Line Of Credit Agreement Template for the United Arab Emirates

A Line of Credit Agreement is a legally binding contract that establishes a revolving credit facility between a financial institution and a borrower in the United Arab Emirates. Unlike traditional term loans, this agreement provides you with flexible access to funds up to a predetermined credit limit, allowing you to borrow, repay, and reborrow as your business needs require. The agreement is governed by UAE Federal Law No. 18 of 1993 (Commercial Code) and must comply with Central Bank regulations and circulars.

When do you need this document?

You need a Line of Credit Agreement when establishing ongoing financing arrangements for your business operations. This document is essential if you're seeking working capital to manage cash flow fluctuations, seasonal business cycles, or inventory financing needs. Companies often use this agreement when they require flexible access to funds for expansion projects, equipment purchases, or to bridge temporary funding gaps. It's particularly valuable for businesses with variable income streams or those operating in industries with irregular payment cycles. The agreement is also necessary when refinancing existing credit facilities or consolidating multiple short-term borrowing arrangements into a single revolving facility.

Key legal considerations

Several critical legal provisions must be carefully considered in your Line of Credit Agreement. The facility amount and availability period define your borrowing limits and timeframe, while interest rate mechanisms determine your borrowing costs under both conventional and Islamic banking structures. Security arrangements are crucial, as they may include personal guarantees, corporate guarantees, or collateral pledges that protect the lender's interests. Conditions precedent outline requirements you must satisfy before accessing funds, such as providing financial statements, obtaining necessary approvals, or maintaining specific financial ratios. Default provisions specify circumstances that trigger acceleration of the facility, while covenants establish ongoing obligations throughout the agreement term. Cross-default clauses may link this facility to your other borrowing arrangements, creating additional compliance requirements.

Legal requirements in United Arab Emirates

Your Line of Credit Agreement must comply with specific UAE legal requirements under Federal Law No. 18 of 1993 and Central Bank regulations. The document must clearly identify all parties with full legal names and UAE addresses, and include proper corporate authorization documentation for business borrowers. Interest rate calculations must comply with Central Bank directives, and Islamic banking facilities must adhere to Sharia principles if applicable. The agreement must specify governing law as UAE law and designate UAE courts for dispute resolution. Documentation requirements include board resolutions for corporate borrowers, power of attorney documents for signatories, and compliance with Central Bank Circular No. 28/2012 regarding bank loans and services. Security documentation must comply with UAE Mortgage Law No. 20 of 2016 if real estate is involved, and all guarantees must meet UAE Civil Code requirements under Federal Law No. 5 of 1985.