Debtor In Possession Loan Agreement Template for the United Arab Emirates

When your company enters bankruptcy proceedings in the United Arab Emirates, securing additional funding becomes critical for maintaining operations during restructuring. A Debtor In Possession Loan Agreement provides this essential financing mechanism, allowing you to access capital with super-priority status under UAE Federal Law No. 9 of 2016 while ensuring compliance with bankruptcy court requirements.

When do you need this document?

You require a Debtor In Possession Loan Agreement when your company has filed for bankruptcy protection and needs immediate financing to continue operations during the restructuring process. This situation commonly arises when existing credit facilities are frozen or terminated due to bankruptcy filing, leaving you without working capital for payroll, suppliers, or essential business operations. The agreement becomes necessary when traditional lenders refuse to provide financing due to bankruptcy status, requiring you to seek specialized DIP financing from institutional lenders willing to accept bankruptcy-related risks in exchange for super-priority repayment status.

Key legal considerations

Several critical legal elements must be carefully structured in your DIP loan agreement to ensure enforceability and compliance. The facility amount and permitted uses must be clearly defined, with restrictions typically limiting proceeds to working capital, professional fees, and court-approved restructuring expenses. Interest rates and fees require careful negotiation, as DIP financing typically carries premium pricing reflecting the elevated risk profile. Security arrangements must be properly documented and may include super-priority liens over company assets, subject to court approval. Monitoring mechanisms and financial reporting requirements are typically extensive, requiring you to provide regular updates on cash flow, restructuring progress, and compliance with loan covenants. Default provisions must account for bankruptcy-specific events and remedies available to the lender within the court-supervised process.

Legal requirements in United Arab Emirates

UAE Federal Law No. 9 of 2016 governs bankruptcy proceedings and establishes the framework for DIP financing arrangements. Court approval is mandatory before implementing any DIP facility, requiring you to file detailed motions demonstrating the necessity of financing and adequacy of proposed terms. The agreement must comply with UAE Federal Law No. 18 of 1993 regarding commercial transactions and UAE Federal Law No. 14 of 2018 governing banking activities if your lender is a regulated financial institution. Security interests must be properly registered according to UAE Federal Law No. 5 of 1985, and any guarantees must comply with UAE civil law requirements. The bankruptcy court retains ongoing supervision over the facility, including authority to modify terms or approve additional financing as restructuring circumstances change. Documentation must be prepared in Arabic or accompanied by certified translations for court filing purposes.