Intercreditor Deed Template for the United Arab Emirates
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What is a Intercreditor Deed?
The Intercreditor Deed is essential in complex financing arrangements where multiple creditors hold different classes of debt or security interests in the UAE. This document becomes particularly relevant in project finance, syndicated lending, and structured finance transactions where various lenders have different priorities and rights. The deed must carefully navigate UAE legal requirements, including the UAE Civil Code, Commercial Code, and where applicable, Islamic finance principles. It typically includes detailed provisions on payment priorities, enforcement rights, security sharing, and creditor decision-making processes. The document is crucial for establishing clear procedures for handling defaults, enforcement actions, and distribution of proceeds, while ensuring compliance with UAE law and regulatory requirements. The Intercreditor Deed serves as the primary agreement governing relationships between different classes of creditors, including senior lenders, mezzanine lenders, and subordinated creditors.
About the Intercreditor Deed
An Intercreditor Deed is a complex legal agreement that establishes the relationship, priorities, and rights between multiple creditors in financing transactions under United Arab Emirates law. When you have various classes of debt or multiple lenders involved in a single transaction, this document becomes essential for defining how creditors will interact, particularly during enforcement scenarios or financial distress.
When do you need this document?
You need an Intercreditor Deed when your financing structure involves multiple creditor classes with different priorities. This commonly occurs in project finance transactions where senior banks, mezzanine lenders, and bond holders participate together. Syndicated lending arrangements also require these deeds when multiple banks provide different tranches of debt. Islamic finance structures often necessitate intercreditor arrangements between conventional and Sharia-compliant lenders. Additionally, refinancing scenarios where new debt ranks alongside existing facilities require careful intercreditor documentation to protect all parties' interests.
Key legal considerations
The deed must clearly establish the ranking and subordination between different debt classes to avoid conflicts during enforcement. Payment waterfall provisions determine the order in which creditors receive payments from the debtor's cash flows and asset recoveries. Security sharing arrangements ensure that all creditors benefit from security packages while respecting their respective priorities. Enforcement procedures must be coordinated to prevent one creditor class from undermining others' recovery prospects. Decision-making mechanisms require careful structuring to balance senior creditors' control with junior creditors' protection rights. Standstill provisions prevent junior creditors from enforcing during specified periods, allowing senior creditors to pursue their remedies first. Islamic finance considerations may require separate treatment of profit-based returns versus interest-based payments.
Legal requirements in United Arab Emirates
UAE Federal Law No. 5 of 1985 (Civil Code) governs the fundamental contractual relationships and creditor rights established in the deed. The UAE Commercial Code provides the framework for commercial lending relationships and business obligations. UAE Federal Law No. 14 of 2018 (Central Bank Law) may impose additional requirements for banking participants and regulated financial institutions. Security arrangements must comply with UAE Federal Law No. 20 of 2016 (Pledge Law) for movable assets and relevant real estate laws for immovable property. The deed must specify governing law clauses and dispute resolution mechanisms, typically choosing UAE law or English law with Dubai International Financial Centre (DIFC) or Dubai International Arbitration Centre (DIAC) jurisdiction. Islamic finance components require compliance with Sharia principles and may need approval from relevant Sharia supervisory boards. All foreign creditors must consider UAE exchange control regulations and ensure proper documentation for cross-border enforcement rights.
GOVERNING LAW
Applicable law
This Intercreditor Deed is drafted to comply with United Arab Emirates law. Key legislation includes:
UAE Federal Law No. 18 of 1993 (Commercial Code): Governs commercial transactions and business activities, including provisions relevant to commercial lending and security arrangements
UAE Federal Law No. 14 of 2018 (Central Bank Law): Regulates banking activities and financial institutions, including provisions affecting lending practices and creditor relationships
UAE Federal Law No. 20 of 2016 (Pledge Law): Governs the creation and enforcement of security over movable assets, which is relevant for securing creditor rights
UAE Federal Law No. 4 of 2020 (Securities Law): Provides framework for securing financial obligations and the registration of security interests
UAE Federal Law No. 9 of 2016 (Bankruptcy Law): Critical for understanding creditor rights and priorities in insolvency scenarios
UAE Federal Law No. 10 of 1980 (Central Bank Law): Contains provisions relating to Islamic banking practices and regulations affecting financial institutions
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