Movable Property Security Law

Purpose and scope

• Governs the creation of security rights over movable property, such as inventory, equipment, receivables and accounts, their effect against third parties, priority and enforcement, through a single electronic register.
• It applies to any contract or transaction creating a security right over movable property, including commercial pledges, sale with a right of repurchase or retention of title until payment, security assignment of rights and sale of receivables (Article 2).
• It does not apply to security over assets excluded by Article 5, such as ships, aircraft, listed securities, trademarks, investment accounts and assets with ownership registers that record security rights.

Key rules, rights and obligations

• A security right is valid between the parties if in writing, the grantor has power to create it, and the secured obligation and collateral are described generally or specifically; the collateral may cover all the grantor's assets (Article 6).
• A security right may secure an obligation arising before, at the same time as or after its creation (Article 6).
• To be effective against third parties, the security right must be registered or possession of the collateral must pass to the secured creditor (Article 8).
• Registration requires the grantor's written consent and is made on an electronic form with the parties' details, a description of the collateral and the expiry date (Article 16).
• Priority among several security rights over the same collateral follows the law's rules (Article 19), and perfected security rights rank ahead of unsecured debts (Article 20).
• The grantor may not transfer the collateral without the secured creditor's consent except in the ordinary course of business; otherwise the creditor may follow it into any hands (Article 22).
• Anyone may search the register and obtain an extract proving the date, time and content of a registration (Article 18).

Violations, penalties and common problems

• The parties may agree in writing, before default, on out-of-court enforcement by auction, private sale or taking ownership of the collateral (Article 23).
• If proceeds are insufficient, repair and enforcement costs come first, then secured creditors by priority; the creditor returns any surplus to the grantor, and the debtor remains liable for the shortfall as an unsecured debt (Article 26).
• The secured creditor is responsible for the accuracy of the data it registers (Article 27).
• Common problems: not registering the security right, so the creditor loses priority against third parties, and vague descriptions of collateral.

Procedures and key deadlines

• Anyone with an interest may challenge a registration, or specific data in it, before the competent court (Article 27).
• A registration ends when the secured creditor terminates it, when its term expires unless extended beforehand, or by a court order to remove it (Article 17).
• The security right automatically extends to proceeds of the collateral for fifteen days after receipt unless agreed otherwise (Article 10).

An advisory summary prepared by Al-Bayan Al-Wadih Law Firm. It is not an official text and does not replace the law, its implementing regulations, or advice from a specialised lawyer. The official published text and its amendments prevail.