The Federal Cabinet has recently issued Cabinet Decision No. 29/2021 regarding the Executive Regulations (the “New Executive Regulations”) for the Federal Law No. 4/2020 (the “New Movables Pledge Law”).
The New Movables Pledge Law, which was promulgated last year, stated that until the issuance of New Executive Regulations, the old executive regulations (the “Old Executive Regulations”) in place for the earlier Federal Law No. 20/2016 (the “Old Movables Pledge Law”) will continue to be in full force and effect.
The New Executive Regulations have now replaced the Old Executive Regulations.
- The Emirates Movables Collateral Registry (“EMCR”), an online security registry which was established pursuant to the Old Movables Pledge Law to register the security interests over movable assets, has now been renamed as the Emirates Integrated Registries Company (“EIRC”). The existing security holders do not need to register their security interests with EIRC. All existing security interests duly recorded in the EMCR will continue to remain recognised by EIRC and be in full force and effect.
- The registration of security interest will not be enforceable where an incorrect identity information is included in the application to EIRC.
- The EIRC will not be responsible for the correctness or accuracy of any information entered by the applicants when recording the security interests in EIRC’s database. However, EIRC may reject an application if any mandatory information is not provided by the applicants.
- A concept of “control agreement” has been introduced. This control agreement will be between pledgor, pledgee and financial institution (or security agent) where the parties will agree that the financial institution will follow the pledgee’s instructions with respect to the balance of the credit or deposit account without obtaining any further consent from the pledgor.
- A lender can now seek out of court enforcement provided it has sent a legal notice to the borrowers/pledgors in form that meets the following requirements:
- intention to take possession of the pledged property and to enforce against it;
- identification of the pledgor and the pledged property against which enforcement will be made;
- the method of enforcement against the pledged property; and
- the time and place of enforcing against the pledged property.
Authored by Musab Iftikhar