Facility Agreement Template for the United Arab Emirates

A facility agreement is the cornerstone document for commercial lending transactions in the United Arab Emirates, establishing the legal relationship between lenders, borrowers, and other parties involved in banking facilities. This comprehensive contract governs everything from term loans and revolving credit facilities to complex multipurpose financing arrangements, ensuring all parties understand their rights, obligations, and the terms under which funds are made available.

When do you need this document?

You need a facility agreement whenever entering into formal lending arrangements with banks or financial institutions in the UAE. This includes situations where your business requires working capital financing, project funding, acquisition loans, or trade finance facilities. The document is essential for both conventional banking transactions and Islamic financing structures compliant with Sharia principles. Financial institutions require this agreement to document their lending decisions, establish security interests, and ensure regulatory compliance with UAE Central Bank requirements. Whether you're a startup seeking initial funding, an established company expanding operations, or an investor pursuing acquisition financing, a properly drafted facility agreement protects your interests and establishes clear legal frameworks for the lending relationship.

Key legal considerations

Several critical legal elements must be carefully structured in your facility agreement to ensure enforceability and protection. Conditions precedent clauses determine what must be satisfied before funds can be drawn, including corporate approvals, security documentation, and regulatory clearances. Security provisions establish collateral arrangements and guarantee structures, particularly important given UAE Federal Law No. 20 of 2016 governing movable property pledges. Representations and warranties create ongoing disclosure obligations, while covenant clauses impose operational and financial restrictions on borrowers. Events of default provisions define circumstances triggering accelerated repayment, and governing law clauses ensure UAE courts have jurisdiction over disputes. Cross-default mechanisms linking multiple financing arrangements require careful consideration to avoid inadvertent breaches across your financing portfolio.

Legal requirements in United Arab Emirates

UAE facility agreements must comply with multiple federal laws governing commercial transactions and banking operations. UAE Federal Law No. 18 of 2017 (Commercial Transactions Law) provides the fundamental framework for commercial lending, while UAE Federal Law No. 14 of 2018 (Central Bank Law) establishes regulatory requirements for banking institutions. Security documentation must conform to UAE Federal Law No. 20 of 2016 for movable property pledges and specific registration requirements for different asset classes. Islamic financing structures require additional compliance with Sharia principles and UAE regulations governing Islamic banks. Documentation must include proper process agent appointments for foreign entities, ensure Arabic translations where required by law, and incorporate UAE Central Bank regulatory reporting obligations. All agreements must specify UAE governing law and jurisdiction, with dispute resolution mechanisms complying with UAE arbitration laws or court procedures.