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Find out moreThe regional real estate, construction and hospitality sectors have been turned upside down over the last two years, with Covid-19 bringing these sectors to a halt. The impact of the pandemic remains, however, the resurrection of these vital sectors across the region is a welcome relief because they support the development of modern cities, which in turn have attracted commerce and tourism to the Middle East and North Africa.
This latest edition of Law Update, provides vital insights, updates and commentary on the latest trends taking shape across the real estate, construction, hotels and leisure sectors. The articles within this edition cover a broad range of topics, from what’s next for real estate in Dubai, to commentary on Saudi real estate, a market that is set to become the main bedrock of the region for years ahead. You will find articles on reforming real estate laws in Qatar, foreign investment and ownership in Oman, and mitigating risks on hotel construction projects and the lessons learnt from Covid.
Read the full reportIn a clear win for secured parties, a recent Dubai case proves the veracity and value of an LLC share pledge following the reforms of the 2015 UAE Commercial Companies Law.
The litigation department of Al Tamimi & Company recently represented a Bank in proceedings relating to its request for an enforcement order for the sale of pledged shares. The Respondent had provided security for the facilities extended by the Bank to the Debtor under a Murabaha agreement. The facilities were secured by a share pledge in favour of the Bank over certain shares that the Respondent owned in a limited liability company, perfected and registered with the Dubai Department of Economic Development. When the Debtor defaulted under the Murabaha agreement, the Bank sought to enforce its rights under the share pledge by filing execution proceedings against the Respondent requesting the court to issue an attachment and order of sale by public auction in relation to the pledged shares in order to collect the amount of the debt from the sale proceeds.
Readers will recall the clear legislative right to grant or take security over shares in an LLC was only expressly set out in 2015 Commercial Companies Law reforms (and continued in the 2021 Commercial Companies Law). Moreover, the reforms in the 2018 Civil Procedure Regulations allowed a share pledge to be an executory deed. However, since these reforms, there has been limited working examples of an LLC share pledge enforcement in action.
The court reversed its initial rejection of the Bank’s application and considered that the Bank had established its right to recover its debt from the sale of the pledged shares. Consequently, the court imposed an executory attachment on the pledged shares and ordered the sale of the pledged shares by auction (as provided in the Civil Procedures Law) to recover the secured debt.
This judgment is significant as it is one of the first judgments in the UAE that permitted the enforcement of a share pledge on LLC companies. It accordingly should provide comfort to secured parties that LLC share pledges can be enforced via an accelerated execution enforcement method in Dubai, akin to the well-developed procedures for land mortgages
Al Tamimi & Company regularly advises clients on shares pledge agreement and enforcement processes. We can explain the implications of this case on any existing practices or for new transactions.
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