Legislation Details
- Full Title: Federal Decree- Law on Factoring And Transfer Of Receivables
- Law Type: Federal Decree
- Law Number: (16) of 2021
- Issued Date: 29 Aug 2021
- Effective Date: 08 Dec 2021
- Official Gazette: No. 711
- Sector: Justice and Judiciary
- Status: Active
- Number of Articles: 62
- Chapters: 12
- Amendments: 0
Summary
This Federal Decree-Law regulates the factoring and transfer of receivables in the UAE. It establishes the legal framework for the assignment of monetary claims from one party (the transferor) to another (the transferee), including the rights, obligations, and enforceability of such transfers. The law aims to facilitate the financing of businesses through the securitization of their accounts receivable, which can improve cash flow and access to credit. It is an important piece of legislation for companies engaged in factoring and receivables financing activities in the UAE. (Federal Decree- Law on Factoring And Transfer Of Receivables, 2021, Art. 1-3)
What is the scope and purpose of this law?
The Decree-Law applies to any commercial or civil transaction involving the transfer of receivables, even if conducted through a regulated financial market, and regardless of whether the transferor has recourse against the transferor. (Art. 2(1)) However, it does not apply to transfers arising from personal, family, or household transactions; financial contracts governed by netting agreements; foreign exchange transactions; interbank payment systems; or the buyback of securities, assets, or financial instruments. (Art. 2(2-3)) The law's purpose is to establish a legal framework for the factoring and transfer of receivables in the UAE. (Federal Decree- Law on Factoring And Transfer Of Receivables, 2021, Art. 2)
What are the key definitions under this law?
The law provides the following key definitions:
- Factoring: A transaction where the transferor transfers current and/or future receivables to the transferee, or an agreement for the transferor to retain the records and collect the transferred receivable while protecting the transferee in case of default. (Art. 1)
- Transfer: An agreement where the transferor transfers its right to collect a monetary amount owed by the receivable's debtor to the transferee, including creating a security interest or irrevocably selling the receivable. (Art. 1)
- Transferor: The person who transfers the receivable to the transferee. (Art. 1)
- Transferee: The person to whom the receivable is transferred. (Art. 1)
- Receivable: A contractual right to receive a monetary amount owed to the transferor by the receivable's debtor. (Art. 1)
- Current Receivable: A receivable that exists before or at the time of the transfer agreement. (Art. 1)
- Future Receivable: A receivable that comes into existence after the transfer agreement. (Art. 1)
(Federal Decree- Law on Factoring And Transfer Of Receivables, 2021, Art. 1)
What are the main obligations and requirements?
The law imposes the following key obligations: 1. The transferor must have the authority to transfer the receivable and must not have previously transferred it to another party. (Art. 10(1)) 2. The transferor cannot guarantee the receivable's debtor's ability to repay the debt. (Art. 10(2)) 3. The transferor and transferee must comply with the terms of their transfer agreement, which cannot prejudice the rights of third parties not party to the agreement. (Art. 3) 4. The transferee must not satisfy any amounts in excess of their rights over the transferred receivable. (Art. 12(2)) (Federal Decree- Law on Factoring And Transfer Of Receivables, 2021, Art. 3, 10, 12)
What licensing, registration, or approval requirements exist?
The law does not specify any licensing, registration, or approval requirements for parties engaging in the factoring or transfer of receivables. However, it states that the enforceability of a transfer against third parties is subject to registration on the Register, as per the Federal Law No. 4 of 2020 on Securing Interest with Movable Property. (Art. 7(2)) (Federal Decree- Law on Factoring And Transfer Of Receivables, 2021, Art. 7)
What rights and protections does this law provide?
The law provides the following key rights and protections: 1. The transfer becomes effective between the transferor and transferee even if the receivable's debtor is not notified. (Art. 4(2)) 2. The transferee retains priority rights over the transferred receivable, even if it involves multiple or divisible receivables. (Art. 4(3)) 3. Ancillary rights, such as security interests, are automatically transferred to the transferee without the need for additional action, unless the law requires a new transfer. (Art. 6) 4. The transferee has the right to receive payments made to the transferor or a third party with a lower priority claim. (Art. 12(1)) 5. The transfer cannot affect the rights and obligations of the receivable's debtor under the original contract, unless accepted by the debtor. (Art. 13(1)) (Federal Decree- Law on Factoring And Transfer Of Receivables, 2021, Art. 4, 6, 12, 13)
Which authorities or bodies are responsible for enforcement?
The law does not specify any particular authorities or bodies responsible for the enforcement of its provisions. It refers to the "Register" and the "Federal Law No. 4 of 2020 on Securing Interest with Movable Property" for matters related to the registration and priority of transferred receivables. (Art. 7) (Federal Decree- Law on Factoring And Transfer Of Receivables, 2021, Art. 7)
What are the penalties for non-compliance?
The law does not specify any penalties for non-compliance with its provisions.
What fees, charges, or financial provisions are specified?
The law does not specify any fees, charges, or financial provisions related to the factoring or transfer of receivables.
What exemptions or exceptions apply?
The law does not apply to the transfer of receivables arising from personal, family, or household transactions; financial contracts governed by netting agreements; foreign exchange transactions; interbank payment systems; or the buyback of securities, assets, or financial instruments. (Art. 2(2-3)) (Federal Decree- Law on Factoring And Transfer Of Receivables, 2021, Art. 2)
How are disputes resolved under this law?
The law does not specify any dispute resolution mechanisms or procedures for resolving disputes arising under its provisions.
What are the key deadlines and time limits?
The law does not establish any specific deadlines or time limits.
How does this law interact with other UAE legislation?
The law references and interacts with the following UAE federal legislation: - Federal Law No. 4 of 2020 on Securing Interest with Movable Property (for registration and priority of transferred receivables) - Federal Decree-Law No. 10 of 2018 on Netting (for exclusion of netting agreements) - Various other federal laws related to civil, commercial, and financial matters (Federal Decree- Law on Factoring And Transfer Of Receivables, 2021, Art. 7, 22-23)
When did this law come into effect?
The Federal Decree-Law on Factoring And Transfer Of Receivables was issued on 29 August 2021 and came into effect on 8 December 2021, as per the publication in Official Gazette No. 711. (Preamble, Art. 27) (Federal Decree- Law on Factoring And Transfer Of Receivables, 2021, Preamble, Art. 27)
Source Documents
This article analyses Federal Decree- Law on Factoring And Transfer Of Receivables for legal research and educational purposes. For the purpose of interpretation and application, reference must be made to the original Arabic text. In case of conflict, the Arabic text prevails. This does not constitute legal advice.