Starting a New Business Relationship

25 Nov 2019

In a competitive business market and especially at the outset of a new commercial relationship where a credit line is to be given, there are a number of key considerations which businesses should attend to when signing contracts with customers and also when bringing clients onboard. These are as follows:

Due Diligence

Whilst a comprehensive due diligence exercise can be costly and time consuming and may not always be a feasible option for many sole traders or small businesses at the outset, it is extremely important to understand the party you are dealing with, especially if later on you need to consider taking legal action against them or conversely if you need to defend yourself against a claim which you believe to be unsubstantiated.

Some ways of undertaking due diligence are as follows:

Checking the source and origin of your customers’ funds;
Requesting financial statements;
Being aware of suspicious financial activity – if there is any real cause for suspicion then this should be reported to the Financial Intelligence Unit (FIU) of the Central Bank of the UAE.

The type of information that a business should be looking to obtain when undertaking a due diligence exercise would be the details and documents of the customer’s business. This could include the following:

Trade licence;
Company’s Memorandum and Articles of Association;
Details of shareholders or ultimate beneficial owners, parent company, subsidiaries as well as details of the relationships between signatories and any ultimate beneficial owners;
Evidence of good financial standing/ information on assets held by the customer.

You need to keep up-to-date information on your customers so that you can:

Amend your risk assessment of a particular customer if their circumstances change; and
Carry out further due diligence measures if necessary.

Changes of circumstance may include:

A substantial change in the level or type of business activity;
A change in the ownership structure of a business.

Onboarding

Onboarding is the process of welcoming new clients, getting them up to speed with your procedures and policies and making them feel comfortable so that you can work together effectively. It is also about getting all of the information you need, thus setting the tone for a successful and productive relationship. A clear onboarding process is proven to increase confidence and satisfaction, improves performance, and reduces confusion. Some of the methods and processes used for onboarding include face to face meetings, calls, videos, printed materials, digital communications, training documentation and questionnaires.

This article does not constitute legal advice and should not be relied upon as such. For specific advice, please contact enquiries@jamesberrylaw.ae.

Written by Hannah Farooq

Legal Consultant

Litigation and Dispute Resolution Department

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