The United Arab Emirates is a civil jurisdiction and does not recognize common law trusts. However, trust receipts are often used in the United Arab Emirates and are recognized under VaE law, provided that ownership of the goods is clearly owned by the financier and that the bank`s proof of trust clearly allows the customer to handle the goods as the financial officer. A trust document is a notification of the release of property to a buyer of a bank, the bank retaining the title to the released assets. In an agreement that includes a trust receipt, the bank remains the owner of the goods, but the purchaser may hold the goods in the person of the bank for manufacturing or sale purposes. On the other hand, the buyer retains the profit from the sale of the products, but must also assume the commercial risk. This risk represents what happens if the buyer is unable to sell the goods or if there is no demand for that product. In addition, the buyer must also bear the risk that the goods will be damaged, lost or degraded their value. In addition, the buyer is also responsible for the additional costs to him in relation to the property, such as freight, customs, storage and more. Note: Section 9 security interest replaces proof of trust when the single code of commerce has been adopted. During the normal conduct of a commercial transaction, companies purchase goods for their inventory from sellers or wholesalers in order to resell them or manufacture goods to the consumer. These goods can be purchased locally or imported by other companies. When these companies receive the goods, they are also charged by the seller or exporter for the products purchased.
If the company does not have the cash to pay the bill, it can obtain financing from a bank through a trust receipt. Banks generally do not hesitate to lend in trust. Because it is certain that the money will be repaid with interest as soon as the goods are sold. This is a win-win situation for both the bank and the borrower, as the bank receives money in the form of interest and the business earns money without having to invest in the first place. “Confirmation of trust.” Merriam-Webster.com Legal Dictionary, Merriam-Webster, www.merriam-webster.com/legal/trust%20receipt. Access 19 Dec 2020. Loan against supporting documents or LATR is a facility that the bank gives to its client, usually an importer of goods or assets. This is essentially a short-term loan against Trust Receipt, which allows the importer to make the payment to the seller.
The bank retains ownership of the goods. A buyer can recover the property after repaying the loan amount. Although the LATR installation is generally available for short term for 90 days, it can be extended to one year under special circumstances. If the goods are sold by the customer to a third party in good faith as part of the sub-receiver agreement, the bank may not be able to trace these products under the tutelage of such a good faith buyer. In addition, in the event of the client`s insolvency, where the proceeds of the commodity are associated with the client`s other assets, the bank must assert a right in the event of insolvency as an unsecured creditor. Any breach or consequence of such an agreement attributable to the client may be considered a breach of the duty of the client as a representative of the Commission under the Code of Commerce and a violation of trust under the penal code. The first and the first step is therefore to ensure that the borrower has the necessary documents to make use of the fiduciary credit, which is why the basic conditions are: normally, on behalf of the client, the financier pays the suppliers of goods at the time of delivery of the goods by the customer (usually for the retirement of existing letters of credit).