Security Account Control Agreement Template for the United Arab Emirates
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What is a Security Account Control Agreement?
A Security Account Control Agreement is essential in secured financing transactions in the UAE where bank accounts are provided as collateral. This document is typically used in conjunction with broader security arrangements and facility agreements, establishing the mechanism by which a secured party can perfect its security interest over bank accounts under UAE law. The agreement complies with UAE Federal Law No. 18 of 1993 (Commercial Transactions Law) and UAE Central Bank regulations, providing detailed provisions for account control, operational procedures, and the rights and obligations of the account holder, secured party, and account bank. It is particularly important in project finance, corporate lending, and other secured transactions where control over cash flows and accounts is crucial for the security package.
About the Security Account Control Agreement
A Security Account Control Agreement is a critical legal document that establishes formal control over bank accounts when they serve as collateral in secured financing arrangements. Under UAE law, this agreement creates the necessary legal framework for secured parties to perfect their security interests over cash deposits and account balances, ensuring compliance with local banking regulations and commercial law requirements.
When do you need this document?
You need a Security Account Control Agreement when entering into secured lending arrangements where bank accounts form part of the collateral package. This is particularly common in project finance transactions, corporate credit facilities, and asset-based lending where lenders require control over cash flows and deposits. The agreement is essential when establishing escrow arrangements, managing proceeds accounts, or securing working capital facilities. Financial institutions, corporate borrowers, and security agents regularly use this document to formalize account control arrangements and ensure proper security interest perfection under UAE law.
Key legal considerations
The agreement must clearly define the roles and responsibilities of all parties, including the account holder, secured party, and account bank. Critical provisions include the establishment of control mechanisms, instruction procedures, and the account bank's obligations to follow secured party directions. The document should address notification requirements, enforcement procedures, and the priority of competing claims over account funds. Important clauses cover operational matters such as account maintenance, reporting obligations, and the handling of account proceeds. The agreement must also specify termination conditions, release mechanisms, and the distribution of remaining funds upon satisfaction of secured obligations.
Legal requirements in United Arab Emirates
Under UAE Federal Law No. 18 of 1993 (Commercial Transactions Law), security interests over bank accounts must be properly documented and perfected to ensure enforceability. The UAE Federal Law No. 10 of 1980 (Central Bank Law) and its regulations impose specific requirements on account control agreements, particularly regarding banking operations and account management procedures. UAE Federal Law No. 20 of 2016 (Pledge Law) governs the creation and enforcement of security interests over movable assets, including bank account balances. The agreement must comply with UAE Federal Law No. 5 of 1985 (Civil Code) regarding contract formation, obligations, and security rights. For entities operating in the Dubai International Financial Centre (DIFC), additional DIFC laws may apply alongside federal UAE legislation, requiring careful consideration of jurisdictional requirements.
GOVERNING LAW
Applicable law
This Security Account Control Agreement is drafted to comply with United Arab Emirates law. Key legislation includes:
UAE Federal Law No. 5 of 1985 (Civil Code): Provides the general principles of contract law, obligations, and security rights in the UAE
UAE Federal Law No. 10 of 1980 (Central Bank Law) and its regulations: Regulates banking operations and account management in the UAE, including requirements for control agreements
UAE Federal Law No. 20 of 2016 (Pledge Law): Governs the creation and enforcement of security interests over movable assets, including bank accounts
UAE Federal Law No. 2 of 2015 (Commercial Companies Law): Regulates corporate entities and their capacity to enter into security arrangements
DIFC Law No. 7 of 2014 (DIFC Law of Security): Relevant if the agreement involves DIFC entities or accounts, governing security interests within the DIFC
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