Monday 17, July 2017 by William Mullally

MoF signs cooperation agreement to assign the ‘Mortgage of Movable Property’ project

 

MoF signs cooperation agreement to assign the ‘Mortgage of Movable Property’ project to Emirates Development Bank

 

 

The agreement was signed by HE Khalid Ali Al Bustani, Assistant Undersecretary of International Financial Relations Sector at MoF and Rashid Mahboob Misbah, Acting CEO of Emirates Development Bank, in the presence of a group of executive directors and heads of departments at the Ministry.

The UAE's Ministry of Finance (MoF) signed a cooperation agreement with Emirates Development Bank (EDB) to create an electronic register to publicise related rights to ‘Mortgage of Movable Property’ under the management of EDB. The agreement, which was signed in the Ministry’s premises in Dubai, aims to provide a legal and legislative environment for companies and projects to pledge their movable properties as security for loans from banks and financial institutions. The register grants the public access to the database.

The agreement was signed by HE Khalid Ali Al Bustani, Assistant Undersecretary of International Financial Relations Sector at MoF and Rashid Mahboob Misbah, Acting CEO of Emirates Development Bank, in the presence of a group of executive directors and heads of departments at the Ministry.

HE Khalid Ali Al Bustani noted that establishing an electronic register to publicise related rights to ‘Mortgage of Movable Property’ in order to allow companies and projects to register their movable property as security for loans, provides security rights over immovable property, specifically that most of the lending activities in the country are real estate loans.

HE said the ‘Mortgage of Movable Property’ provides financing to the legal and legislative environment that allows companies, including SMEs, to pledge their movable properties as security for loans from banks and financial institutes. The product’s introduction comes parallel to establishing a legal and regulatory framework. It is also feasible for the concerned parties and the public to view information that is published in the register, based on the Federal Law No. (20) of 2016 and its executive regulations.”

HE added: “This project strengthens the ability of financial institutions to expand their lending operations against movable securities and the use of movable funds that include, for example, inventory and receivables as collateral. Economic analysis shows small and medium-sized enterprises are more likely to access finances in countries that adopt the secured transaction law. This in turn supports the achievement of a better credit rating, helps to increase their competitiveness in the sector whilst also improving the stability of the financial system; in virtue of the legislative framework organised for secured lending operations”.

MoF has assigned Emirates Development Bank the task create an electronic register to publicise related rights to ‘Mortgage of Movable Property’. EDB’s role will comprise implementing, developing and supporting developmental projects in the country inclusive of industrial, real estate, crafting and agricultural projects, in addition to facilitate real estate credit allocated to the construction, maintenance and development of buildings intended for personal housings, and accepting deposits, opening bank accounts and other banking and financial activities.

The agreement signed between the Ministry of Finance and the Emirates Development Bank stipulates committing to a number of measures including establishing and managing the electronic registry in accordance with international best practises, as well as holding regular meetings and workshops in collaboration with the Ministry of Justice, as well as specialists and experts to introduce law implementation procedures.

MoF completed the feasibility study over two years (2012-2013) on the draft law for ‘Mortgage of Movable Property’ draft to secure project financing. The study included implementing a basic survey for different practises of current loans in the UAE and identifying the best international practises in this field. It also included holding workshops with related entities in the UAE to discuss the draft and identify challenges faced by the SME sector. The Ministry completed all documents related to the registration process and public policies, and an evaluation was carried to identify the various legal and institutional development aspects necessary to establish a secure transaction system for movable properties according to the best practises and in line with UAE’s Privacy Policy.

In 29 May, 2013, the Ministerial Development Council resolution No. (82/5/4) which assigns MoF to prepare a federal draft law to record mortgage of movable properties to secure projects, in coordination with the Ministry of Economy (MoE) and the UAE Central Bank, and transfer it to the Technical Committee for Legislations to study it.

MoF built an internal legal team formed of legal experts from related entities and the International Finance Corporation (IFC) to prepare a draft federal law on ‘Mortgaging of Movable Properties’ as security for debts. MoF held over 40 meetings with related entities in the UAE to discuss and prepare a draft law. The final draft was discussed with related entities and the Technical Committee for Legislations through multiple meetings.

In December 2016, the Federal Law No.20 of 2016 on the pledge of moveable properties as security for debts was issued and adopted by the Federal National Council (FNC) in June 2016. It is also stated to come into force 90 days from the date of publication in the Official Gazette as per the Article No. (47). The executive regulations are due to be published within six months of the new pledge law coming into effect, as stipulated in Article No. (46).

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