HOW TO ESTABLISH A FAMILY OFFICE WITH SYARIAH COMPLIANT GOVERNANCE

HOW TO ESTABLISH A FAMILY OFFICE
WITH SYARIAH COMPLIANT GOVERNANCE
by
Tuan Haji Abdul Aziz bin Hassan
LL.B(HONS)(BUCKINGHAM), BARRISTER-AT-LAW(LINCOLN’S INN), DSLP (IIUM), IFP, CFP, MSc. MAP(UUM),
DOCTOR OF BUSINESS ADMINISTRATION(UUM)-candidate
FAMILY OFFICE : Standard Meaning
•
An organisation set up to look after the family’s business interest
including tax and estate planning, wealth management, business
issues, philanthropic initiative and family dynamics. It is usually
staffed by outside professionals reporting to the founder or the
successor. It can be for single family or multi-family.
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FAMILY OFFICE : Alternative Meaning
•
An ultimate family holding company with family governance
principles in place through a family constitution
3
The Family Governance Document
(The Family Constitution)
Founder’s goals &
objectives
• Must be syariah compliant
•Family values (islamic based values)
Beneficiaries
•Preferably muslim (not compulsory)
•Family council – the highest family decision making authority. Decisions to
be implemented by the family office
Benefits
•Dividends
•ALLOWANCES ( EDUCATION, MARRIAGE, CHILDBIRTH, FAMILY
SUSTAINANCE DUE TO DEATH etc)
•Employment of family members in family business
•Family gatherings/dinners
•Resolution of family conflict
•Appointment of protectors/ advisers
•MEMORANDUM OF wishes
4
Syariah Compliant Governance
Acquisition of Asset or the
Inherent Characteristic of the
Asset
Must not infringe the guidelines
relating to islamic muamalah:
1.Gharar-uncertainty
2. Maisir- gambling
3. Riba- usury
Holding Structure
Endowment must not infringe the
governing acts:
 Labuan trusts act 1996
(amended 2010),
 labuan foundations act 2010,
 Labuan islamic financial
services and securities act 2010
And
Comply with guidelines issued by
labuan financial services authority
(lfsa)
Objectives And Goals Of Islamic
Trust/ Foundation
Undertaken according to islamic
rules , principles and code of
practices.
Appointment of syariah adviser to
ensure syariah compliance
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Islamic Wealth Distribution and
Preservation
FAMILY PATRIARCH
(ASSET OWNER)
LEGACY PLANNING
(PRESERVATION OF ASSET AND
DISTRIBUTION TO MULTIPLE
GENERATIONS)
ESTATE PLANNING
(DISTRIBUTION OF ASSET TO ONE
GENERATION)
LIFE TIME
DISTRIBUTION
HIBAH
DIRECT
GIFT
DISTRIBUTION UPON DEATH
(AFTER SETTLEMENT OF DEBTS)
HARTA
SEPENCARIAN
TRUST/FOUNDATION
WASIYYAH
ACCORDING TO
FARAID LAW
ASSETS ENDOWED BY OWNER DURING
LIFETIME/UPON DEATH THROUGH DFA
BALANCE
OF ESTATE
FAMILY
CONSTITUTION
BY WAY OF
DEED OF FAMILY
ARRANGEMENT
(DFA) SUBJECT
TO CONSENT
OF FARAID HEIRS
MANAGEMENT
CONTROL
FAMILY
OFFICE
FAMILY
TRUST/FAMILY
FOUNDATION
DIRECT
HOLDING
ASSETS
BUSINESS
ASSETS
PASSIVE
MANAG
E-MENT
INCOME
PRODUCING
ASSETS
FAMILY
HOLDING
COMPANY
NONBUSINESS
ASSET
NON
INCOME
PRODUCING
ASSETS
6
Islamic Wealth Distribution and
Preservation
FAMILY PATRIARCH
(ASSET OWNER)
ESTATE PLANNING
(DISTRIBUTION OF ASSET
TO NEXT GENERATION)
LEGACY PLANNING
(PRESERVATION OF ASSETS AND
DISTRIBUTION OF BENEFITS TO
FUTURE GENERATIONS)
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Estate Planning
(Distribution of Asset to the Next Generation)
ESTATE PLANNING
LIFE TIME
DISTRIBUTION OF
ASSETS
DISTRIBUTION OF ASSETS
UPON DEATH (AFTER
SETTLEMENT OF DEBTS)
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Life Time Distribution
LIFE TIME
DISTRIBUTION
HIBAH
IMMEDIATE
TRANSFER TO
RECIPIENT
DELAYED
TRANSFER (
AFTER DEATH)
GIFT
DIRECT TO
DONEE
ENDOWED TO
TRUST/
FOUNDATION
9
Distribution During Lifetime
•
Hibah (lifetime gift)
•
•
•
Transferred
Not transferred
Challenges
•
•
•
Fear of loss of control
High stamp duty payable (1% of first rm100,000, 2% up to rm500,000,
3% thereafter)
Property encumbered
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Distribution Upon Death
(After Settlement of Debts)
AFTER DEATH DISTRIBUTION
OF ASSETS
(AFTER SETTLEMENT OF DEBTS)
FIRST, HARTA
SEPENCARIAN
(MARRIAGE
COMMUNITY
PROPERTY)
THEN,
WASSIYAH
(GIFTING OF ASSET TO
NON FARAID HEIRS
LIMITED TO 1/3 OF
ESTATE)
FINALLY, BALANCE
OF ESTATE
DISTRIBUTION
ACCORDING TO
FARAID LAW
DISTRIBUTION
ACCORDING TO
DEED OF FAMILY
ARRANGEMENT
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Deed of Family Arrangement (Dfa)
•
•
Needs-based justice distribution
Family Wealth Distribution Master Plan (before and after death)
• may include wealth preservation assets for transfer to family wealth holding
companies
• must be consented by all beneficiaries
• before and after death
• rights under the faraid waived
• if endorsed through a court order under a testamentary document, NO
STAMP DUTY IS PAYABLE
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Legacy Planning
(Preservation of Assets and Distribution of Benefits to
Future Generations)
LEGACY PLANNING
(PRESERVATION OF ASSETS
AND DISTRIBUTION OF
BENEFITS TO FUTURE
GENERATIONS)
ASSETS ENDOWED BY OWNER
DURING LIFETIME/UPON
DEATH THROUGH DEED OF
FAMILY ARRANGMENT
FAMILY
TRUST/FAMILY
FOUNDATION
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Family Asset Holding Structure
govern
FAMILY TRUST/FAMILY
FOUNDATION
FAMILY CONSTITUTION
manage
DIRECT HOLDING ASSETS
FAMILY HOLDING
COMPANY
FAMILY OFFICE
manage
BUSINESS ASSETS
MANAGEMENT
CONTROL
PASSIVE
MANAGEMENT
NON-BUSINESS
ASSETS
INCOME
PRODUCING
ASSETS
NON INCOME
PRODUCING
ASSETS
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Contact Details
Tuan Haji Abdul Aziz bin Hassan
Founder, Aziz Hassan & Co, Advocates & Solicitors, Advisor (Islamic), AD Financial Sdn Bhd and
Labuan IBFC Specialist Panel member
dr.azizhassan@gmail.com
+6 012-3035096
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Thank You
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