Loan Memorandum Template for United Arab Emirates

The Loan Memorandum is a crucial document used in the UAE banking and finance sector to formalize lending arrangements between financial institutions and borrowers. It must comply with UAE Federal Laws, including the Civil Code (Federal Law No. 5 of 1985) and Commercial Code (Federal Law No. 18 of 1993), as well as Central Bank regulations. The document is typically employed when establishing new credit facilities or refinancing existing ones, requiring careful consideration of both conventional and Islamic banking principles where applicable. The memorandum serves to document all essential aspects of the loan relationship, including facility terms, security arrangements, conditions precedent, and ongoing obligations. Given the UAE's unique legal framework, the document must balance international banking practices with local regulatory requirements and, where relevant, Sharia principles.

1. Parties: Identification of the lender(s) and borrower(s), including full legal names, registration details, and addresses

2. Background: Context of the loan arrangement, purpose of the facility, and any relevant preliminary agreements or conditions

3. Definitions: Detailed definitions of terms used throughout the memorandum, including financial terms and calculation methodologies

4. Facility Details: Key terms of the loan including amount, purpose, currency, and drawdown conditions

5. Interest/Profit Rate: Specification of interest/profit rate (ensuring Sharia compliance where applicable), calculation method, and payment terms

6. Repayment Terms: Repayment schedule, installment amounts, and prepayment provisions

7. Security Structure: Details of any collateral, guarantees, or security arrangements supporting the loan

8. Conditions Precedent: Prerequisites that must be satisfied before the loan becomes effective or before drawdown

9. Representations and Warranties: Statements of fact and assurances given by the borrower

10. Covenants: Ongoing obligations of the borrower throughout the loan term

11. Events of Default: Circumstances that would constitute a default and trigger remedial actions

12. Governing Law and Jurisdiction: Specification of UAE law as governing law and choice of jurisdiction for disputes