Business Tips

Role of letters of Credit in trading

A Letter of credit (L/C) has often been a key element in international trade. It is an important payment scheme that eliminates risks between sellers and buyers. It can be revocable or cancelled without consent up to the time the documents are submitted or irrevocable unless there is consent of all parties including the seller.
The written instrument is issued and checked for compliance by the bank for the buyer to document promised payment to the seller. The seller presents all documents called for in the letter while meeting all its terms and conditions. Once both parties have agreed, amendments are incorporated into it.
L/C is clearly a safe document that helps structure the buyer’s payment plan. There is also surety that payment will only be made after all the documents are presented.
Sellers are also guaranteed of reduced risk during trade especially when the buyer requests modification in the middle of a transaction.
L/Cs are distinguished by their different types of use: transferable for international trade, standby which is akin to a guarantee, revolving or contract for delivery and payment by installments, and future or credit for payment at future dates after negotiation, among others.
Reimbursements and courier charges are usually borne by the buyer. The cornerstone of L/Cs is that banks deal with documents only not goods.

Letter Of Credit Tips

• One letter of credit can cover many transactions
• It gives security to both the seller and the buyer
• See additional costs involved in a letter of credit

Power Of Attorney key tool for business setup

The power of attorney (POA) is an important legal document given by a person or a company to another person or a company to act for and on behalf of them in various government departments and for contractual purposes. The attorney and the person giving the other authority to act on his behalf, called the principal, must be over 21 years of age.
If the POA is being executed in the UAE, both the principal and the attorney are mandated to be present before the notary public to sign it. The notary public checks the identity of the document or contract holder and also verifies his capacity and his approval.
If the POA is signed abroad, the process is slightly more complex. The document needs to be attested by the foreign office of that country and needs a seal of approval from the UAE embassy in that country. The contract, which needs to be translated into Arabic in the UAE, is required to be attested by the UAE Ministry of Foreign Affairs and ratified by the Ministry of Justice.
A general POA empowers the attorney to be responsible for a variety of areas ranging from the purchase and sale of business, dealings with banks and financial institutions, and representation in courts.
Here, a POA is common practice in limited liability companies. An Emirati partner, holding a majority stake in the company, often gives his expatriate partner the right to manage the business on his behalf through a POA.
Power Of Attorney

• Power Of Attorney gives one authority to do a legal act for you
• It needs to be notarised with both parties present
• It is commonly used in limited liability firms in UAE