Facility Agreement Template for the United Arab Emirates

A Facility Agreement is a comprehensive legal document that establishes the terms and conditions for lending arrangements between financial institutions and borrowers in the United Arab Emirates. This essential banking document governs everything from loan disbursement procedures to repayment schedules, security requirements, and default remedies, ensuring all parties understand their rights and obligations under UAE commercial law.

When do you need this document?

You need a Facility Agreement whenever establishing any commercial lending arrangement in the UAE, whether for corporate term loans, revolving credit facilities, or trade finance arrangements. Banks and financial institutions require this document for compliance with UAE Central Bank regulations and to protect their interests when extending credit facilities. The agreement becomes essential when structuring complex financing involving multiple lenders, security providers, or guarantors, particularly in project finance, acquisition financing, or working capital facilities. Islamic financial institutions also use adapted versions to ensure Sharia compliance while meeting UAE regulatory requirements for Islamic banking products.

Key legal considerations

The agreement must carefully address several critical legal provisions to ensure enforceability under UAE law. Conditions precedent clauses require specific documentation and approvals before funds can be drawn, including board resolutions, regulatory consents, and security perfection requirements. Interest rate provisions must comply with UAE Central Bank guidelines and, for Islamic facilities, must incorporate profit-sharing or cost-plus structures that satisfy Sharia requirements. Security and guarantee clauses need precise drafting to ensure enforceability against UAE and foreign assets, while cross-default and acceleration clauses must align with local court procedures. The document should also include comprehensive representations and warranties covering corporate authority, regulatory compliance, and financial condition, along with ongoing covenants that protect the lender's position throughout the facility term.

Legal requirements in United Arab Emirates

UAE law imposes specific requirements that must be incorporated into any Facility Agreement to ensure legal validity and enforceability. Under UAE Federal Law No. 18 of 2017 (Commercial Transactions Law), the agreement must comply with commercial lending regulations and banking operations standards set by the Central Bank. UAE Federal Law No. 14 of 2018 (Central Bank Law) requires adherence to prudential lending guidelines, interest rate regulations, and reporting obligations for financial institutions. Security provisions must conform to UAE Federal Law No. 20 of 2016 (Pledge of Movable Properties) for movable asset security, while real estate security must comply with local property registration requirements. The agreement should include UAE court jurisdiction clauses and specify governing law, typically UAE law for domestic facilities. For international transactions, the document must address exchange control regulations and ensure compliance with anti-money laundering requirements under UAE Federal Law No. 20 of 2018.