 20 of 2016 on the Mortgage of Moveable Property to Secure Debt.
What is covered?
Under the new version, receivables, credit balances with banks and other financial institution, written instruments transferable by delivery or endorsement, including commercial paper such as promissory notes, bank certificates and bills of lading; vehicles, and equipment are covered. (Plus, animals and animal products and agricultural crops come under the purview.)
However, the law excludes such movable assets that guarantee the rights of wages, worker benefits, public funds, endowment funds, and funds held by diplomatic and consulates, and international government organisations.
The law states that “secured obligations” are required, which include all current and future obligations of the debtor/borrower. There is a requirement to specify an upper limit of the amount secured, with the bylaws determining this threshold.
Under the law, a "security interest" would be enforceable against third-parties and have priority over other debts. The first security interest registered will have priority over others coming later.
A new registration system called the Register for Rights Over Movable Assets is to be established based on proposals from the finance minister.
Offenders may face a prison time or a fine of not more than Dh60,000, or both.