On 15th March 2017, Law No 20 of 2016 Regarding the Pledge of Movables as Security for a Debt (“Pledge Law”) came into force in the United Arab Emirates. The Pledge Law is poised to substantially alter and create certainty in commercial lending practices in the UAE. It provides protection against the multiple pledges of assets to different lenders by borrowers. It is designed to encourage the adoption of more prudent lending practices by lenders in a market long dominated by “name” and family-based lending in place of contemporary best practice risk analysis.

In March 2018, secondary legislation supplementing the Federal Law was published, and an online registry for registering mortgages under the Pledge Law, the Emirates Movable Collateral Registry (“EMCR”) went live. The EMCR provides for a centralized, federal, publicly-accessible online register that records and prioritizes secured assets, which can be searched by the public.

The EMCR allows:

  1. Free public searches of registered


  1. Certified searches of registered


  1. Registration of notices of security interests against assets of the primary  obligors  as  well  as  third  party  security providers, including nonresident foreign persons (legal or natural) and UAE entities incorporated by federal decrees, for a minimal fee; and
  2. Registration of notices of termination of security interests (whether by mutual consent of the parties or by way of a court order) free of charge.

Definition of Pledge Law:

The Pledge Law covers a range of movable property including equipment and other tangible commercial assets and raw materials, as well as intangible assets such as receivables, bank accounts and shares. Article 3 provides a list of assets which may be subject to a security interest under the Pledge Law. The Pledge Law introduces a new form of no possessory registered security over movables assets so that mortgaged assets can now remain with the borrower (Article 5). However, it also recognizes possessory liens and allows for them to be registered in the Registry (Article 44). Pledged property can include changing property too, such as bank accounts with fluctuating balances. A property that may not be the subject of a mortgage under the Pledge Law includes objects intended for personal or home use (unless these are being mortgaged to finance their purchase) and insurance entitlements, wages, public funds (which are not defined).

The form required between a Pledgor and Pledgee:

Commercial or business pledges under the Commercial Transactions Law were to be executed before a notary public. To create a valid mortgage under the Pledge Law, the security agreement must:

  1. Be in writing in a consistent form with Executive Regulation;
  2. Pledgor must have the capacity to enter into the pledge concerning the pledged property;
  3. Include a description of the mortgaged property and a declaration by the mortgagor relating to the rights of any other parties;
  4. Importantly, the pledge must contain a statement as to whether or not there are prior liens on the same asset (a move to bar the practice of creating multiple assignments or pledges of the same assets); and
  5. Pledgee must pay the monies stipulated in the pledge agreement.

The Executive Regulations provides detailed guidance on the forms that need to be compelled for Registry. The instructions are provided in detail, including the fee payment method. The Publicity and Notice form should include information about the parties and the Pledged asset, which consists of the duration of the Notice.


The registration of the mortgage in the online Registry is not a requirement to create a valid lease. It is required to perfect the security and make it effective as per Article 9. The Pledge Law provides that no subsequent mortgage can be granted over the same property without giving notice of the first mortgage in the mortgagor’s declaration as per Article 10 (2). The fee is generally expected to range from AED 100 to AED 200 per registration.

Benefits of registering your asset:

  1. If you are buying a good, EMCR will provide information on whether EMCR will provide information on whether any potential rights exist against the goods you wish to purchase. Protect yourself from being cheated
  2. If you are selling or leasing goods, an EMCR registration will indicate that you have a title or an interest in the goods that have been given on consignment or lease to a third party
  3. When you sell on retention of title or hiring or leasing, proper registration on EMCR will protect your interests
  4. Retention of title clause in your contract or invoice may not be enough to protect you. Protect your contracts by registering your interest
  5. Registering helps protect your investment in your goods when they are not in your possession or under your control

New Amendments:

The new amendments to the Pledge Law are:

  1. Comingling and mixing of fungibles: The New Pledge Law provides that when you mix similar goods, the pledge will remain active if they are separable.
  2. No transfer of possession: The current procedure in the UAE is that establishing a pledge over an asset requires the pledgor (i.e. the asset’s owner) to transfer ownership of the asset to the pledgee, which significantly limits the owner’s rights to deal with the asset. Such pledges in UAE are registered at the Registry following Article 11 of the Movables Law.
  3. Future property may be pledged: The New Pledge Law expressly provides that next property may be secured. The current position is that, in respect of bank account security, the credit balance should be fixed and identifiable; effectively meaning the borrower should maintain a blocked account.
  4. Self-help remedies and enforcement: The New Pledge Law departs from the existing position of requiring a local court order permitting enforcement against the assets subject to a pledge and provides the following categories. Self-help remedies are available to the bank, and the bank may enforce against the asset directly without the need for any judicial or court sanction.

Amongst these amendments, a new amendment was introduced in September 2019. Article 11 of the Movables Law provides further additional rights that may be registered on the Emirates Movable Collateral Registry. Registration of the assignment in accordance with the Movables Law, Article 11 (3)   prescribes that the assignee has all rights and obligations under the Movables Law unless stated. This includes the priority of ranking of the assignment determined by the date and time of registration and the benefit of the enforcement rights provided by the Movables Law (i.e. the ability to repossess and sell the assets privately, or summary proceedings to repossess and sell the assets privately).

Security in the DIFC:

The Dubai International Financial Centre (DIFC) is unique among the free zones as it has an entirely separate body of laws and regulations. The relevant security laws include the:

  1. Law of Security which, subject to specific exclusions, applies to all transactions, regardless of their form, that creates a security interest in personal or real property by contract
  2. Real Property Law which specifically covers mortgages over land
  1. DIFC Security Regulations

A security interest must be filed in the Security Registry to perfect it. If the security holder is a natural person, he must submit the following information to the registrar:

  1. His identity.
  2. His residence and domicile.
  3. Any other information required under the Security Regulations, for example, a financing statement.

DIFC is permitted and governed by the Law of Security (DIFC Law No. 8 of 2005). These free zone companies have their own set of regulations for such registration requirements for such security which may include execution of specific forms and filing of executed documents concerning the relevant free zone registrar. The attachment for the asset to be pledged must consist of the following:

  1. A value must be given to the respective asset that is being pledged.
  2. The debtor must have rights in the collateral or the power to transfer its rights in the collateral to a security party.
  3. One of the following: (a) the obligor must be bound by a security agreement that provides a description of the collateral; or (b) the collateral must be a negotiable document of title, a negotiable instrument, money, deposit account or financial property and the secured party must have control pursuant to the obligor’s security agreement.

After filling up all these forms regulated with DIFC, the financing statement should be filed within 20 days of the date of the security agreement, and the agreement will lapse within five years from the time it is filed. However, financing statements are not mandatory to submit for certain receivables as per DIFC regulations and monies held in an investment account as defined in the DIFC Personal Property Law.


The Law will penalize the pledgor or the pledgee of the mortgaged asset in case of any breach to the agreement. The sentence could include imprisonment or a fine of Dhs 30,000. If a corporate entity commits such criminal action, the penalty is applied to the board members, joint shareholders and appointed employees.


The Law is a step in the right direction and widens the legislation of commercial reform in UAE. This Law will prove to be more transparent in the commercial sector. It is not clear as to how the UAE Courts will adapt to their new and to whom is it open for scrutiny and somewhat reduced role under the new law.


Adv. Shayan Dasgupta
Corporate & Commercial Law | M&A | FinTech, Blockchain & AI