Co Financing Agreement Template for the United Arab Emirates

A Co Financing Agreement is a sophisticated legal instrument that enables multiple financial institutions to collaborate in providing substantial financing facilities to borrowers in the United Arab Emirates. This document establishes the contractual framework between lead banks, participating lenders, borrowers, and various agents, creating a structured approach to large-scale financing arrangements that require significant capital deployment and risk sharing among multiple parties.

When do you need this document?

You need a Co Financing Agreement when undertaking major infrastructure projects, corporate acquisitions, or significant capital investments that exceed the lending capacity or risk appetite of a single financial institution. This document is particularly relevant for real estate developments, oil and gas projects, renewable energy installations, and large-scale manufacturing facilities in the UAE. It becomes essential when borrowers require financing amounts that necessitate syndication among multiple lenders, or when specialized expertise from different financial institutions is needed to structure complex financing arrangements. The agreement is also crucial for Islamic finance structures where multiple Sharia-compliant institutions participate in facilities that must adhere to Islamic banking principles while complying with UAE regulations.

Key legal considerations

The agreement must clearly define the roles and responsibilities of each party, including the lead arranger's duties in structuring and marketing the facility, the facility agent's administrative obligations, and the security agent's role in holding and enforcing security interests. Critical provisions include detailed drawdown procedures, interest calculation methods, repayment schedules, and default remediation mechanisms. You must ensure proper allocation of costs, fees, and expenses among participating lenders, while establishing clear voting thresholds for amendments and waivers. The document should address intercreditor arrangements, particularly regarding security sharing and enforcement priorities, and include comprehensive representations, warranties, and covenants from the borrower. Special attention must be paid to jurisdiction and dispute resolution clauses, ensuring they align with UAE legal requirements and accommodate the international nature of many participating institutions.

Legal requirements in United Arab Emirates

Under UAE law, Co Financing Agreements must comply with Federal Law No. 18 of 1993 (Commercial Transactions Law) governing commercial contracts and banking operations. The document must satisfy requirements under Federal Law No. 14 of 2018 (Central Bank Law), particularly regarding lending limits, provisioning requirements, and regulatory reporting obligations for participating banks. If the borrower is a UAE company, compliance with Federal Law No. 2 of 2015 (Commercial Companies Law) is essential, ensuring the borrower has proper corporate authority to enter into financing arrangements. For Islamic finance components, the agreement must align with Sharia principles and UAE Central Bank regulations governing Islamic banking products. The document should incorporate appropriate UAE governing law clauses and specify dispute resolution mechanisms that comply with local arbitration laws, while ensuring enforceability of security interests under UAE civil and commercial codes.