UAE Federal Law No. 20 of 2016 on Mortgages of Movables (the New Law) was published in the Federal Gazette on 15 December 2016 and came into effect on 15 March 2017. The New Law anticipates further executive regulations to be published within the six months thereafter (Executive Regulations), setting out further detail on the relevant procedures and applicable fees. Previously, taking security over movable assets was governed by provisions of the Civil Code (Federal Law No. 5 of 1985) and the Commercial Code (Federal Law No. 18 of 1993). The position is complicated by the fact that the UAE has a range of different commercial security registers, and the forms and processes vary from Emirate to Emirate and among the various free zones. The New Law aims to introduce a more streamlined, efficient process for taking security over movables. In the table below, we summarise the current regime and the key changes introduced by the New Law.


Current regime

New Law

Forms of security

Commercial mortgage: mortgage of movable assets of a business, including all tangible and intangible movable property.

Chattel mortgage: pledge over movable property. Cannot be perfected through registration nor include intangible assets.

Other mortgages over specific assets: e.g. vehicles, vessels, aircraft, shares of LLC.

Account pledge and assignment over cash deposits.

Assignments of receivables, income and insurances.

Allows for the creation of security over movable assets including future assets and intangible assets including:

  • Receivables
  • Accounts and bank deposits
  • Bonds and title deeds transferable by way of delivery/endorsement
  • Equipment and work tools
  • Goods ready for sale or lease and raw materials and work-in-progress
  • Agricultural crops and livestock
  • Movable property affixed to real property but capable of separation

Certain movable property is excluded, such as assets held for personal use (other than by way of consumer finance), insurance proceeds (unless related to a pledged asset), salaries, public funds and future inheritance rights.

Does not apply to assets where the law requires specific registration (e.g. vehicles, vessels, aircraft, shares of LLC).

The New Law does not impact on the ability to create commercial and chattel mortgages, possessory pledges or other existing security interests but provides greater certainty for movable assets.


A commercial mortgage can only be created in favour of a licensed UAE bank or financial institution.

No requirements in the New Law as to the identity of the security holder. However, this may be dictated by the Executive Regulations or as a matter of practice in order to register a security interest.


To create a valid chattel mortgage, physical possession or control of the pledged assets must be transferred to the pledgee.

Can appoint a true third party on arm's length terms who takes possession of the asset as a bailee and who grants control over such assets to the pledgee.

Common industry practice for security to be granted over certain assets is for an agent / bailee to be appointed who is related / affiliated to the pledger. However, this does not provide certainty as to effectiveness due to questions over actual possession and control over those assets.

There is no requirement for possession. The mortgage is perfected through registration.

Problem assets

There is no concept of a "floating charge" in the UAE. This gives rise to problems with security in relation to:

  • Future assets: the assets to be pledged must be in existence at the time of creation of the charge. To address this, a lender may require the security to be updated on a periodic basis.
  • Fungible assets: In relation to raw materials converted into end products, a lender may require an assignment over income generated from the sale of the products and for any pledges covering assets that are replaced from time, the pledge arrangements have needed to be amended and supplemented on a periodic basis to cover any changes in the quantity of the pledged assets following co-mingling.

The New Law expressly refers to future property as being capable of being secured. This should remove the need for lenders and borrowers to enter into periodic supplemental security agreements.

The New Law also confirms that the lender will have a secured right in the proceeds of secured assets. This is important in relation to a business, such as a retail business, which must sell secured assets in order to generate revenues.

Under the New Law, it is possible for goods that are pledged under a possessory pledge as security to instead be secured through the mortgage over moveable assets and such security would not be required to be further supplemented following any co-mingling event.


Commercial mortgage: must be in writing (with specific details of the assets covered); executed before a public notary; advertised locally and registered in the Commercial Register (only Dubai and Abu Dhabi currently register commercial mortgages in the Commercial Register). Once registered, the mortgage is valid for 5 years and must be renewed to maintain its validity.

Chattel mortgage: transfer of possession (see above). Good practice to notarise the pledge document to confirm the date of perfection in case of competing claims.

Other mortgages over specific assets should comply with the requirements of the relevant legislation and be registered with the applicable authority (e.g. the local traffic police and road or transport authority in the case of vehicles).

Assignment: an assignment of rights requires notification from the assignor to the third party, confirming the assignment to the assignee.

To register a mortgage under the New Law, the parties must execute a written security agreement including a description of the secured assets and complying with the requirements of the Executive Regulations (once issued).

The security will be effective as against third parties upon registration on an electronic register (to be established).

Any third party holders of the secured assets must be notified of the mortgage.


There is no centralised registration system. It is difficult to conduct reliable public searches of prior encumbrances.

A new electronic register is to be created. However, the Executive Regulations (once issued) will specify exactly what information must be disclosed and the degree of public access to the information lodged.


Other than pledges over cash, enforcement of security requires a court order. The underlying debt must be proven. Secured assets must be sold via public auction.

Self-help remedies are introduced in relation to certain assets (bank accounts, negotiable instruments).

Alternative methods of sale are permitted to the public auction, although the court may set a minimum sale price.


Security is generally created by transfer of possession or registration (if applicable). The time of registration of a security interest over the same property determines priority between such interests.

Priority shall be determined in accordance with the time and date of registration (unless the security holder waives its priority in writing and registers such waiver).

A pledgee may register any pledge right arising by way of possession which pre-dates the New Law within one year of the New Law coming into force, by providing evidence of the relevant pledge agreement. Once registered, priority of such pre-existing pledges will be determined in accordance with the date of creation.

Free Zones

Other than the financial free zones (DIFC and ADGM), which have their own civil and commercial legal regimes, the Commercial and Civil Codes apply in the free zones.

However, free zone companies have not historically been able to generally grant a commercial mortgage as free zone authorities have been unwilling to approve their execution or registration.

The New Law does not make specific reference to free zone companies. As a federal law, however, it should apply to the free zones (other than the financial free zones). The Executive Regulations (once issued) may provide further detail as to how the New Law will apply to free zone companies in practice.