UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

Archive for December 19, 2010

A Close Look at the Special Tribunal on Lebanon

 

Lebanon, like a beautiful jewel blood-red rose who sheds endless clear pearl tears.

 

Click to access 914.pdf

http://www.stl-tsl.org/ (Special Tribunal on Lebanon website)

http://www.un.org/apps/news/infocus/lebanon/tribunal/ (Article)

http://www.yalibnan.com/2010/12/19/hezbollah-mp-launches-another-attack-against-stl/  (Article)

 

 

 

How Does Islamic Finance Perceive A Share?

 

 

A share is issued by a company, which seeks to raise capital through equity rather than debt financing.   A subscribed share represents the shareholder’s ownership in the assets of a company/corporation which is in turn represented by a certificate.  The certificate serves as evidence of ownership in the event of liquidation.  However, although the share represents an ownership right, it is an equity instrument that ranks below the creditors in the liquidation process. 

According to Amanie, ownership through equity could be manifested through a Mudarabah or a Musharakah contract.  The basic underlying principle of Mudarabah and Musharakah contracts is that the investor bears loss to extent of her paid up capital (limited liability).  Equity ownership in a company through Mudarabah and Musharakah is Sharia’h compliant as a share is a valid instrument through which to manifest ownership over the company.  The necessity of stock screening arises in Islamic Finance from the requirement of ascertaining which activities of the company are Sharia’h compliant. 

In Islamic Finance, a share entitles the shareholder to the right of management in Musharkah although the right of management and the right of voting may be waived through voting.  A share does not guarantee capital or profit, however, the share represents a joint-venture between the shareholders to share the loss and profit.  Loss in equity-based ventures is spread among the investors according to each shareholder’s capital contribution.  The profit is also shared among the investors and the profit ratio is negotiable among the shareholders.  However, any preference to one class of shares over another either in profit distribution or liquidation is not Sharia’h compliant.  Shares are liquid instruments and can be traded on the secondary market*.  However, the trading of shares is subject to certain guidelines relating to the percentage of illiquid assets to liquid assets in the balance sheet of the company.  Shares can be open or closed-ended.   (AMANIE)

*Secondary Market: http://en.wikipedia.org/wiki/Secondary_market

Auditing Standards of the United Arab Emirates

 

 

http://www.estandardsforum.org/united-arab-emirates/standards/international-standards-on-auditing

What is AAOIFI?

 

AAOIFI stands for Accounting and Auditing Organization for International Financial Institutions and is based in Manama, Bahrain.

“The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is an Islamic international autonomous non-for-profit corporate body that prepares accounting, auditing, governance, ethics and Shari’ah standards for Islamic financial institutions and the industry. Professional qualification programs (notably CIPA, the Shari’ah Adviser and Auditor “CSAA,” and the corporate compliance program) are presented now by AAOIFI in its efforts to enhance the industry’s human resources base and governance structures.

AAOIFI has gained assuring support for the implementation of its standards, which are now adopted in the Kingdom of Bahrain, Dubai International Financial Centre, Jordan, Lebanon, Qatar, Sudan and Syria. The relevant authorities in Australia, Indonesia, Malaysia, Pakistan, Kingdom of Saudi Arabia, and South Africa have issued guidelines that are based on AAOIFI’s standards and pronouncements.”

http://www.aaoifi.com/aaoifi/

Certifications Offered by AAOFI:

  1. Certified Islamic Professional Accountant (CIPA) http://www.aaoifi.com/aaoifi/pdf%20forms/CIPA%202011.pdf
  2. Certified Sharia’h Advisor and Accountant http://www.aaoifi.com/aaoifi/pdf%20forms/CSAA%202011.pdf

“The objectives of AAOIFI are:

1.  to develop accounting and auditing thoughts relevant to Islamic financial institutions;

2.  to disseminate accounting and auditing thoughts relevant to Islamic financial institutions and its applications throught raining, seminars, publication of periodical newsletters, carrying out and commissioning of research and other means;

3.  to prepare, promulgate and interpret accounting and auditing standards for Islamic financial institutions; and

4.  to review and amend accounting and auditing standards for Islamic financial institutions.

AAOIFI carries out these objectives in accordance with the precepts of Islamic Shari’ah, which represents a comprehensive system for all aspects of life, in conformity with the environment in which Islamic financial institutions have developed. This activity is intended both to enhance the confidence of users of the financial statements of Islamic financial institutions in the information that is produced about these institutions and to encourage these users to invest or deposit their funds in Islamic financial institutions and to use their services.”

http://www.aaoifi.com/aaoifi/

Key Publications of AAOFI including Accounting, Auditing & Governance Standards (for Islamic Financial Institutions) and Shari’ah Standards; Standards Under Development and Standards that Have Been Developed.

http://www.aaoifi.com/aaoifi/Publications/KeyPublications/tabid/88/language/en-US/Default.aspx

IFRS v AAOIFI: The Clash of Standards?

http://mpra.ub.uni-muenchen.de/12539/1/MPRA_paper_12539.pdf

AAOIFI to Start Screening  Islamic Finance Products to Ensure Shari’ah Compliance in 2010

http://www.arabianbusiness.com/aaoifi-start-islamic-finance-screening-in-2010-40549.html

UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance