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UAE Law on Securing Interest over Movable Assets

Published on : 15 Jan 2021

UAE: Federal Law Number 4 of 2020 on Securing Interest over Movable Assets 


Federal Law Number 20 of 2016 concerning mortgage of movable properties has been repealed and replaced by the introduction of Federal Law Number 4 of 2020 on securing interest over movable assets. It is imperative to note that, the essential elements of the old law have been retained in most cases with a few additions that will facilitate the creation of legislation which is better suited to meet the domestic needs of the persons concerned in transactions hereunder. 

Further, the law does not capture all the necessary provisions and procedures attached to the law, a detailed view of the application of the law can only be taken once the Implementing Regulations are issued by the Ministry of Finance. 


The amendment mainly brings about the following notable differences:

  1. Scope of application 

The prior law applied to contracts that created a security interest over tangible or intangible assets that were movable in nature, and this applied to assets both in the present and the future in case of civil and commercial transactions. The amendment retains the basic principle that was followed in the old law, changes have been made regarding the transferee’s rights with respect to the sale of account receivables, and the new law suggests that these rights shall be treated as a security right. 

  1. Protocol 

In order to create valid security, the prior law mandated strict adherence to protocol regarding the contract, description of secured assets and declarations as to rights of third parties. The new law provides clarifications as to the automatic extension of security rights concerning returns and proceeds of the secured assets unless except the parties involved agree otherwise. Barring the aforesaid, the formalities as per the old law have been retained. 

  1. Types of assets 

The old law lays down property that can be subject to a mortgage, which includes any current or future material or moral movable property like:

  1. Accounts payable.
  2. Payables and deposits at licensed banks and financial institutions including current account deposit accounts.
  3. Bonds and other documents that make ownership transferable through delivery endorsement, commercial papers, certificates of deposit, bills of lading and warehouse bonds.
  4. Work equipment and tools.
  5. Material and moral elements of a business falling under the Commercial Transaction Law and the Trademark Law.
  6. Raw materials, goods intended for sale or lease and goods used in the manufacturing process.
  7. Fixtures that may be separated from real estate. 
  8. Any other such movable property that may be considered to be valid under federal laws of the state.

The amendment to the old law has retained the abovementioned movable assets that are valid and subject to a security interest. However, it does include one additional definition with respect to accounts receivables; these are defined as the right to receive any such amount that the third party owes to a pledger. The amendment clarifies that these amounts shall not include rights to deposits, endorsable bonds, or the right to entitlement to collect securities. 

  1. Exclusions 

Movables that were subject to registration as per existing laws or ones that had a relevant registry were not included in the prior law. Under Article 4 of the old law, property that was excluded from being mortgaged included:

  1. Items intended for personal or home use necessary for him and his dependents.
  2. Beneficiaries of an insurance contract or entitlements thereof.
  3. Wages, salaries, expenditures and compensation to workers and employees.
  4. Public funds, endowment funds, foreign diplomatic funds and funds of international government organizations.
  5. Future rights arising out of inheritance or wills.

The amendment has narrowed down the range of assets under three heads:

  1. Movables required by law to be registered as security rights in relevant registries.
  2. Wages, salaries, expenditure and compensation to workers and employees.
  3. Public funds, endowment funds, foreign diplomatic funds and funds of international government organizations.
  1. Right to access the Register

As per the old law, parties to a contract were permitted to agree upon allowing public access to the public with regards to the information declared in the Register. Generally, the public is permitted to access basic information within limits set by the Implementing Regulations attached to the law. The information could be obtained in a hard copy or soft copy format, once ratified by the Registrar, the report has a binding force. 

The new law provides for public access to information in a similar manner that may be governed by the new Implementing Regulations. The same can be requested in a hard copy or soft copy format as previously practiced. The new law does not expressly mention whether or not parties to a contract can withhold confidential information, but the same may be elaborated upon by the implementing regulations. 

  1. Priority Rights 

Under Article 17, the old law laid down that declaration of the mortgage by the mortgagee entitled him to rights over other creditors in fulfilling his rights over the mortgaged property. This priority was subject to the date and time of said declaration. 

The amendment makes some additions to the old law, retaining the basic essence of the provision:

  1. Priority rights shall be granted to all secured liabilities including the ones that arise after they become enforceable.
  2. Security rights established under the law shall not be affected any other competing rights that may come to the notice of the mortgagee.
  3. The implementing regulations shall lay down any, and all other such priority rules all may affect particular types of mortgage.
  1. Registration 

Article 6 of the old law called for the establishment of a Register that could manage declaration of rights made by the rights holder, i.e., the Emirates Movable Collateral Registry. The new law aims to establish a new authority for registration of security rights, and the procedures of the same shall be determined by the Implementing Regulations attached to the new law. 

In order to enforce security rights, the old law recommended registration on the online registry, and this was done with the view to create a valid security interest and ensure security against third parties. The new law, however, enumerates methods in which the right holder can ensure the security of interest enforceable against a third party, as follows:

  1. Registering the security on the Register.
  2. Delivering possessory rights over mortgage.
  3. Control over mortgage by the mortgagee.

Moreover, registration of future security rights was permitted to be declared as per the old law upon the approval by the parties to a contract. This declaration then created security rights between parties and all such other third parties involved in said transaction. However, a cap of 5 days was imposed for the conclusion of the contract from the date of possession of the mortgaged property, subject to extension by not more than 30 days. 

The new law allows registration of security interest prior to establishing the interest or concluding the contract. The new law has done away with the cap of days that was imposed on the conclusion of the contract; however, the Implementing Regulations may contain provisions to that effect. Further, the new law also provides that security interest of the following nature must be registered within a period of not more than seven working days of the possession of assets, as follows:

  1. Intellectual property rights;
  2. Financing acquired for equipment; and
  3. Inventory.
  1. Rights of the security holder 

The old law sets out conventional execution against the mortgaged property; it drew a difference between movable assets related to bank accounts and bonds and other movable assets.

Bonds and bank accounts

In case of bonds and bank accounts, violation of any obligations by the principle debtor or pledger under the security contract was permitted to be remedied under the law. If the security consists of accounts payable at banks, the collection thereof was to be conducted via set-off of the balance of any account against the relevant obligation. The new law provides that the mortgagee shall have recourse to accounts receivables at any time and can fulfill any payment from debts prior to the breach of obligation. The new law also provides for the waiver of rights regarding enforcement in their written contract. 

Movable assets 

In the prior law, failure to perform obligations by the principle debtor or mortgagor under the written contract, the property was subject to seizure and sale at market value within a period of 10 days after notification by the mortgagor of such breach of contract. This right could be enforced under certain circumstances as follows;

In case of an agreement between the parties allowing the use of conventional measures:

  1. When secured assets were unencumbered by another security.
  2. Where notification of possession of the property has been given to the owner of said property.
  3. Where the secured asset is a fixture and the owner of real estate to which the fixture is attached, and the mortgagee and all such other parties are notified.

The new law restricts the use of conventional measures of execution to breach by the principle debtor or mortgagee and discards all such other provisions provided as under Article 27 of the old law. 

  1. Execution through judiciary 

The old law provided that the mortgagee could request for seizure of property before the Summary Court, once such seizure was effected, the court was permitted to authorize the sale of secured assets attached to the transaction. The new law retains these essential elements with an addition; that each interested party has the right to raise objections to the application for seizure within a period of 5 days from the date of being informed of such an application. 


The issues regarding the legal status of security interests already registered with the Emirates Movable Collateral Registry have not been dealt with, in the new law. The varying effects on the legal status on all such other matters shall be provided under the Implementing Regulations. However, currently, the old regulations shall apply as long as there is no conflict with provisions mentioned in the new law. 



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