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Legal PerspectiveDuties of an agent to the principal are normally derived from the contract and or the law of agency. While most agency relationships arise out of the contract, the agency contract, especially oral, may state little more than the general purpose of the agency. Ali being away, may ask Ahmed to sell his car. In such cases the duties of the agent owe to his principal must be found in the law.Certain duties exist in the law, even when the agency contract is silent. They include, inter alia, the duty of loyalty, duty to obey instructions, to exercise care and skill, to communicate info, duty of accountability. However, the most important duty is the fiduciary duty of loyalty.A fiduciary, is one who is trusted to act in the best interests of another rather than pursuing his own interests. While all of the other law duties can be reduced by the terms of the agency contract, the duty of loyalty cannot be eliminated.The duty of loyalty, is in need of complete honesty from agents in all dealings with principals. Further, the duty requires either avoidance of conflicts between the interests of the agent and those of the principal or full disclosure of any such conflict to the principal. If, after disclosure, the principal is willing to continue the relationship, the agent is shielded from liability for breach of the duty of loyalty.Such disclosure, should include notification of all compensation that the agent expects to receive in the course of fulfilling functions, because the agent is not permitted to make a secret profit. Anything of value that comes to the agent because of the agency relationship belongs to the principal. Thus if Ali, is a purchasing agent for Ahmed company and receives kickbacks or secret gifts from suppliers from whom he purchased goods for Ahmed company, the company is entitled to those gifts or whatever received.Agents breach their duty of loyalty by buying for the principal from themselves even if they charge a fair price. The duty of loyalty demands that the agent avoids even appearance of impropriety. Such purchases are permissible only when the agent has informed the principal, in advance of the potential conflict and discloses other pertinent facts. Same is true of sales to the agent. In all actions, full loyalty is a must.All such points shall be taken in consideration by both parties. We noticed that, many agency relationships continue to the point of close friendship or respectable relation, however, for different reasons this relation de tour and go to the contrary and the parties became enemies. So, carefulness is highly needed from the start, so as to escape bitter endless disputes rather than benefits to both parties.Dr AbdelGadir Warsama Ghalib is a legal counsel. Email: [email protected]

Legal PerspectiveThe main duties of banks include giving loans and facilities. This venture, brings profits to banks; nevertheless, it is full of risks.The associated risks are numerous, however, let’s take legal risks as example. This risk includes many issues as the choice of the applicable law, jurisdiction and others including documentation. The loan agreement could be a bomb in the hands of the bank. Therefore, attention is required while drafting docs with the intention of giving full security to the bank.To give security, the loan agreement shall include clear covenants. A covenant is a promise on the part of the borrowers to uphold certain conditions stated in loan agreements. Covenants are to protect creditors from risk associated with lending and compel borrowers to maintain their physical assets and forbid them from taking certain actions that could affect the equity. A loan covenant is a condition in a commercial loan that requires the borrower to fulfil certain conditions or which forbids the borrower from undertaking certain actions, or which possibly restricts certain activities to circumstances when other conditions are met.The violation of a covenant may result in declaring default event, applying penalties, or calling the loan. The legal provision in the agreement provides for calling the loan, in other words the "Acceleration Clause". Once the buyer defaults, all future payments due under the loan are "accelerated" and deemed to be due and payable immediately. This works as an injection and the purpose is to help the lender ensure that the risk attached to the loan does not unexpectedly deteriorate prior to maturity.From the borrower's point of view covenants often appear to be an obstacle at the time of negotiating a loan and burdensome restriction during its term. It is important to mention that, covenants may be waived, either temporarily or permanently at the sole discretion of the lender, however, this depends on the merits of each case and varies from bank to another.Even if the borrowers continue to pay the loan on time, they may perform certain actions that jeopardise their ability to pay back. To protect from risk, the lender may ask the creditor to enter into a covenant, which helps dictate the terms under which business remains eligible for a loan. Usually, covenants include maximum debt-to-equity ratios that the company must observe. Lenders calculate this ratio by dividing any debt a company owes by the amount of equity the company owns. The debt-to-equity ratio is the relationship between a company’s total debt and its total equity.Covenants can require a business to take out a certain amount of insurance as well as prescribe what business liens are permitted. In what’s called a negative loan covenant, creditor’s limit how much a company can owe at any given times and establish the payment schedule for dividends, if any are offered. Also, there are restriction regarding mergers, acquisitions, divestiture and investments in capital.By all means, banks and borrowers shall clearly understand the covenants agreed upon. As a borrower, take your time to negotiate to the extent that you know all the details in a sufficient manner; otherwise, you may be taken by surprise in future. Banks are also advised to be very careful to minimise all associated risks to achieve better results.Dr AbdelGadir Warsama Ghalib is a corporate legal counsel. Email: [email protected]

Legal Perspective Shareholders are the owners of the company as they have the shares that constitute the company. With this in mind, I would like to stress the point that it is important for each shareholder, particularly, in joint-stock companies to learn that the company law gives shareholders certain legal rights and protection against some specifics by the company or the Board or other 3rd parties. The shareholders, it goes without saying, are supposed to know their rights and their duties as well, in their company. The statutory protection given to shareholders is provided for in the company law, wherein, the different assemblies of the company are not authorised nor allowed to take, add or amend any of the legal rights conferred on the shareholder by the law particularly the company law. This important statutory right has been vested with all shareholders regardless of the fact that they are individuals or institutions, small or big, smart or dull, active or otherwise, etc. This legal stand constitutes a healthy environment and should give each shareholder the necessary boost and charisma to preserve such statutory rights and to maintain them all through his holder-ship. It would be very interesting to mention that many shareholders in many companies are either ignorant about this de jure situation or merely they don’t understand that this statutory right and privilege should be maintained and exercised all through their equity shareholding. In certain instances, it has been observed that the general assembly has gone astray in relation to certain rights of shareholders. A good example, could be the emergence of certain discussions in some issues during the general assembly and their refusal for discussion because they are not included in the agenda as required by the law. This could be a good excuse to escape from the situation. This practice, to my knowledge, happens frequently as there is provision that says, only issues in the agenda are to be discussed. However, this provision should not be taken as absolute prohibition otherwise this will be against the intention of the lawlegislature. It should be clear that decisions or resolutions taken in such instances could be considered illegal, void “ab initio” and of no effect. Particularly, when such matters raised for discussion are of prime importance for the company and or there is urgent need to discuss and deliberate during the on-going session. The door for discussion should be open and not closed for good. The chairman presiding the session should have a key of wisdom and professionalism. The shareholders statutory rights are many, such as the right to attend meetings, right to participate in discussions, right to call for meetings due to certain reasons and ultimately, the right to exercise the voting powers and the like. At certain times there could be difference of opinion in relation to certain issues between the Board, the executive management on one hand and shareholders on the other hand. We believe this is normal and encourageable, however, the differences shall not affect or jeopardise the statutory rights given to the shareholders as attending assemblies or participation in discussing any issue during meetings. Differences or disagreements could happen when the shareholders are active or knowledgeable, for example, when the company is planning a merger or acquisition, increase or decrease of the capital or involvement in mega projects, etc. There are examples wherein extensive debates had been going on in many countries between the shareholders and the management regarding such important issues. Some companies, have changed or stopped certain projects after facing justifiable resistance from the shareholders. Each shareholder, and likewise each company, shall work to achieve this result in good faith and high spirit to the betterment of the company and the shareholders who own the company through all tenure. Dr AbdelGadir Warsama Ghalib is a corporate legal counsel. Email: [email protected]

Legal PerspectiveCommercial banks play a pivotal role in most trade finance transactions. Herein, the banks can take different roles, such as the issuing bank, the confirming bank, the nominating bank, the advising bank or otherwise depending on the intention and interest of the bank in serving their different clients.I believe that the role of each of the above-mentioned banks is important and highly needed for such transactions. However, the role of the confirming bank could be more important and very essential to complete the smooth process of trade finance transactions.Therefore, we need to know more about confirming banks. Under the UCP 600, a confirming bank is a bank that adds its confirmation to a letter of credit (LC) at the initial request or authorisation of the issuing bank, undertaking obligations similar to the issuing bank's own. In other plain words, it is a kind of a “confirmer” that agrees to perform the principal duties of the issuing bank.This banking activity adds an extra layer of security for the exporter (beneficiary), ensuring the payment even if the issuing bank defaults. Moreover, the key responsibilities of a confirming bank include examining documents for compliance and ensuring payment or negotiation if the presentation is complying.According to the UCP (Uniform Customs and practices for Documentary Credits) 600, explain the meaning of “Confirming Bank”. Sub-article 37 (c) of UCP 600 states: “A bank instructing another bank to perform services is liable for any commissions, fees, costs or expenses (‘charges’) incurred by the bank in connection with its instructions”.Based on this and according to sub-article 8 (b) of UCP 600, the obligation of a confirming bank begins only when it adds its confirmation to the credit: “A confirming bank is irrevocably bound to honour or negotiate as of the time it adds its confirmation to the credit”.In trade finance transactions, the issuing bank is in fact open to confirmation being added, but not mandating it. The confirming bank can add its confirmation, however, it still retains the right to decline the confirmation, as stated in sub-article 8 (d) of the UCP 600. As a rule, if a bank authorised or requested by the issuing bank to confirm a credit, is not prepared to do so, it must inform the issuing bank without delay and may advise the credit without confirmation. All this is optional for the confirming bank as they deem appropriate and acceptable for them.Many people ask if the issuing bank can also take the role of a confirming bank. Generally, the answer is yes. An issuing bank can also act as the confirming bank, although typically these are separate entities. Normally, the issuing bank issues the LC, while the confirming bank adds its own guarantee of payment, which provides greater security to the beneficiary. However, in situations where the issuing bank is also the one performing the confirmation, it's acting in both capacities within the same transaction.Even though, the role of the confirming bank is very clear, however, there are many cases in Courts between the issuing banks and the confirming banks and or clients. It is important to be more vigilant and careful in such transaction as they may cause unnecessary troubles and legal obligations.Dr AbdelGadir Warsama Ghalib is a corporate legal counsel. E-mail: [email protected]