What are the requirements of Islamic Private Equity Fund (IPEF) establishment?
Two fundamental requirements for Islamic Private Equity Fund establishment exist: an appointed Sharia Advisor (SA) with specific levels of involvement, and Sharia-compliant business and Sharia-compliant core activities of the investee entities. The appointed SA is involved in fund structure, monitoring compliance, exit strategy development, investment funds disbursement, legal documentation, and the development of principal terms and conditions.
What is the role of the Sharia Supervisory Board (SSB)?
The SSB analyzes the fund’s investment opportunities to determine Sharia-compliance, and subsequently issues approvals if the requirements are met. The SSB ensures that non-Sharia compliant profits are kept separate from Sharia-compliant fund profits, and also coordinates the income purification process. The SSB conducts an annual Sharia audit and issues a report for the fund’s investors.
Does the SSB have veto power in respect to the investment opportunities considered by the fund manager?
The SSB shall not be involved in the commercial aspects or investment strategy of the fund’s investments. The role and responsibilities of the SSB are strictly on the Sharia-compliance aspects of the fund.
Does the SSB have a say in the exit strategy of the fund?
The SSB does not enter into commercial or investment strategy fund decisions, so long as it is Sharia-compliant.
What type of fund is Crestmount Fund I?
Crestmount Fund I is a Sharia-compliant Real Estate Private Equity fund (REPE) or an Islamic Private Equity Fund (IPEF). Crestmount Fund I’s capital will be deployed via a Commodity Murabaha Agreement (CMA) in compliance with Sharia principles.
Which jurisdiction would the SSB be subject to considering that members are geographically dispersed?
Sharia standards and applications are in general almost standardized worldwide. The diverse composition of the SSB ensures that the Sharia rules as adopted are based on the universally-accepted practices. For legal jurisdiction for the purpose of any contract disputes, the law of the land as adopted by the fund will be applied. In cases of any inconsistencies between the law of the land and Sharia requirements, the law of the land will prevail.
Is the SSB subject to any regulation as per United Arab Emirates laws (ie. DFSA)?
Yes, the SSB is subject to regulation; the legal requirements do not regulate primarily on the SSB members themselves, but rather on the institution itself. Primarily, any institution offering Sharia-compliant products or services must have a SSB, and the institution must follow the direction of the SSB for this purpose.
Is an annual Sharia Audit mandatory, and would it be conducted by the SSB?
As per DFSA rules, an annual Sharia Audit is mandatory and must be submitted to the relevant regulator. Crestmount Capital’s Sharia Audit will be conducted by Amanie Advisors on behalf of the SSB, who will assess the final report and endorse it accordingly.
Will the SSB issue a fatwa for each investment transaction?
The SSB will issue a fatwa on the fund structure and on its related legal documentation including the Sharia investment guideline. Fatwas are not issued on a per investment basis.