FRAMEWORK FOR THE MANAGEMENT, GOVERNANCE AND ADMINISTRATION OF - PowerPoint PPT Presentation

FRAMEWORK FOR THE MANAGEMENT, GOVERNANCE AND ADMINISTRATION OF LABUAN WAQF STRUCTURES 24 October 2018 Farah Deba Mohamed Sofian Partner, WONG LU PEEN & TUNKU ALINA Chairperson, STEP MALAYSIA

Scope 1. Legal structure of WAQF Foundation under Labuan International WAQF Foundation (‘LIWF’) 2. Management of LIWF  Founder  Council  Supervisory Person  Officers 3. Mechanism for Good Governance 2

Introduction: What is WAQF ? Literal Meaning Legal Definition A voluntary permanent irrevocable dedication of a Waqafa portion of one’s wealth to ALLAH SWT Stop, contain, preserve Islamic endowment of property to be held in trust and used for charitable or religious purposes 3

Basic Characteristics of Waqf BELONGS TO BENEVOLENT GIFT NOT INHERITABLE ALLAH PRESERVED INTENTION TO OR WAQF REPLACED

LEGAL STRUCTURE OF LABUAN INTERNATIONAL WAQF FOUNDATION (LIWF)

Basic Tenets of LIWF I. TO SERVE A RELIGIOUS PURPOSE: SHARIAH- COMPLIANT II. LEGAL ENTITY: LABUAN FOUNDATIONS ACT 2010 6

Other Available Legal Structures TRUST FOUNDATION COMPANY Settlor Founder Subscribers Reserved power Reserved rights Memorandum Trustee Council of Officers Board of Directors Charter and Articles of Articles of Trust Deed Registration Association Property Assets and Property Assets Distribution Distribution Dividend Beneficiaries Beneficiaries Shareholders

ASSETS ARE THE PROPERTIES OF THE FOUNDATION BENEFICIARY NOT OWNED BY FOUNDER OR enjoy the SHAREHOLDERS Benefits NOT NOT INHERITABLE SUBDIVIDED

Waqf As A Legal Entity ‘Incorporated Waqf ’ Management Control Labuan Foundations Act 2010 Shariah Advisor Council Supervisory Legal Officer Person Personality. 9

Establishment of Waqf LIWF is an Islamic Foundation • Registered under Section 107 Labuan Islamic Financial Services & Securities Act 2010 • Provisions of Labuan Foundations Act 2010 apply Guidelines on the Establishment of LIWF • Section 4A Labuan Financial Services Authority Act 1966 ( to clarify Part III, IV, V, VI of Labuan Foundations Act 2010 & Part IX of LIFSSA) 10

Failure to Comply with Guidelines COMPOUNDING ADMINSITRATIVE OFFENCE: S 36B of PENALTIES: S 36G of FAILURE TO COMPLY Labuan Financial Labuan Financial WITH GUIDELINES Services Authority Services Authority Act 1996 Act 1996 11

LIWF Structure in a Nutshell LABUAN INTERNATIONAL WAQF FOUNDATION (“LIWF”) Governed by Sharia principles on Waqf Founder LIWF (acts as Trustee/ Beneficiaries (Waqif) Nazir/Mutawalli) Endow Distribution assets 1. Charter (Waqfiyyah) of income/ through 2. Sharia Adviser usufruct Waqf 3. Supervisory person 4. Council 5. Officer 6. Secretary Governance and 12 12 management of Waqf foundation and assets

FLEXIBILITY OF LIWF

• Waqf income retained by founder • Waqf income for and goes to charitable purpose charitable purpose Self after his death Charitable dedicated Waqf Waqf (Waqf (Waqf ‘Ala Khayri) Nafs ) Joint Waqf Family (Waqf Waqf • Waqf income • Waqf income Mushtarak) (Waqf Ahli) reserved for family shared between & goes to charitable family members purpose when none and charitable of family members purpose exist Recipient of charitable purpose defined by founder and endorsed by Shariah Adviser 14

GOVERNANCE & MANAGEMENT OF LABUAN INTERNATIONAL WAQF FOUNDATION: “Separation of Powers” “Check & Balance”

Charter (Waqfiyyah) of LIWF FOUNDER PURPOSE & BENEFICIARIES TERMS & CONDITIONS GOVERNING THE FOUNDATION 16

The Relationship: Founder-Trustee- Governing Body-Beneficiaries • FOUNDER • TRUSTEE (WAQIF) (Nazir/Mutawalli) • WAQF PROPERTY (MAWQUF) FOUNDATION LEGAL & ENDOWMENT BENEFICIAL OWNER FIDUCIARY USUFRUCT DUTY of the & HIGHEST BENEFIT STANDARD OF CARE & • BENEFICIARIES • GOVERNING LOYALTY (MAWQUF BODY ALAIH) 17

Founder • The one who establishes the Foundation based on his wishes • Corporate or individual • Resident or non-resident of Malaysia • A founder can be a beneficiary 18

Council • Optional • Compulsory if the foundation solicits donation. The Council represents the Foundation. • Qualification of Council Members as per Founders requirements. • Resident or non-resident of Malaysia. • Cannot act as Officer at the same time. • Ensures compliance by Foundation. 19

Supervisory Person • Have supervisory powers over the Foundation (in addition & in lieu of the Council) • Monitor Council’s decision • Power to add or remove Officers & Council Members • Compulsory for foundation that solicit donation from the public 20

Officers • Mandatory requirement • At least 1 person initially appointed by Founder • Administer the Foundation to achieve its purpose or objects • Officers are required to act in accordance with instruction of Council • In the absence of Council or Supervisory Person, Officers acting jointly shall represent the Foundation 21

Shariah Adviser • Mandatory requirement • Qualified person • To advise the Foundation of its objective, operations & management & ensure compliance with Shariah principles including waqf, circulars & directives of LFSA • Must conduct an internal Shariah compliance review/audit annually • Non-compliance to be rectified 22

Secretary • Mandatory requirement • Must be a Labuan registered trust company • Compliant agent • Conduit between Foundation & Labuan FSA 23

GOOD GOVERNANCE

Fiduciary Duty: Highest Standard of Care and Loyalty ETHICS ACCOUNTABILITY PERFORMANCE TRANSPARENCY REPORTING 25

Best Practices WHO ARE THE EFFECTIVENESS OF QUALIFIED THE GOVERNING TRAINING PERSONS? BODY MISSION FOR CAUSE – SUCESSION PLAN NON PROFIT & FOR PROFIT ORGANISATION “MONEY HELD IN PUBLIC TRUST SHOULD BE WELL SPENT, NOT JUST WELL- INTENTIONED” 26

Thank You Courtesy of: Che Jamaliah & Aderi Adnan

Disclaimer This presentation should not be regarded as offering a complete explanation of the matters referred to and is subject to changes in law. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Labuan IBFC cannot accept any responsibility for loss occasional to any person acting or refraining from action as a result of any material in this presentation. LABUAN IBFC INC SDN BHD IS THE OFFICIAL AGENCY ESTABLISHED BY GOVERNMENT OF MALAYSIA TO POSITION LABUAN IBFC AS THE PREFERRED INTERNATIONAL BUSINESS AND FINANCIAL CENTRE IN ASIA PACIFIC 28