Suretyship is one of the most used forms of security in commercial and financial transactions, as it provides creditors with an additional avenue of recovery if the debtor fails to fulfil its obligations. The enactment of Federal Decree-Law No. 25 of 2025 introduces a more comprehensive and structured framework governing suretyship under UAE law. The new provisions clarify the relationship between creditors, debtors, and sureties while introducing several significant protections designed to prevent prejudice to guarantors.

Enhanced Protection Where Securities Are Lost

Article 1005 states that the surety’s liability is released to an extent of the value of the securities that are lost by the creditor. It defines securities as any security allocated to guarantee the debt, including securities established after the suretyship and securities created by law.

Six-Month Time Limit for Legal Action

Article 1006 mandates a six-month limitation period. A creditor must initiate a legal proceeding against the debtor and the surety within six months from the day following the maturity of the debt. If the proceedings are not initiated within this period, then the surety is released from the suretyship.

Effect of Delay in Insolvency or Bankruptcy Proceedings

If the debtor becomes bankrupt or insolvent, then the creditor is required to file its claim in the relevant proceedings. If the creditor fails to do so, it may extinguish the creditors rights against the surety.

Rights of the Surety Following Payment

Once the surety pays the debt, the creditor must:

  1. Deliver the documents necessary for the surety to pursue the debtor;
  2. Assign any movable assets pledged or retained as security for the debt; and
  3. Take the necessary measures to transfer any real security over immovable property, provided that the surety bears the transfer expenses.

After the surety pays the debt, they acquire the creditor’s rights against the debtor. However, if the surety pays only part of the debt, they cannot recover that amount from the debtor until the creditor has been paid in full.

Creditor’s recourse against the surety

  1. The creditor may not have recourse against the surety alone before first having recourse against the debtor and the surety’s assets cannot be executed until all the debtor’s assets have been exhausted.
  2. This would not apply in cases where the surety is jointly and severally liable with the debtor, law provides otherwise or the parties have agreed otherwise.
  3. If the surety wants the creditor to first proceed against the debtor’s assets, the surety must identify those assets at their own expense.
  4. Once the surety identifies the debtor’s assets, the creditor must take the necessary enforcement steps in a timely manner. If the creditor fails to do so, then they may become liable to the surety if the debtor subsequently becomes insolvent or bankrupt.

Suretyship of a Surety

Article 1019 allows a person to act as a guarantor for another guarantor. In such cases, the creditor must first seek payment from the original surety before pursuing the surety’s surety. However, if the surety’s surety has agreed to be jointly and severally liable, the creditor may proceed directly against them.

Continuation of the Suretyship After Death

The death of either the debtor or the surety does not bring the suretyship to an end. The obligations under the suretyship continue and may be enforced against the estate of the deceased.

The new suretyship provisions under Federal Decree-Law No. 25 of 2025 provide a clearer framework governing the rights and obligations of creditors, debtors and sureties. These changes are likely to have an important impact on the drafting and enforcement of suretyship agreements in the UAE.

We at Ayesha Aldhaheri Advocates & Legal Consultants, we regularly advise and represent clients in matters involving guarantees and suretyship obligations.