Share Mortgage Agreement Template for the United Arab Emirates

A Share Mortgage Agreement creates a security interest over shares in a UAE company to secure financial obligations. Under United Arab Emirates law, this document establishes a legal charge that allows the mortgagee to enforce against the shares if the secured obligations are not met. The agreement must comply with UAE Federal Law No. 32 of 2021 and related securities regulations.

When do you need this document?

You need a Share Mortgage Agreement when obtaining corporate financing where shares serve as security. This is common in acquisition finance transactions where the target company's shares are mortgaged to secure the purchase price. Banks and financial institutions regularly require share mortgages for term loans, revolving credit facilities, and syndicated lending arrangements. Listed companies must also use this document when shareholders pledge their shares to secure corporate obligations or personal guarantees. The agreement is essential for Islamic finance structures where shares provide security for murabaha, ijara, or other Sharia-compliant facilities.

Key legal considerations

The agreement must clearly identify all mortgaged shares, including certificate numbers and percentage holdings. Voting rights provisions are crucial - you can retain voting rights subject to certain restrictions, or transfer them to the mortgagee upon default. Dividend and distribution clauses determine whether you receive income from the shares during the security period. The document should address share transfers, requiring mortgagee consent for any dealings with the mortgaged shares. Enforcement provisions must specify the mortgagee's rights upon default, including power of sale and appointment of receivers. For listed shares, the agreement must comply with UAE Securities and Commodities Authority requirements regarding disclosure and registration.

Legal requirements in United Arab Emirates

UAE Federal Law No. 32 of 2021 governs share mortgages for different company types. Public joint stock companies require board approval and compliance with SCA regulations for listed shares. Limited liability companies need consent from other shareholders unless the articles permit share mortgages. The security must be registered in the company's share register to be effective against third parties. For listed companies, SCA Board Decision No. 3/R of 2017 requires notification to the exchange and disclosure in market announcements. The agreement must be executed before a UAE notary public and may require translation into Arabic. Financial institutions must comply with Central Bank Law No. 14 of 2018 regarding security documentation and risk management. Islamic finance transactions need additional Sharia compliance certificates and may require approval from the institution's Sharia board.