On Banks and Banking Activity in the Republic of Kazakhstan (стр. 10 )

Article 52-3. Consequences of the Recognition of Operations and Transactions of an Islamic Bank as Incompliant with the Requirements to Activities of the Islamic Bank

1. In the case of recognition of financing of a transaction as incompliant with the requirements, indicated in Article 52-1 of this Law, at the conclusion stage by the Council for Islamic Financing Principles, such a transaction may not be concluded and executed.
  2. In the case of recognition of a concluded but not executed or partially executed transaction by the Council for Islamic Financing Principles as incompliant with the requirements, indicated in Article 52-1 of this Law, such a transaction upon the request of an Islamic bank shall be terminated in accordance with the procedure, established by the civil legislation of the Republic of Kazakhstan.
  3. In the case of recognition of an executed or partially executed transaction by the Council for Islamic Financing Principles as incompliant with the requirements, indicated in Article 52-1 of this Law, income of an Islamic bank on such a transaction shall be forwarded to charity.

  Article 52-4. Additional Requirements to Charter of an Islamic Bank

The charter of an Islamic bank apart from information, indicated in Article 14 of this Law, shall contain the following:
  1) the purposes of activities of an Islamic bank;
  2) the tasks, the functions and the authorities of a permanently operating body of an Islamic bank – the Council for Islamic Financing Principles, as well as the procedure for its establishment and requirements to the members of the Council for Islamic Financing Principles.

Article 52-5. Banking and Other Operations of an Islamic Bank

1. Banking operations of an Islamic bank shall include the following operations:
  1) acceptance of interest-free deposits at short notice of individuals and legal entities, opening and maintenance of bank accounts of individuals and legal entities;
  3) bank loan operations: granting of loans in money terms by an Islamic bank on a maturity and recoverability basis, interest-free;
  4) financing of business activities in the form of:
  financing of trade activities as a trade intermediary through granting of a commercial loan;
  financing of production and trade activities through participation in the charter capitals of legal entities and (or) on the partnership basis;
  5) investment activities on the leasing (rent) basis;
  6) agent activities at the performance of bank operations by an Islamic bank.
  2. Banking operations, indicated in subparagraphs 4), 5) paragraph 1 of this Article, shall be carried out by an Islamic bank at its own funds and (or) money raised for investment deposits. At the same time the Islamic bank and (or) its clients on the investment deposit shall acquire a right of joint shared ownership to the property, purchased at their expense, and the Islamic bank shall act as a participant of joint shared ownership and (or) trust manager, carrying out management of the property, which is subject to the joint shared ownership. The Islamic bank as a trust manager shall have a right to provide state registration of rights to real estate and associated transactions, registration of vehicles and any other movable estate in accordance with the requirements of the legislative acts of the Republic of Kazakhstan. The Islamic bank shall maintain record-keeping of the participants of joint shared ownership of the purchased property.
  3. An Islamic bank shall have a right, if it is fixed in the charter, to carry out certain types of banking and other operations, indicated in Article 30 if this Law upon compliance with the requirements, indicated in Article 52-1 of this Law, except for the following operations:
  1) factoring operations: acquisition of claims of payment from a buyer of goods (works, services), taking the risk of non-payment;
  2) forfeiting operations (forfeiting): payment of debt obligation of a buyer of goods (works, services) through purchase of a bill of exchange without recourse.
  The Council for Islamic Financing Principles shall have a right to recognize certain types of banking and other operations, indicated in Article 30 of this Law, as incompliant with the requirements, indicated in Article 52-1 of this Law.

Article 52-6. Deposits of an Islamic Bank

1. Under an agreement on interest-free deposit on a short notice, an Islamic bank shall be obliged to accept a client’s funds to the bank deposit on a short notice, which does not provide for payment of the guaranteed interest and return a deposit or its part upon the client’s request. The agreement on interest-free deposit of an Islamic bank is subject to the rules of the agreement on bank deposit, except for the provisions on payment of interest.
  2. Under an agreement on investment deposit, an Islamic bank shall be obliged to accept funds of a client for definite period without a guarantee of its return in the nominal terms, to pay income on such funds depending on the results of disposal of the transferred funds in accordance with the procedure, established by the agreement on investment deposit. The agreement on investment deposit of the Islamic bank is subject to the rules of the agreement on trust management of property and particular features, indicated in this Article for the procedure or disposal and return of funds, rights and obligations of the client and the Islamic bank, the procedure for calculation and accrual of remuneration of a trust manager – the Islamic bank.
  At conclusion of the agreement on investment deposit there may be opened a current account.
  3. Provisions of an agreement on investment deposit shall contain the amount of remuneration of a trust manager – an Islamic bank for management of funds of a client – the founder of trust management, the terms and the procedure for return of funds, risks of losses from disposal of funds and any other provisions.
  4. Remuneration of an Islamic bank shall be defined as a part of income, gained from disposal of funds, raised for the investment deposit on the condition that remuneration may be paid only from the income on the investment deposit’s funds. The Islamic bank shall loose a right to remuneration at non-profitability of the investment deposit (at absence of income on the deposited funds of the investment deposit). Provisions of the agreement on investment deposit may not fix the guaranteed amount of income on the investment deposit or remuneration of the Islamic bank.
  5. A client shall loose a right to gain income at early return of an investment deposit upon his/her request, if other is not stipulated by the agreement on investment deposit.
  6. An agreement on investment deposit may fix the provisions on determination of the methods of funds disposal by a client, the list of asset types or investment objects, or the provisions on disposal of the client’s funds separately from any other clients’ funds without a right of aggregation.
  7. An Islamic bank shall maintain record-keeping of the funds disposal for separate investment projects, including determination of the methods of funds disposal, the list of assets or investment objects, the amount of profits or losses from such disposal, the amount of remuneration of the Islamic bank.
  8. Upon a client’s request an Islamic bank shall be obliged to submit the report on funds disposal under the investment project.
  9. If other is not stipulated by the agreement, a client, who has contributed funds in the investment deposit, shall not bear responsibility on the obligations of an Islamic bank, which occurred due to placement of funds, but shall bear a risk of losses, associated with decrease in the value of assets, which are subject to the funds contribution within the limits of the amount of funds contributed to the investment deposit.
  10. An Islamic bank shall not bear responsibility for the losses, associated with decrease in the value of assets, which are subject to the funds contribution of investment deposit, except for the cases when such losses aroused due to its fault.
  In the case when losses, associated with decrease in the value of assets, which are subject to the funds contribution on the investment deposit aroused due to an Islamic bank’s fault, the Islamic bank shall be obliged to inform a client on such losses.

  Article 52-7. Particular Features of Securities Issue by an Islamic Bank

  An Islamic bank shall have a right to issue shares or any other securities, except for the preference shares, obligations and any other debt securities, which provide for a debt, a guaranteed interest rate or payment of remuneration as an interest rate.

Article 52-8. Financing of Trade Activities as a Trade Intermediary through Granting of a Commercial Loan

1. Islamic banks shall have a right to participate in the trade activities as a trade intermediary through granting of a commercial loan to a buyer or a seller of goods on the basis of an agreement on commercial loan of the Islamic bank (hereinafter – the agreement on commercial loan).
  2. The agreement on commercial loan shall be concluded on the basis of a proposal by a buyer of goods on conclusion of an agreement on commercial loan (offer), which shall fix the timeline for its acceptance by an Islamic bank (accept). Within the offer validity period the Islamic bank shall have a right to conclude a purchase-sale agreement with the buyer of goods. Accept of the Islamic bank shall be given after it acquires a right of property to such goods. At receipt of the Islamic bank’s accept within the validity period of the offer, execution of the agreement on commercial loan shall be obligatory for the buyer. At rejection of execution of the agreement on commercial loan, the buyer shall compensate actual damage caused by such rejection to the Islamic bank, and the Islamic bank shall sell goods to a third party or return it to the seller.
  3. The agreement on commercial loan is subject to the rules of a credit purchase-sale agreement (with deferred payment or payment by instalments), taking into account the particular features, established by this Article and the requirements, indicated in Article 52-1 of this Law.
  4. The agreement on commercial loan shall contain the provisions on title and quantity of goods, the price at which a buyer purchases goods from an Islamic bank with indication of a mark-up, as well as the provisions of a commercial loan (deferred payment or payment by instalments).
  5. If other is not stipulated by the agreement on commercial loan, the price at which an Islamic bank sells goods to a buyer shall be calculated as the amount of price at which goods were purchased from a seller and a mark-up. The mark-up may be set as a fixed amount or an interest from the price at which goods were purchased from the seller.
  6. At purchase of goods on the basis of a buyer’s offer, an Islamic bank shall be obliged to indicate in a purchase-sale agreement that these goods are purchased exclusively for conclusion of the agreement on commercial loan.
  7. It shall not be allowed to purchase goods from a seller, which simultaneously acts as a buyer under the agreement on commercial loan. The purchase-sale agreement of an Islamic bank concluded with a seller of goods may stipulate the provisions on advanced payment for goods, possibility of return of the purchased goods in the definite period and recovery of the purchase price.
  8. The agreement on commercial loan may fix the provisions on the security for performance of obligations of a buyer on payment of goods through pledge of funds or any other property.
  9. In the case if subject of the agreement on commercial loan is purchase of goods to be processed (processing products, new movable estate, newly established real estate), goods, manufactured in the result of disposal of property, performance of works or rendering of services (in the form of separable items at disposal of property, manufactured by agricultural, cattle breeding or any similar products), it shall be obtained an opinion of the Council for Islamic Financing Principles on compliance of the agreement with the requirements, indicated in Article 52-1 of this Law.
  10. The agreement on commercial loan, concluded between an Islamic bank and a seller, which is a producer (manufacturer) of goods, indicated in paragraph 9 of this article, may fix immediate partial or complete payment for the purchased goods (commercial loan in the form of advanced payment) on the condition of timely delivery of goods, defined by the agreement of the parties (deferred delivery). At granting of a commercial loan to a producer (manufacturer) of goods, the purchase-sale agreement between the Islamic bank and the buyer of goods may fix the provisions on immediate partial or complete advanced payment for goods on the condition of timely delivery of goods, defined by the agreement of the parties (deferred delivery).
  11. In the case of conclusion of the agreement on commercial loan, indicated in paragraph 9 of this Article, the relations between a bank and a producer (manufacturer) of goods are subject to the rules of the procedure, delivery, contraction, chargeable rendering of services or any other rules of a relevant obligation in respect to such relations, established by the civil legislation of the Republic of Kazakhstan.

Article 52-9. Financing of Production and Trade Activities through Participation in the Charter Capital of Legal Entities and (or) on the Partnership Basis

1. An Islamic bank shall have a right to finance production and trade activities on the basis of a partnership agreement for the purposes of gaining profits or achievement of any other purpose, compliant with the legislation of the Republic of Kazakhstan. The partnership agreement may fix the provision on establishment of a legal entity (partnership agreement accompanied by establishment of a legal entity).
  2. A partnership agreement may be concluded after obtaining a positive opinion of the Council for Islamic Financing Principles. Violation of the requirements, indicated in Article 52-1 of this Law, shall be the basis for early termination of the partnership agreement and (or) liquidation of a legal entity, established on the basis of the partnership agreement, or for alienation of an Islamic bank’s share, including shares and participation interest in the charter capital of legal entities, and contribution of the gained profits to charity.
  3. A partnership agreement not accompanied by the provision on establishment of a legal entity (simple partnership agreement with participation of an Islamic bank) is subject to the rules of joint activity with the particular features, indicated in this Article.
  4. A simple partnership agreement with participation of an Islamic bank shall contain the purpose of joint activities, validity period of the agreement or the provisions on termination of the agreement, the procedure and the frequency of distribution of profits from joint activities, liability of a participant for violation of the contractual provisions, information on the list, types and cost of property, contributed by each participant for the performance of joint activities. If other is not stipulated in the agreement, the share of each participant in total property is defined in proportion to the cost of property, contributed for the performance of joint activities. The agreement may fix the provisions on disposal of a part of income gained from joint activities for charity purposes.
  5. Income from joint activities, general expenses and losses of the participants of a simple partnership agreement with participation of an Islamic bank are distributed in proportion to the share from total property, if other is not stipulated in the agreement. Income of the simple partnership with participation of the Islamic bank shall be distributed upon actual results without consideration of the expected income. Income of the participant of the simple partnership may not be fixed amount of funds.
  6. At inadequacy of total property of a simple partnership, its participants shall bear liability on the obligations, associated with the simple partnership agreement in proportion to the shares from total property.
  7. A partnership agreement with establishment of a legal entity is subject to the rules of the foundation agreement of a legal entity of a relevant legal form, if other is not stipulated in the agreement or the provisions of this Article.
  8. Apart from information, established by the legislation of the Republic of Kazakhstan on the foundation agreement of a legal entity of a relevant organizational and legal form, the partnership agreement with establishment of a legal entity shall contain the provisions on purposes and terms of partnership, the provision on distribution of income of a legal entity in proportion to the contributed share of each participant.
  9. Rules of the partnership agreement with establishment of a legal entity shall also apply to the partnership, which provisions include purchase of shares (participation interest) of a legal entity on the essential condition that purpose of such partnership is financing of production or trade activities of such a legal entity.