28 June 2024

Ajmal Khan Nadakkal

The new Security Law implemented in the Dubai International Financial Centre (DIFC) introduces significant changes impacting creditors' rights and how they secure their loans.

Dubai: The DIFC implemented DIFC Law No. 4 of 2024 the Law of Security 2024 (New Law) on March 8, 2024, replacing the previous Law of Security 2005 (Old Law). This update aligns DIFC’s security framework with international standards, particularly the UNCITRAL Model Law on Secured Transactions. While the new regulations bring clarity and modernize the framework, they also pose challenges for existing creditors who must take action to maintain their security rights.

Key Changes and Considerations:

Transitional Provisions:

  • Applicability: The New Law applies to all security rights, including those created before March 8, 2024 (Prior Security Rights).
  • Validity: Prior Security Rights remain valid between the original parties but must be perfected under the New Law to remain effective against third parties.
  • Actions Required: Creditors must file a financing statement with the DIFC Registrar of Security by March 8, 2025, to maintain the priority and effectiveness of Prior Security Rights.

Creation of Security Rights:

The new law emphasizes the importance of "perfection" for a security right to be enforceable against third parties. This means creditors need to take specific steps to register their security interest with the relevant authorities (typically the DIFC Registrar).

Previously, creditors might have relied on "attachment" (simply creating the security agreement) to secure their claim. Under the new law, perfection takes precedence.

  • Simplification: The New Law removes the "attachment" requirement from the Old Law. A security right is now created by a security agreement, provided the grantor has rights in the asset or the power to encumber it.
  • Description and Form: Secured obligations can now be described broadly, and security agreements may be oral if the secured creditor possesses the encumbered asset.

Knowledge of Existing Security Rights (Section 54):

A creditor's knowledge of existing security rights in the collateral (the asset used to secure the loan) does not affect the priority of their own security right.

Impact: Creditors should conduct thorough due diligence to identify any pre-existing security interests in the collateral before extending credit.

Security Rights in Receivables (Section 55):

The new law allows creditors to create security rights over future receivables generated by the debtor (the borrower). This provides more flexibility for creditors to secure their loans.

Perfection and Priority:

  • Perfection: Security interests are perfected by filing a financing statement. Specific rules apply to different assets, including negotiable instruments and independent undertakings.
  • Priority Rules: The order of perfection determines priority, with additional clarity on conflicts involving commingled assets, judgment creditors, and acquisition security rights.


  • Out-of-Court Enforcement: Secured creditors can enforce security without court application, though practical challenges remain, especially for tangible assets. Consent from both the grantor and the possessor is required for taking possession out of court.

Asset-Specific Rules:

  • Proceeds of Collateral: The definition of "identifiable proceeds" is expanded to include various forms of income from encumbered assets.
  • Commingling: Security rights extend to commingled assets, subject to specific conditions.
  • Digital Assets: Provisions for digital assets reflect the DIFC’s Digital Assets Law, allowing security rights to be perfected by granting control over the assets.
  • Assignment of Receivables: Security rights in receivables remain effective despite agreements limiting the grantor's rights.

Independent Undertakings (Section 56):

The beneficiary of an independent undertaking (a third-party guarantee) can create a security right over the future proceeds of the undertaking. This offers additional protection for creditors relying on such guarantees.

Key Benefits for Creditors:

·       Enhanced Clarity and Certainty: Clearer rules on perfection and priority can help creditors ensure the enforceability of their security interests.

·       Increased Options for Securing Loans: The ability to create security rights over future receivables and independent undertakings provides creditors with more tools to mitigate risk.

Recommendations for Creditors:

·       Review Existing Loan Agreements: Ensure existing loan agreements comply with the new law's perfection requirements.

·       Consult with Legal Counsel: Seek advice from a lawyer specializing in secured transactions to understand how the new law impacts your specific situation.

·       Conduct Thorough Due Diligence: Before extending credit, investigate the presence of any pre-existing security interests in the collateral.


The New Law significantly enhances the legal framework for secured transactions in DIFC, aligning it with global best practices. By providing clearer rules for the creation, perfection, and enforcement of security rights, it strengthens DIFC’s position as a leading global financial hub and lays a solid foundation for future financial sector innovations.

For detailed advice and steps to ensure compliance, creditors should consult legal experts or the DIFC Registrar of Security.


ALKETBI team is highly skilled and frequently provides legal assistance specializing in sustaining employers and employees. For further insights and updates on law reforms, visit our website and social media platforms as it provides valuable resources and guidance for understanding the complex landscape of legal changes in the region and beyond. If you request further guidance or you have concerns and queries, Let us know!

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