Federal Law No. 16 of 2021 regarding factoring and transfer of civil accounts receivables is a law that was recently passed in the UAE. The law aims to regulate factoring and assignment of receivables activities in the country, providing a legal framework for these financial practices. Factoring is a financial transaction where a business assigns its accounts receivable (invoices) to a third party (the factor) at a discount in exchange for immediate cash. This can be a useful way for businesses to access cash quickly and improve their cash flow.
The law sets out the legal requirements for factors and other parties involved in factoring transactions, including licensing and registration requirements. Factors must be licensed by the Central Bank of the UAE and must meet certain financial and professional requirements. The law also requires factors to disclose certain information to their clients, including fees and charges, and to provide regular reports on the status of the factored receivables.
As well as the rights and obligations of the parties involved in factoring transactions. For example, it requires factors to provide notice to the business's customers when they purchase the accounts receivable. The law also provides for the transfer of ownership of the receivables to the factor, which gives the factor the right to collect the debts from the business's customers.
The law is important for the UAE's financial sector for several reasons. First, it provides a legal framework for factoring and assignment of receivables activities in the UAE, which were previously unregulated. This will help to promote the development of the factoring industry in the country and make it easier for businesses to access financing.
Second, the law sets out the legal requirements for factors and other parties involved in factoring transactions, including licensing and registration requirements. This will help to ensure that these activities are conducted in a transparent and fair manner, which will be beneficial for all parties involved.
Third, the law sets out the rights and obligations of the parties involved in factoring transactions, which will help to prevent disputes and protect the interests of all parties.
The law provides a legal framework for factoring and receivables transfer activities, which will help to promote the development of the factoring industry in the country and make it easier for businesses to access financing.
One of the key points introduced by the law is the requirement for factors to be licensed by the Central Bank of the UAE. Factors must meet certain financial and professional requirements in order to obtain a license, and the Central Bank has the authority to supervise and regulate factors to ensure compliance with the law.
The law also sets out the legal requirements for factoring transactions, including the transfer of ownership of the receivables to the factor. It requires factors to provide notice to the business's customers when they acquire the accounts receivable, and to disclose certain information to their clients, including fees and charges. The law also provides for the rights and obligations of the parties involved in factoring transactions, which will help to prevent disputes and protect the interests of all parties.
Overall, the law has introduced important changes to the legal framework for factoring and assignment of receivables activities in the country. These changes will help to promote the development of the factoring industry in the UAE and make it easier for businesses to access financing.
Jassim Al Suwaidi Advocates & Partners can provide valuable assistance and guidance to businesses navigate the legal requirements of the Federal Law No. 16 of 2021 on factoring and transfer of civil accounts receivables in the UAE.
Where Jassim Al Suwaidi Advocates & Partners is the first law firm that has experience in this law by assisting a client and providing legal advice in this matter.
- Advising on compliance: help businesses understand their obligations under the law, including licensing and registration requirements, disclosure obligations, and reporting requirements. As well as develop policies and procedures to ensure compliance with the law.
- Drafting contracts: help businesses draft contracts for factoring and receivables transfer transactions that comply with the legal requirements of the UAE. As well as review existing contracts to ensure compliance with the law.
- Representing clients in disputes: represent the client in arbitration proceedings or in court if a dispute arises between a business and a factor or other party involved in a factoring transaction.
- - Providing general legal advice: provide businesses with general legal advice on factoring and receivables transfer in the UAE, including advice on the legal risks and benefits of factoring, the potential impact of the law on their business, and other related legal issues.