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Saturday, August 13, 2011

Save on Your Foreign Exchange and Avoid Hefty Bank Fees (part 1)

One of the most important yet least considered aspects of emigrating has to be changing your funds and savings into your new currency. Picking the optimum moment to change currencies can be like a game of Russian roulette. You only get one chance. If you don’t get it right, you stand to lose a significant amount.

People moving sums abroad can avoid the banks’ high rates by using a specialist FX dealers. Banks tend to charge fees each time you make a transfer and many also levy commission. In addition to the British bank’s charges, you may face further fees from the recipient bank.

There are basically four main places you can goto - tourist bureau de change, high street bank, private bank or foreign exchange specialists. Many if not all of us use high-street bank to switch money between currencies, perhaps to buy property abroad or because we work overseas and want to convert their earnings into sterling or Indian rupees or Euros and even Philippine pesos. Companies involved in all sorts of industries import or export goods. Manufactures have to import parts or export the finished goods and will need to buy or sell euros. Retailers buy stock from China or Europe. However, banks levy hefty fees on such foreign-exchange transactions, costing consumers hundreds of millions a year. The foreign exchange market is huge.

New advances in foreign exchange technology are enabling companies to make multiple payments in various currencies using a variety of payment methods. Doing business internationally has never been so easy and inexpensive. The world’s largest non-bank foreign exchange specialists are leading the way with more competitive services and pricing challenging the banks.

Currency markets constantly fluctuate, so knowing when to make your international payments can be tricky. And in today’s economic climate, it’s more important than ever to make the most of your money. Whether you are buying your Australian Dollars with British Pounds, American Dollars, Euros or any other foreign currency, it pays to shop around. A currency specialist can help you do just that. They ensure you understand all the options available and can provide expert guidance on the currency markets.

Being FX knowledgeable involves having an understanding about the different types of trades available.

Rajiv Shah
Head - Life and Pensions
Earnest Insurance Brokers

Monday, June 27, 2011

Save and Win - Banking on National Bonds (part 2)

How it Works

The Corporation’s profit is based on the principles of Islamic Shariah in which the profit made is determined and 20 per cent of this amount is distributed amongst Bondholders. The distribution will be according to the number of Bonds held by an individual, and for the time period the bonds were held. There is no interest on the bonds as this is a Shariah compliant product. At the end of the financial year, profits made by National Bonds Corporation from its investments will be determined and 20 per cent of this amount will be distributed amongst bond holders.

All bondholders are eligible for the profit. Your profit will be converted to Bonds which can be redeemed instantly since there is no lock in period. National Bonds corporation announced the highest annual profit rate of 7.07 per cent for its bond holders for a second consecutive year in 2008. It is the highest return against any comparable savings scheme offered by any financial institution in the UAE .

The National Bonds Shariah-compliant savings programme invests the proceeds from Bonds in establishing developmental projects in the country in compliance with the principles of Islamic Sharia through the mode of Mudaraba (fund management), and give you (the holders) indicative annual returns in addition to giving you the opportunity to win one of 101 prizes every week from National Bonds Corporation’s own funds.

The Mudaraba fund is being invested back into the UAE economy through its initiatives like Taaleem an educational initiative to raise the level of education in the region, BCS a Strata Management company specialising in property management, its property development projects, Skycourts and Flamingo Creek and Souk Extra the community shopping chain.

There are 101 prizes given away every week. The total value of these prizes is Dh1,155,000. The top prize being Dh1 million.

To be eligible for the weekly Millionaire draw, minimum bondholding should be Dh10,000 and above. All bondholders are eligible for the other prizes regardless of the number of bonds they hold.

The winning National Bond numbers are randomly picked by a computer, the whole process is carried out under the supervision of Economic Department and independent international auditors, Ernst and Young. So each Dh10 Bond has a separate and equal chance of winning.

The revamped draw format, from monthly to weekly, came into effect on 9th May with the aim of encouraging and rewarding even more people to save to achieve their personal and financial aspirations.

The minimum age required to purchase National Bonds is 16 years unless purchased by a parent/guardian for a minor. The youngest millionaire to date is a 3 year old!

The minimum number of National Bonds that must be purchased in any Application is ten.

The price for a National Bond for which an Application is accepted will be Dh10. Bonds must be held for a minimum period of 30 days from the date of issuance before they can be redeemed. This restriction, however, does not apply to those Bonds that are issued as prizes or as profit distribution.

National Bonds can now be purchased from nearly 500 outlets nationwide, including exchange houses and banks, online at or by calling toll free 800-BONDS (26637)

Good luck in saving and winning!
Rajiv Shah
Head - Life and Pensions
Earnest Insurance Brokers 

Thursday, June 23, 2011

Save and Win : Banking on National Bonds - part 1

Putting away some money regularly is an ideal way to build up your savings for a rainy day, but sometimes it’s difficult to keep that commitment wouldn’t you say? 

If keeping cash in banks has you wondering whether the interest you are being paid is decent enough then one possible solution may be to look into National bonds. With relative safety at least you have a chance of winning cash prizes since National Bonds is now quadrupling its prize draws from monthly to weekly. With no income or job requirement, anyone can purchase national bonds, whether a resident, non-resident or UAE national. Not only does it offer a unique opportunity to save, and win, but it is also a Shariah compliant product which will within its programme of investments actively support the development and improvement of infrastructure within the local community. With National Bonds you are eligible to win not just once, but every week, for as long as you hold your Bonds. Each individual Bond is eligible to win one prize in every draw. It is anticipated that National Bonds will fulfill some of the demand for more diverse savings opportunities. In addition the capital leveraged from the scheme will be utilised for the benefit and development of the area. And why not! 

National Bonds Corporation has so far succeeded in securing 10 per cent of the UAE’s population as its market share in reaching half a million bond holders from over 91 nationalities of which 35 per cent are non-residents. The beauty of the product is that it allows a potential investor to save as much as they want or as little as Dh100. The bonds offer participants a safe and credible savings option whilst simultaneously providing people with a unique opportunity to win millions of dirhams in draws. With a commitment to give out annual returns to customers on their deposits, comparable to those offered by bank saving accounts. Each National Bond is an investment certificate and is included in every draw until it is redeemed.


National Bonds is a private joint stock company that was established in March 2006. The company’s main shareholders are Government of Dubai, Dubai Holding Company, Emaar Properties Company and Dubai Bank which are all overseen by the UAE Central Bank which means National Bonds Corporation is subject to the same regulatory procedures as other financial institutions here.

Rajiv Shah
Head - Life and Pensions
Earnest Insurance Brokers

Sunday, June 19, 2011

Cashflow Crisis in UAE: Insolvency & Bankruptcy Insight - part 2

Current Procedure:

UAE Federal Law No. 18 of 1993 (the Commercial Transactions Code) contains the bankruptcy law. Upon declaration of a debtor as bankrupt and appointment of a trustee in bankruptcy, notice is given to all creditors to register their claims.

Local creditors are required to register their claims within 10 days of publication and creditors resident outside the UAE are required to register their claims within one month. The trustee in bankruptcy would verify the documents submitted by the creditors and prepare a schedule of debts and lodge the same with the court. A copy of the schedule along with a statement of the amounts that the trustee intends to accept as debt owed will be sent to every creditor and the bankrupt. The creditors may file objection to the amounts contained in the schedules. The judge supervising the bankrupt’s estate will decide on these objections and prepare a final schedule of debts with the amounts that have been accepted. The judge supervising the bankrupt’s estate will designate the manner in which the assets are to be sold. The sale proceeds will be deposited with the court cashier or in a bank account designated by the judge supervising the bankrupt’s estate. Fees and expenses incurred towards administration of the bankrupt’s estate will be deducted from the sale proceeds. Thereafter, the amounts due to preferred creditors will be paid and the remainder will be distributed to the unsecured creditors in proportion to debts due to them. 

Rajiv Shah
Head - Life and Pensions
Earnest Insurance Brokers

Tuesday, June 14, 2011

Cashflow Crisis in UAE: Insolvency & Bankruptcy Insight - part 1

Bankruptcy in itself is not a crime in the UAE. A debtor who is unable to pay his debts commits no crime and the Law only provides for certain procedures to be followed in respect of determining and extinguishing his debts. However, the Penal Code does specify certain instances where a trader will be charged for committing a bankruptcy offense that amounts to a crime.

Under the Penal Code, a trader will either be regarded as bankrupt by default or bankrupt by misrepresentation if he/she:

· Conceals, mutilates, falsifies or destroys of his books.

· Falsifies entry in any book or document for any artificial debts.

· Spends on gambling or materially contributes to or increases the extent of insolvency by rash hazardous speculations.

· Payment of debts to some creditors with intent to defend or delay other creditors.

· Failing to keep proper books of account or failing to produce all the books of accounts as are necessary to demonstrate or explain his debts or credits.

Owing debt in Dubai and not being able to pay it is a problem without a solution, even in this modern age. Currently there are no bankruptcy laws for ‘non traders’, which would include consumer bankruptcy cases such as employees of companies. Changing market conditions, particularly in the real estate sector, have put the use of insolvency laws into the limelight. It addresses the position of individuals in financial trouble and what steps can be taken by businesses that are in difficulty.

Dubai Chamber shares that 408 cases were filed over the first four months of 2009 representing an astonishing 80 per cent in-crease in comparison to the same period last year.

A survey report compiled by Hawkamah, a non-profit organisation based in Dubai that promotes higher standards of corporate governance in the region, urges more robust and better-integrated legal systems as the financial crisis enters a new phase in which more insolvencies are possible gave the UAE a score of 74 points out of a maximum 155 on a scale measuring the strength of insolvency regimes. Other countries in the region scored higher; The Dubai International Financial Centre received a score of 126. It was given its own score because it is a free zone with its own insolvency laws that are clear, well-drafted and based mainly on the English legal system

Insolvency laws are on the books in the UAE, but are largely untested by the judicial system. Both the UAE’s Commercial Companies Law and the Commercial Transactions Law give extensive coverage to how courts should treat insolvent companies. Under the commercial code, for example, companies must declare bankruptcy within a month of ceasing to pay debts. Directors and executives (based in UAE) continuing to trade companies that are insolvent risk a two year prison sentence if their company fails to pay its debts within the 30 days. Failure to follow this procedure can have criminal implications for the company’s directors or officers.

The law does not provide a definition of bankruptcy but the Commercial Code provides that any trader that is not able to pay its commercial debts when due by reason of its financial instability may be declared bankrupt.

There is an urgency to encourage awareness of the legislation that already exists as it would certainly enable businesses in difficulty to consider their options at the earliest possible opportunity. Such options may, depending on the circumstances, include entering into a formal or informal composition with creditors.

Rajiv Shah
Head - Life and Pensions
Earnest Insurance Brokers

Sunday, June 12, 2011

Islamic Inheritance: Hiba — Capacity for Making a Gift (part 2)

Acceptance – The one who can receive is known as the donee. Acceptance may be made expressly or implied by conduct. Any person can receive a gift if he or she is in existence at the time of the gift. An absolute gift to an unborn child is invalid, but if the child is born within six months of the date of gift, it will be valid on the presumption that the child was actually existing in the womb of the mother. A muslim may also make a lawful gift to a non-muslim. The Donee must be in existence at the time of giving the gift, & In case of a minor or lunatic, the possession must be given to the legal guardian otherwise the gift is void.

A Gift to an unborn person is void. However, gift of future usufructs to an unborn person is valid provided that the donee is in being when the interest opens out for heirs.

A gift is void is the donee has not given his acceptance. The real test of the delivery of possession is to see who (the donor or the donee) reaps the benefits of the property. If the donor is reaping the benefit then the delivery is not done and the gift is invalid.

Muslim law recognises the difference between the corpus and the usufructs of a property. Corpus, or Ayn, means the absolute right of ownership of the property which is heritable and is unlimited in point of time, while, usufructs, or Manafi, means the right to use and enjoy the property. It is limited and is not heritable. The gift of the corpus of a thing is called Hiba and the gift of only the usufructs of a property is called Ariya.

A Hiba, once validly created cannot be revoked. No receiver of a gift under a Hiba can also be compelled to give anything in exchange. Of course, it is quite common that the donor and receiver agree that something will be done or given in exchange for the gift, and such gifts fall under a different category altogether, known as Hiba bil Iwaz or gifts for return.

A Hiba which does not take effect immediately is of no effect whatsoever. Finally, a Hiba which is purported to be made by a person who is on his death-bed, cannot operate on a greater piece of property than his will (or Wasiyat) would, if he had left behind a will. Such gifts in contemplation of death are known as donatio mortis causa and can operate to the extent of one-third of the donor’s estate only. As distinguished from a Will, a gift may be made of the whole property of the donor, even to an heir. It can be made in favour of a stranger to the exclusion of his heir. The only restriction is the rule which invalidates death-bed gifts.

Having regard to all of the above, it is clear that a Muslim gentleman who wants to provide for his son or daughter like his Hindu or Christian brethren, would, instead of executing a Settlement Deed, make a Hiba of his property in such manner and form as he thought fit, and thereby, ensure that the son or daughter in question had a piece of property which they could then utilise for their maintenance and upkeep. 

Rajiv Shah
Head - Life and Pensions
Earnest Insurance Brokers

Wednesday, June 8, 2011

Islamic Inheritance: Hiba — Capacity for Making a Gift (part 1)

As in all religions, Islam too attaches great value to the performance of charity and to the act of giving. In the Holy Quran, it is laid down that the act of spending out of love for God, your kin, for orphans, for the poor, for the wayfarers, for those who ask, and to be steadfast in prayer and to practice regular charity, are all held to be acts of righteousness.

Gift is a generic term that includes all transfers of property without consideration. In India, Gift is considered equivalent to Hiba but technically, Gift has a much wider scope than Hiba. The word Hiba literally means, the donation of a thing from which the donee may derive a benefit. It must be immediate and complete. The most essential element of Hiba is the declaration, “I have given”.

As per Hedaya, Hiba is defined technically as, “unconditional transfer of property, made immediately and without any exchange or consideration, by one person to another and accepted by or on behalf of the latter”.

Under Muslim Law, where one Muslim signifies his willingness to make to another an immediate and unconditional transfer without consideration of the ownership of an existing and definite piece of property, and if the other accepts that transfer of ownership and if possession of the property is transferred thereupon, then a valid gift (or “Hiba” as it is called) takes place in respect of such property.

Since Muslim law views the law of Gift as a part of law of contract, there must be an offer (izab), an acceptance (qabul), and transfer (qabza). The transfer of certain existing moveable or immoveable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee must be made during the lifetime of the donor and while he is still capable of giving. If the donee dies before acceptance, the gift is void

The donor (the person who gives). Any person who is sui juris can make a gift of his property. Like any other contract, the requisite conditions are [the age of] majority, understanding, freedom and ownership of the subject matter of the disposition. A person must be major, able to understand the nature of the act, be subject to no undue influence, coercion or duress and must be the owner of the property to be gifted. A declaration by the donor therefore must be clear and unambiguous intention of the donor to make a gift. Further Conditions for donor would be that he must be free of any fraudulent or coercive advice as well as undue influence & of course he must have ownership over the property to be transferred by way of gift.

A gift by a married woman is valid and is subjected to same legal rules and consequences. A gift by a pardanashin woman is also valid but in case of a dispute the burden of proof that the transaction was not conducted by coercion or undue influence is on the donee. A person in insolvent circumstances is also valid provided that it is bona fide and not merely intended to defraud the creditors.

Rajiv Shah
Head - Life and Pensions
Earnest Insurance Brokers

Sunday, June 5, 2011

Business Ownership Issues - part 2

A business partnership differs from a personal relationship/partnership in one important, fundamental way: It’s just business. You can prepare for a split in your business partnership with a lot less emotional upheaval than you might in a personal relationship.

The Articles of Association of most private companies include ‘pre-emption rights’, which provide that shares must first be offered to existing shareholders before they are sold to a third party. This will enable other shareholders to acquire shares from the personal representatives of a deceased shareholder.
More specifically, a separate Shareholders’ Agreement can set out the exact wishes of all shareholders with regard to matters such as the purchasers of any shares that become available; a formula for arriving at the purchase price; and how a purchase will be funded.
The purchase of shares or assets from a deceased shareholder or partner is very often funded by means of a life assurance policy taken out on the lives of all of the shareholders or partners concerned. Specialist advice should be obtained when taking out such a policy, as there can be inheritance tax or income tax ‘pre-owned assets’ implications where these policies are written in trust.
Loss of a key shareholder - in some businesses, the shareholders wish to retain control of the business, perhaps within a family. In these cases, agreements are commonly drawn up between the shareholders to ensure that control of the business is retained.
Should a business owner die, you have more issues to face than simply, “how do I replace him/her so that we can avoid a financial setback?” If the right provisions aren’t made, you could also find that the deceased owner’s spouse inherits the shares and becomes your co-owner, continuing to expect the same salary and profits from the business.
Company directors business partners shareholders and property owners should seek particular guidance on the impact of their death not only on their family but also on their business affairs. The failure to do so may jeopardise the continuing viability of the business after the death of the business client.
Rajiv Shah
Head – Life & Pensions
Earnest Insurance Brokers

Wednesday, June 1, 2011


Enhance the interest on your Savings with an International instant access savings account & Secure your funds away from the inheritance laws of Sharia.

Check out
Lloyds TSB Offshore Savings for rates of interest on instant access and Fixed deposit schemes.

Rajiv Shah

Head – Life & Pensions
Earnest Insurance Brokers

Wednesday, May 25, 2011

Business Ownership Issues - part 1

WHAT will happen to my business and whose responsibility will it become if I die?
If you are part of a business partnership, how will your partners continue on without you and will they be able to liquidate your shares to pass on inheritance?
An estimated two thirds of family businesses do not survive beyond the first generation of owners. A proportion of these failures is directly attributed to inadequate succession planning. It is not only death but also on disability or retirement that can destroy a business and plans for its successful continuation.
Many people have started a business partnership (or limited liability company) with at least one other person.
The lack of direction after a death can cause fear within staff and customers, and competitors can soon seize that opportunity to move in. A considerable percentage of value can be wiped out in months. The key is to have the correct instructions and protection in place to avoid a financial catastrophe.
As a business owner, you’ll surely want to ensure that your business continues to succeed after you retire, whether wanting your children succeed you or sell your business to others. Ensuring the right arrangements are put in place during your lifetime will help. Much depends on the type of business you have and how it is set up in the first place.
With ownership goes control over compensation, benefits, hiring and firing, management, short and long term business goals. Ownership also allows for the creation and maintenance of a Board of Directors, necessary to the long term health of the organisation. Many succession plans involve dividing ownership and control so that the business owner retains control but passes ownership to others.
The most basic and essential requirement, especially for those in business, is to make a will.
If a person dies ‘intestate’ (without having made a will), the law specifies how their assets are to be dealt with. Where shares or other business assets are held, it can also affect business partners, directors, other shareholders and the business itself.
A well drafted will can limit the potential for claims against the deceased’s estate. This includes claims made against the deceased share in a business, which without a will could result in serious damage to the business. Businesses need to ensure their directors have wills and that these concur with any articles or shareholder agreements. Many businesses are family run with the intention that the business should pass to another family member working in the firm. Often a child working with a parent in the family business will have an expectation that the business will come to them. Where this is not covered by a Will, or if the articles of the business allow for another shareholder to buy the deceased’s shares, families can quickly fall out. The child working in the business may be expected to purchase their siblings interest even if the other siblings have never worked in the business or contributed to its success.
Rajiv Shah
Head – Life & Pensions
Earnest Insurance Brokers

Succession planning and safeguarding your assets – part 2

It is essentially important therefore to keep separate bank accounts in addition to any joint accounts you may have if you are married, as well as a primary offshore bank accounts as Bank accounts that are maintained outside the UAE are not be governed by the UAE's legal jurisdictions and laws.

International Life Insurance is one of the most important steps to succession planning. Beneficiary payouts are paid out of trust held offshore & paid directly to the beneficiary thereby not falling as part of your estate for the purposes of distribution under sharia.

Although preparing a will is not something many people relish it is essential in the UAE and in the long term. Succession planning is something that we all should be prepared with.
Parents of minors should consider the possibility for temporary and permanent guardianship of their children resident in the UAE. Instructions in relation to this should be made before, and lodged at the embassy of which the parents are nationals.

The procedure upon death of an expatriate who has made a Will is to obtain an application for a grant of representation in the deceased’s country of domicile. Once probate is obtained, it must be notarised, and attested at the notary public or the ministry of foreign affairs here before it may be recognised by the UAE courts as authentic and valid. Upon recognition by the government authorities of the deceased’s representatives the trustees or executors would have full power to administer the deceased’s estate in accordance with his wishes. In the case of intestacy, a letter of administration would also have to be obtained from the country of domicile and duly notorised & attested.

People are often misinformed that when they die their estate will be passed to their next of kin even without a will. This is certainly not the case as the laws relating to inheritance of an estate are often complicated when there is no will in place. Without a Last Will and Testament (“Will”), these very important decisions will be made by the government.

Rajiv Shah
Head - Life and Pensions
Earnest Insurance Brokers

(Rajiv Shah is a Personal Finance Specialist and Head of Life & Pensions at Earnest Advisors. The opinions expressed by the author are his own)

Succession planning and safeguarding your assets – part 1

The UAE law of inheritance is based on the principles of Sharia Law, which differs greatly to the laws that many of us expatriates are used to and to the way in which our total assets are normally distributed upon death away from the UAE. 

In a Muslim country like the UAE, all courts adhere to Sharia - the primary source of Islamic law. Legal systems in the Gulf are usually quite complicated and those unfamiliar with their workings can find this difficult to understand & accept.

So what happens when a non-Muslim expatriate dies out here in the UAE?
According to the UAE Civil Code, Federal Law No.2 of 1987 (Article 17/1) stipulates that inheritance shall be subject to the law of the deceased at the time of death. This law was promulgated to stem confusion surrounding inheritance issues for expatriates. Therefore the law of the domicile country of the deceased would apply.

Your “Last Will & Testament” is a document that details exactly what you would like to happen to your estate in the event of your death. The professionally drafted document can cover all aspects of your life, from physical assets such as property, investments or cash, to who you would like to look after your children until they are of an age that they can look after themselves. It is worth noting that if you marry, you will have to start again, as marriage automatically revokes a will; however, possibly just as important, a divorce does not.

Your Dubai freehold property is still governed by the inheritance laws of sharia and would not be distributed as per your wishes or your Will. The UAE treats movable assets (such as cash, investments, cars, etc) differently to immovable assets (property) for inheritance purposes. Only moveable assets as safeguarded when making a Will. 
The laws relating to foreign owners of property in the UAE and inheritance still need to be examined closely and the process is ongoing. But as the situation stands, UAE law (sharia) shall apply to immoveable property (real estate) in the UAE held by foreigners.

When purchasing real estate in the UAE, it is always advisable to try to do so through a foreign company that may be jointly owned by you, your spouse and/or your children.
When an expatriate dies in the UAE, their visas are cancelled and banks are instructed by the courts to freeze all transactions on the accounts of the deceased, including joint accounts. The bank is obliged to freeze the account from such notification until the successors of the deceased are nominated as per Article 379 (4) of the Commercial Transactions Law, UAE Federal Law No. 18 of 1993. Unfreezing of the account can only be carried out by order of the Sharia Courts. This process aims to safeguard any payments that need to be made after an expatriate has died, such as outstanding loans and any debt payments and can take as much as 6-9 months to clear up.

With Visas cancelled (and 30 days grace to make visa re-arrangements), and bank accounts frozen, does one even have time to grieve over the loss of their loved one? Many of us do not understand the possible implications of death in the UAE and the financial implications that entail.

Simple financial planning can help overcome such obstacles and help create a safety net. It’s not just about safeguarding your assets by making a Will but also the welfare of your family & young children who are dependent on you even when you are not around.

Ravi Shah
Head - Life and Pensions
Earnest Insurance Brokers