Federal Decree-Law No. (16) of 2021 On Factoring And Transfer Of Receivables
Federal Decree-Law No. (16) of 2021
Establishes the UAE legal framework for factoring and the transfer of current and future receivables, including validity, registration, priority, debtor protections, enforcement and licensing of factoring business.
Overview
What this legislation covers
Establishes the UAE legal framework for factoring and the transfer of current and future receivables, including validity, registration, priority, debtor protections, enforcement and licensing of factoring business.
Who or what it applies to
- Businesses assigning or selling trade receivables.
- Banks and licensed factoring providers.
- Transferors, transferees and receivable debtors.
- Creditors and insolvency representatives competing for rights over transferred receivables.
Key points
Important points at a glance
Applies to factoring and receivables transfers in civil and commercial transactions, subject to statutory exclusions.
Recognises transfers of current and future receivables when the receivables are sufficiently identifiable.
A transfer can be effective between transferor and transferee before notice is given to the receivable debtor.
Enforceability against third parties and priority are tied to the movable-security registration framework.
Ancillary rights may pass with the receivable subject to applicable legal requirements.
The law regulates notices to debtors, payment instructions and when payment discharges the debtor.
Debtors retain statutory defenses and set-off rights subject to the law and any valid written waiver.
The law addresses amendments to the underlying contract after transfer.
Factoring business requires the relevant Central Bank licence.
Article 27 provides for entry into force ninety days after publication.
Practical explanation
Understanding the law
Purpose and scope
This decree-law gives businesses a federal framework for converting receivables into financing and for transferring payment claims in a legally enforceable way.
Who the law affects
It affects sellers or assignors of receivables, factoring companies and other transferees, receivable debtors, secured creditors and insolvency representatives.
Main obligations and rights
Transfers should identify the receivables, allocate rights and duties between the parties, address notices to the debtor and, where third-party effectiveness is required, be registered in the applicable movable-security register.
Debtor protection
The law preserves important debtor defenses and set-off rights and regulates when payment to the transferor or transferee validly discharges the debt.
Priority and enforcement
Priority against competing claimants is closely linked to the registration and priority rules in the UAE movable-security framework.
Licensing
Article 25 states that carrying on factoring business in the UAE requires the relevant licence from the Central Bank under its applicable conditions.
Practical example
A supplier may transfer a portfolio of unpaid invoices to a licensed factor. The parties should document which receivables are covered, complete any required registration, and give debtors compliant payment notices so that collection and priority are clear.
Related instruments
Federal Law No. (4) of 2020 on Securing Rights in Movables and its executive regulations are central related instruments.
Practical notes
- Registration priority can be decisive where more than one person claims the same receivable.
- Notices to debtors should identify the transferred receivable and payment instructions clearly.
- Consumer, personal and household transactions are subject to statutory exclusions and protections.
- Read this law together with Federal Law No. (4) of 2020 on securing rights in movables.
Legislation text
Text and provisions
Official-text notice. This file is a structured English rendering prepared from the UAE Legislation portal and the official sources listed in the package. It is not represented as the legally controlling Arabic text. For interpretation and application, consult the original Arabic text and the latest Official Gazette / official UAE legislation source.
Federal Decree-Law No. (16) of 2021 — Factoring and Transfer of Receivables
Verified legislative metadata
| Instrument | Federal Decree-Law No. (16) of 2021 |
|---|---|
| Issued date | 2021-08-29 |
| Effective date | 2021-12-08 |
| Status | Active / in force |
| Official source | UAE Legislation |
Structured rendering of the legislation
Chapter I — Definitions and applicability (Articles 1–3)
The law defines factoring, transfer, receivables, transferor, transferee, receivable debtor, current and future receivables, notice of transfer, proceeds, registration and ancillary rights. It applies broadly to civil and commercial receivables transactions while excluding specified personal/household transactions and certain financial-market, payment, securities, documentary-credit and similar rights. Parties may regulate their mutual rights by agreement, but cannot prejudice rights of third parties.
Chapter II — Effect of transfer between the parties (Articles 4–6)
A transfer may cover one or more current or future receivables and becomes binding according to the law and agreement. Receivables must be described so that they can be identified. The law also addresses restrictions on assignment and the transfer of ancillary rights securing payment.
Chapter III — Third-party effectiveness and priority (Articles 7–8)
Effectiveness against third parties and competing priority are connected to registration under Federal Law No. (4) of 2020 on Securing Rights in Movables. Priority disputes may involve other transferees, creditors and an insolvency trustee.
Chapter IV — Rights, obligations and debtor protections (Articles 9–21)
The law regulates the transferor's undertakings, notices and payment instructions to the receivable debtor, collection rights, discharge by payment, defenses and set-off, waiver of defenses, amendments of the original contract, recovery of payments, collection of receivables and enforcement of ancillary rights.
Article 15 — Discharge by payment
Before notice of transfer, payment in accordance with the original contract may discharge the debtor. After proper notice, the debtor generally must pay the transferee or follow the payment instructions in the notice. The article also provides rules for multiple notices and for requesting proof of the transfer.
Articles 16–18 — Defenses, set-off and amendments
The debtor may rely on statutory defenses and set-off rights arising from the original transaction. Written waiver is possible within the law's limits, while certain defenses cannot be waived. Amendments to the original contract are treated differently depending on when they are made and whether the transferee agrees.
Chapter V — Applicable law and interaction with other legislation (Articles 22–23)
Conflict-of-laws rules determine the law applicable to creation, effectiveness, priority and enforcement. Federal Law No. (4) of 2020 applies to receivables transfers to the extent it does not conflict with this decree-law.
Chapter VI — Transitional and final provisions (Articles 24–27)
Article 24 provides transitional registration rules for transfers created before commencement. Article 25 requires the relevant Central Bank licence to conduct factoring business. Article 26 repeals conflicting provisions. Article 27 provides for publication and commencement ninety days after publication.
Source hierarchy
The official Arabic legislation controls interpretation and application. Registration, licensing and enforcement questions should also be checked against current Central Bank requirements and the current movable-security legislation and implementing regulations.
Verification
Official source & references
Official legislation sourcehttps://uaelegislation.gov.ae/en/legislations/1515Open ↗Official Gazette: Official Gazette No. 711
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