Facility Letter Template for the United Arab Emirates

A Facility Letter is the cornerstone document in UAE banking transactions that formally establishes the terms and conditions of credit facilities extended by financial institutions to borrowers. Under UAE Federal Law No. 14 of 2018 (UAE Banking Law), this document serves as both an offer from the lender and, upon acceptance, becomes a legally binding agreement that governs the entire lending relationship. You will encounter this document whenever seeking credit facilities from UAE banks or financial institutions.

When do you need this document?

You need a Facility Letter when obtaining any form of credit facility from a UAE financial institution, including term loans, revolving credit facilities, trade finance facilities, or overdraft arrangements. Banks are required to issue this document before disbursing funds to ensure compliance with UAE Central Bank Notice No. 4430/2020, which mandates proper documentation for all lending facilities. Corporate borrowers require this document for business expansion, working capital needs, or project financing, while individual borrowers may need it for personal loans or mortgage facilities. The document is also essential when restructuring existing facilities or when multiple lenders participate in syndicated financing arrangements.

Key legal considerations

The Facility Letter must clearly define the facility type, principal amount, interest calculation methodology, and all applicable fees to avoid disputes under UAE Civil Code provisions. Security requirements must be explicitly detailed, including personal guarantees, corporate guarantees, or asset-based security, as governed by UAE Federal Law No. 4 of 2020 (Security Law). You should pay particular attention to conditions precedent that must be satisfied before fund disbursement, including documentation requirements, regulatory approvals, and security perfection. The document must specify events of default, remedies available to the lender, and governing law provisions. Cross-default clauses linking the facility to other borrower obligations require careful consideration, as they can trigger acceleration of all facilities upon a single breach.

Legal requirements in United Arab Emirates

Under UAE Federal Law No. 14 of 2018, all facility letters must comply with UAE Central Bank regulations regarding interest rate disclosure, fee transparency, and consumer protection requirements. The document must be executed in accordance with UAE Commercial Code provisions, requiring proper authorization from corporate borrowers and witness signatures where applicable. Financial institutions must ensure the facility serves legitimate business purposes and complies with UAE anti-money laundering regulations. For facilities exceeding AED 500,000, additional documentation and due diligence requirements apply under Central Bank guidelines. The letter must specify the governing jurisdiction for dispute resolution, typically UAE courts, and include mandatory Arabic translations for certain commercial arrangements as required by UAE law.