Third Party Security Agreement Template for the United Arab Emirates

When you need to secure financing in the United Arab Emirates through a third party's assets, a Third Party Security Agreement provides the legal framework for this arrangement. This document allows one party (the security provider) to grant security interests over their assets to secure another party's (the principal debtor) obligations to a lender or financial institution.

When do you need this document?

You'll need this agreement when a bank requires additional security beyond what the borrower can provide. Common scenarios include parent companies securing subsidiaries' loans, wealthy individuals backing family members' financing, or group companies cross-guaranteeing each other's facilities. In UAE's business environment, this is particularly relevant for family-owned enterprises, holding company structures, and international businesses establishing local operations. The agreement is also essential when original collateral is insufficient or when spreading risk across multiple assets owned by different entities within a corporate group.

Key legal considerations

The agreement must clearly define the secured obligations, specify the security assets, and establish proper creation and perfection mechanisms. Under UAE law, you must ensure the security provider has legal capacity and proper authority to grant security, particularly for companies requiring board resolutions or shareholder approvals under Federal Law No. 32 of 2021. The document should include comprehensive representations and warranties, detailed enforcement procedures, and provisions for asset substitution or release. You must also address potential conflicts between Arabic and English versions, establish governing law clauses, and ensure compliance with Islamic finance principles if applicable. Priority arrangements with other creditors and intercreditor considerations require careful structuring.

Legal requirements in United Arab Emirates

UAE Federal Law No. 20 of 2016 governs security interests over movable property, requiring registration with the UAE Pledge Registry for perfection. For immovable property, registration with the relevant Land Department is mandatory under individual emirate laws. The agreement must comply with UAE Civil Code Articles 1399-1508 regarding security rights and guarantees, and Commercial Code provisions for commercial transactions. Corporate security providers must obtain proper board resolutions and, where required, shareholder approvals. The document should specify dispute resolution mechanisms, preferably UAE courts or DIFC/ADGM arbitration. You must ensure compliance with Central Bank regulations if the secured party is a UAE bank, and consider UAE exchange control requirements for foreign currency obligations. All registration requirements, stamp duties, and notarization procedures must be completed according to the specific emirate's regulations where assets are located.