Federal Decree- Law on Factoring And Transfer Of Receivables

For the purpose of applying the provisions of the this Decree Law, the following words and expressions shall denote the meanings assigned thereto respectively, unless the context requires otherwise:

The State: The United Arab Emirates

The Ministry: The Ministry of Finance.

The Minister: The Minister of Finance.

The Person: The Natural or Legal Person.

Factoring: A transaction whereby the Transferor transfers the current and / or future receivables to the Transferee, or an agreement between the parties that the Transferor shall retain the entries relating to and collect the receivable transferred and to afford protection to the Transferee in case the Receivable's Debtor defaults on payment.

Transfer: An agreement whereby the Transferor transfers to the Transferee its contractual rights for collecting a monetary amount owed by the Receivable's Debtor. The transfer involves an agreement to create a security interest over the receivable, to transfer as a collateral and irrevocably sell the same.

Transferor: The person who transfers the receivable to the Transferee.

Transferee: The person to whom the receivable is transferred.

Competing Claimant:

1. The other Transferee to whom the Transferor transfers the same receivable, including the person who claims a legally prescribed right to the receivable transferred on the grounds of a right over the other property of the Transferor.

2. The Transferor's creditor

3. Bankruptcy Trustee

Receivable: A contractual right to satisfy sums of money owed to the Transferor by the Receivable's Debtor.

Receivable's Debtor: The person indebted with the receivable transferred.

Current Receivable: The receivable that comes into existence before the transfer agreement is concluded or when the same is being concluded.

Future Receivable: The receivable that comes into existence after the transfer agreement is concluded.

Notice of Transfer: A written notice whereby the Transferor defines both the receivable transferred and the Transferor.

Original Contract: The contract entered into by the Transferor and Receivable's Debtor and whereby the receivable is created.

Proceeds: Each and every amount received from the receivable transferred, whether completely or partially, including all sums picked up as revenue, and not including the goods returned.

Registration: The entry recorded on the Register and indicating the transfer of a receivable or any amendment or revocation of such registration according to the provisions of the above-cited Federal Law No. (4) of 2020.

Register: The electronic register designated for the registration of rights over the movable property.

Ancillary rights: Any personal or in-rem rights that secure payment of the receivable transferred, including the security interest over the goods, collaterals and credit insurance.

In writing: The information created, transmitted, received or stored in a written form or by electronic means, including modern means of communication.

1. The provisions of this Decree Law shall apply to any transaction carried out in the context of commercial or civil transactions, even if through a regulated financial market, and whether involving the right to recourse against the Transferor or not.

2. The provisions of this Decree Law shall not apply to the transfer of receivables that arise out of the following situations:

 a. The transactions carried out by any person for his personal, family or household purposes;

 b. The financial contracts regulated by netting agreements;

 c. Foreign exchange transactions;

 d. Systems and agreements of interbank payment, netting systems and adjustment relating to securities, assets or other financial instruments; and

 e. Buyback of securities, assets or financial instruments deposited with a broker.

3. The provisions of this Decree Law shall not apply to the following cases:

 a. The right to payments proven under endorsable instruments;

 b. The right to payments deposited into the credit accounts with banks; and

 c. The right to payments under securities, documentary credits and letters of guarantee.

4. Nothing in this Decree Law may prejudice the rights and obligations of the transferor and Receivable's Debtor arising out of the law that govern the protection of the parties to transactions made for personal, household or family purposes.

Subject to the provisions of Article (17.2) hereof, the Transferor, Transferee and Receivable's Debtor may enter into an agreement that defines the provisions regulating their respective rights and duties, provided that such agreement may not prejudice the rights of Third Parties not involved in such agreement.