Charter of Al-Amanah Islamic Investment Bank

Legal basis; creation and repeal

Section 2 creates the Al-Amanah Islamic Investment Bank of the Philippines, to be known as the Islamic Bank.
Republic Act No. 6848 repeals Presidential Decree No. 264, as amended by Presidential Decree No. 542, which created the Philippine Amanah Bank (Section 52).
Section 48 transfers to the Islamic Bank the assets, liabilities, and capital accounts of the Philippine Amanah Bank upon approval of the Act.
Section 49 requires the Islamic Bank to commence reorganization within six (6) months from the effectivity of the Act.

Policy, purpose, and Shari’a framework

Section 3 states that the primary purpose of the Islamic Bank is to promote and accelerate the socio-economic development of the Autonomous Region by performing banking, financing and investment operations, and by establishing and participating in agricultural, commercial and industrial ventures based on the Islamic concept of banking.
Section 3 requires all business dealings and activities to be subject to the basic principles and rulings of Islamic Shari’a within the scope of the declared policy.
Section 3 provides that zakat (“tithe”) paid by the Islamic Bank on behalf of its shareholders and depositors is part of the Islamic Bank’s compliance with its obligation to appropriate the zakat fund and disburse it in legitimate channels as first ascertained by the Shari’a Advisory Council.
Section 43 directs the Monetary Board of the Central Bank of the Philippines to formulate rules and regulations to provide adequate credit facilities primarily to the people of the Autonomous Region and to supervise the Islamic Bank in accordance with Islamic Shari’a.

Corporate establishment, governance, and officers

The Islamic Bank has its principal domicile and place of business in Zamboanga City (Section 2).
The Islamic Bank may establish branches, agencies, or other offices in the Philippines or abroad, subject to laws, rules, and regulations of the Central Bank (Section 2).
Section 4 creates a Shari’a Advisory Council of not more than five (5) members selected from Islamic scholars and jurists of comparative law.
Section 4 requires that Shari’a Advisory Council members are elected at a general shareholders meeting every three (3) years, from a list of nominees prepared by the Board of Directors; the Board selects the first council and determines their remunerations.
Section 25 provides a Board of Directors of nine (9) members elected by the General Shareholders Meeting, which convenes at the principal office once every three (3) months at the most, on due notice by the Chairman or upon request of three (3) directors.
Section 27 provides that the Chief Executive Officer is the Chairman, chosen by the Board from among themselves; other officers and employees are appointed and removed by the Board upon recommendation of the Chief Executive Officer, not subject to Civil Service Law.
Section 28 requires a Business Development Office to conduct economic surveys and identify viable projects for the Autonomous Region, provide technical consultancy, and perform other Board-directed functions.

Capital, shares, and shareholder-related rules

Section 7 sets the Islamic Bank’s authorized capital stock at One billion pesos (P1,000,000,000) divided into ten million par value shares of One hundred pesos each.
Section 7 requires shares to be nominative and indivisible.
Section 7 limits subscription to and ownership of shares, including transfers to third parties, to persons and entities who subscribe to the concept of Islamic banking.
Section 8 classifies the authorized capital stock as:
- Series “A”: five million one hundred thousand shares equivalent to Five hundred ten million pesos (P510,000,000) for subscription by present stockholders of the Philippine Amanah Bank (including the National Government and other financial entities it may designate).
- Series “B”: nine hundred thousand shares equivalent to Ninety million pesos (P90,000,000) for subscription by Filipino individuals and institutions.
- Series “C”: four million shares equivalent to Four hundred million pesos (P400,000,000) for subscription by Filipino and foreign individuals and/or institutions or entities.
Section 8 provides that any shareholder may exercise a preemptive right to consolidate ownership of outstanding shares as increased, subject to concurrence of existing shareholders of the Philippine Amanah Bank; the common shares of the Philippine Amanah Bank form part of the increased capitalization of the Islamic Bank.
Section 8 authorizes the Islamic Bank to reacquire its common shares held privately.
Section 8 authorizes the Islamic Bank to take steps to have Series “B” shares listed in any duly registered stock exchange.

Dispute settlement, arbitration, confidentiality, and accounting

Section 9 establishes that the Board of Directors, acting as an arbitrator, settles disputes between and among shareholders arising from their relations as shareholders, decided by majority decision, without being bound by civil and commercial pleadings procedures except for due process.
Section 9 provides that disputes between the Islamic Bank and investors or shareholders are settled by a Board of Arbitration of three (3) members.
Section 9 requires formation of the Board of Arbitration within forty-five (45) days from receipt of written notice by either party; each party selects one arbitrator, then the two selected arbitrators select a casting arbitrator as the third member.
Section 9 provides that if a party fails to select its arbitrator or if there is non-agreement on the casting arbitrator or presiding member within the specified period, selection is submitted to the Shari’a Advisory Council.
Section 9 requires the Board of Arbitration to set its procedure, decide the dispute, specify the method of execution and the party incurring arbitration costs, and deposit the final judgment with the Bank’s Corporate Secretary and the Securities and Exchange Commission.
Section 9 declares that the Board of Arbitration’s decision is final and executory, valid for execution as final judgments under Republic Act No. 876 (Arbitration Law).
Section 33 makes banking transactions relating to all deposits of whatever nature confidential, and prohibits examination or inquiry by any person, government official, bureau, or office except under conditions stated by the section.
Section 33 makes it unlawful for any official, employee, or designated person to disclose confidential information except under the circumstances allowed by the section.
Section 34 sets the financial year on the Gregorian calendar (January 1 to December 31) and requires the corresponding Islamic Hijra date to be mentioned in correspondence, contracts, printed materials, forms, and records.
Section 35 requires determination of profits and losses at the close of each financial year after deducting general and administrative expenses and operating expenses, including Board of Directors and Shari’a Advisory Council remunerations.
Section 35 requires separate accounting for financing and joint investment operations from other banking activities, and separate accounts where specific investments have separate projects.
Section 36 requires the Board to determine and publish general percentages of profit not later than the end of the first month of each financial year.
Section 36 entitles the Islamic Bank (as Mudarib) to a percentage after deducting investors’ allocation and entitles it to a share in profits of joint investments in proportion to its invested funds.
Section 36 directs that, for calculating funds employed in financing operations, priority is given to joint investment accounts and holders of muquaradah bonds.
Section 36 requires all zakat due on shareholders’ capital and reserves represented by the pecuniary value of shares and zakat due on investors’ funds or profits accruing to every depositor to be paid to the zakat fund, subject to instructions.
Section 37 grants tax exemptions and other tax treatment (see tax and customs sections below).
Section 32 authorizes appointment of an external auditor approved by the general shareholders meeting; fixes qualification and remuneration by the Board; requires access to books and forwarding of specified audited documents to the Central Bank within the prescribed time.

Banking and investment operations; authorized limits

Section 16 requires the Islamic Bank to exercise all powers and perform all services of a bank except those prohibited by the Act.
Section 16 prohibits allowing Central Bank discounts for any transactions by customer companies, corporations, or firms with the Islamic Bank.
Section 17 authorizes the Islamic Bank to operate an Investment House under Presidential Decree No. 129, as amended, and a Venture Capital Corporation under Presidential Decree No. 1688, and to conduct specified profit-sharing Islamic financing activities and investment banking objectives.
Section 17 prohibits these commercial operations from involving riba or other activities prohibited by Islamic Shari’a principles.
Section 19 sets investment and credit ceilings:
- Aggregate credit facilities or other liabilities of any customer may not exceed 15% of the unimpaired capital and surplus of the Bank at all times.
- Aggregate investment portfolios for any single industry may not exceed 30% of the Islamic Bank’s investment capacity; investment capacity is defined as the Islamic equivalent of commercial lending and overall credit ceilings, computed by the Central Bank in relation to unimpaired capital and surplus.
- Unsecured loans or credit accommodations may not exceed P50,000.00 to any person, company, corporation, or firm at any time; the term loan in this paragraph represents qard hasan.
- Credit facilities may not be granted for financing acquisition of shares in excess of 50% of the appraised value of shares at the time the credit facility is granted.
Section 20 restricts loans to directors, officers, employees, and related interests; the Islamic Bank shall not grant advances or credit facilities to directors, officers, employees, or persons for whom any of them is guarantor or obligor for money granted by the Islamic Bank.
Section 20 prohibits lending to a company, corporation, partnership, or firm where a board member or auditor is shareholder, partner, manager, agent, or employee unless approved by the written approval of and by the unanimous vote of no less than two-thirds of all Board members, excluding the concerned director.
Section 20 limits total liabilities to the Islamic Bank to the director or auditor’s outstanding deposits or the book value of paid-in capital in the Islamic Bank.
Section 20 makes violations automatic vacancy of the office of any director, officer, or auditor who violates; persons who acted in contravention are subject to criminal prosecution and penalties provided by law.
Section 21 requires the Islamic Bank to open a special cash account with the Central Bank, and limits transfers from that account to other accounts to only upon prior consultation with the Islamic Bank.
Section 22 requires maintenance of combined capital accounts in proportion to assets as prescribed by the General Banking Act and subject to Central Bank rules and regulations.
Section 23 requires maintenance of general reserves and appropriations pursuant to profit and loss distributions; amounts appropriated for the Investment Risk Fund out of net profits of each year are invested for the Islamic Bank’s benefit only in safe non-interest-bearing transactions authorized by the Board.
Sections 12–15 govern placements and investments:
- Section 12 authorizes accepting deposits under non-interest-bearing placements: savings accounts, investment participation accounts, and current accounts and other deposit liabilities.
- Section 12 treats unauthorized-to-invest deposits as current or savings accounts withdrawable wholly or partly at any time.
- Section 13 authorizes the Islamic Bank to act as agent/attorney for co-mingled deposits, invest under mudarabah or other joint investment forms permitted by Islamic Shari’a, and ensure liquidity subject to Central Bank reserve requirements.
- Section 14 entitles investors in joint investment participation accounts to a portion of return on investment based on deposit balances and period; profits for authorized-specific transactions are calculated on the same basis as capital funds invested as determined pursuant to Section 35.
- Section 15 authorizes allocating investible funds or deposits to finance investment projects, including creating and financing investment companies or affiliates under Islamic Bank supervision; requires viability assessment and inspection/supervision of financed or majority-held projects, and requires remittance of original capital and related profits in the same currency or one of the convertible currencies as the Board determines.

Shari’a Advisory Council; employee and profit-sharing schemes

The Shari’a Advisory Council’s role is to offer advice and undertake reviews on application of Islamic Shari’a principles and rulings to Islamic Bank transactions, without directly involving itself in bank operations (Section 5).
A Shari’a Advisory Council member may be invited to regular or special Board meetings to expound views on Islamic Shari’a matters affecting a transaction, but the member has no right to vote (Section 5).
Section 18 authorizes the Board to adopt an employee profit sharing scheme in either of these forms:
- Profit-sharing arrangements giving directors, officers, and employees a predetermined share in profits realized by the Islamic Bank or affiliate companies; or
- Share incentive arrangements facilitating acquisition by directors, officers, and employees of common shares as share-incentives, share-bonus options, or other share-saving schemes.
Section 18 prohibits Board approval of any scheme unless the Board is satisfied that participants are bound by a contract appropriating shares for the scheme; purchased/appropriated shares must be deposited in escrow with the Bank.
Section 18 requires trustees for the approved scheme; trustee functions are regulated by Chapter VII of the General Banking Act and other pertinent laws, and are embodied in a deed of instrument required by the Board.

Meetings, quorum, voting, and auditor actions

Section 29 requires the general shareholders meeting to convene annually at the latest within six (6) months following the end of the financial year at the place, date, and time fixed in the notice.
Section 29 sets quorum at shareholders representing at least 60% of the capital of the Islamic Bank.
Section 30 provides that the general shareholders meeting hears reports on activities and financial condition, the auditor’s report, and approves the balance sheet and profit and loss statement for the ended financial year; it determines dividends and appoints auditors and elects members of the Shari’a Advisory Council.
Section 31 provides that in ordinary sessions, resolutions are adopted by majority vote of shareholders represented, with the Chairman casting a vote to break ties; resolutions bind all shareholders, including those absent or opposing.
Section 31 requires extraordinary general meeting resolutions for capital increase or decrease, extension of legal existence, or matters affecting amendment of the Charter, with adoption by majority vote of at least 66 & 2/3 + 1% of capital shares.
Section 31 prohibits the general meeting from resolving to modify the object of the Bank as an Islamic investment bank.

Central Bank supervision; reporting and corporate changes

Section 46 places the Islamic Bank under Central Bank supervision and regulation, and subjects all provisions of the Act except those pertaining to Islamic Shari’a principles to Philippine banking and pertinent laws and Central Bank rules and regulations with safeguards for depositors and investors.
Section 24 requires periodic Central Bank reporting of any changes relating to the Islamic Bank’s employee profit sharing scheme approved by the Board.
Section 24 requires reporting to the Central Bank whenever a change is about to take place relating to ownership or control; approval of the Monetary Board is required for:
- Proposals for sale or disposal of shares or business or other matters resulting in change of control or management; and
- Schemes for reconstruction, consolidation, or merger involving transfers of the whole or part of the undertaking or property to another corporation.

Taxes, customs, and selected acts exempted

Section 37 exempts Islamic Bank assets, profits, distributions, and all contracts, deeds, documents, and transactions related to the conduct of business from all taxes under the National Internal Revenue Code beginning the first taxable year following its actual Islamic banking operation as certified by the Central Bank, to the following extent:
- 100% for the first five (5) years; and
- 75% for the sixth through eighth years.
Section 37 limits the exemption to taxes, fees, charges, and assessments the Islamic Bank would otherwise be liable for, and excludes taxes, fees, charges, or assessments payable by persons or entities doing business with the Islamic Bank.
Section 37 provides that investments in Islamic banking business to the extent of actual participation in profit and loss sharing schemes, paid in cash or property, are exempt from all taxes under the National Internal Revenue Code except income tax.
Section 37 permits an investment tax allowance as a deduction from taxable income under such transactions to the extent the Islamic Bank pays zakat on investors’ income of capital and surplus reserves for the duration of the joint investment period.
Section 38 grants customs duties and compensating taxes exemption for the first five (5) years of operation for importations by the Bank of machinery, equipment, calculators, and computers and accompanying spare parts necessary for operation.
Section 38 prohibits domestic disposal of exempted imported items unless all duties are paid at tariff rates and according to their condition at the time of disposal, and upon compliance with import and exchange procedures.
Section 39 renders inoperative, to the extent of Islamic banking international and domestic objectives, specified statutory provisions:
- The Central Bank Act and General Banking Act provisions on bank interest rates, loans and discounts, and interest-bearing instruments or charges, while preserving Central Bank powers to supervise and regulate;
- The General Auditing Act and inconsistent enactments; and
- Republic Act No. 3591, as amended, and all laws regulating insurance companies.
Section 39 preserves the Islamic Bank’s ability to establish contemporary Islamic tafakul (solidarity services) free of riba premiums or interests.

Foreign employment, training, and operational funds

Section 40 allows the Islamic Bank to employ foreign nationals in supervisory, technical, or advisory positions for a period not exceeding five (5) years, extendible for limited periods upon recommendation of the Governor of the Central Bank, subject to Section 29 of Commonwealth Act No. 613 and the Anti-Dummy Law, as amended.
Section 40 permits foreign nationals employed under the Act, including their spouses and unmarried children under twenty-one (21) years of age, who are not excluded by Section 29 of Commonwealth Act No. 613, to enter and reside in the Philippines during the period of employment.
Section 41 requires the Islamic Bank to promote and sponsor training of technical personnel in Islamic banking, finance, and insurance, and authorizes defraying study costs at home or abroad for outstanding employees, promising university graduates, or other qualified persons determined by competitive examinations; the Board sets rules and regulations for the training program.

Legal existence, transformation, reorganization, and by-laws

Section 42 sets the Islamic Bank’s legal existence at fifty (50) years from approval of the Act, renewable upon resolution of the general shareholders meeting called for that purpose.
Section 42 requires that on expiration of corporate existence or earlier dissolution, the general shareholders meeting define the dissolution method upon request of the Board of Directors, as provided in the by-laws.
Section 48 transfers by operation of law, upon approval, the Philippine Amanah Bank’s assets, liabilities, and capital accounts to the Islamic Bank.
Section 49 requires reorganization to commence within six (6) months, while Philippine Amanah Bank personnel continue to discharge functions in the interim; dispensed officials and personnel receive usual gratuities under existing laws.
Section 50 deems the Act, upon effectivity, accepted as the Islamic Bank’s statutory articles of incorporation and deems the Islamic Bank registered and authorized to do business and operate as an Islamic Bank as of the date of approval.
Section 51 requires the Board to adopt Islamic Bank by-laws within sixty (60) days upon effectivity by affirmative vote at a general shareholders meeting representing a majority of all subscribed capital stock entitled to vote, subject to Monetary Board certification pursuant to Section Ten of the General Banking Act.
Section 51 requires the by-laws, duly certified by the Monetary Board, to be signed by shareholders voting for them, kept at the principal office for inspection by shareholders during office hours, and filed and registered with the Securities and Exchange Commission, with certified signatures and countersignature by the Corporate Secretary.

Incentives to Islamic banking; supervision; penalties

Section 10 makes applicable, subject to Section 74 of the Central Bank Act, the Omnibus Investment Code provisions on basic rights and guarantees of investors to the Islamic Bank’s commercial operations regarding repatriation or remittance of profits and protection against nationalization, sequestration, or expropriation proceedings.
Section 10 prohibits judicial or administrative seizure against property or investment except upon a final court judgment.
Section 11 authorizes acceptance of grants, donations, endowments, subsidies, and funds/property offered by individuals and organizations, including earmarking for specific purposes beneficial to Muslim communities, without prejudice to the Bank’s general objectives.
Section 11 requires separate financial statements and books of accounts for such funds, which may be supplemented to the Islamic Bank’s balance sheet.
Section 11 authorizes, under special circumstances and Board advisability, the Islamic Bank to seek financing from governments, organizations, individuals, or banks without prejudice to Section 43 of the Charter.
Section 45 imposes penalties for violation: any director, officer, employee, auditor, or agent who violates or permits violation is punished by a fine not exceeding Ten thousand pesos (P10,000.00) or imprisonment not more than five (5) years, or both, at the discretion of the court.

Transitional and interaction with other laws

Section 46 preserves that Central Bank supervision applies to all provisions except Islamic Shari’a principles, and requires safeguards for depositors and investors in investments, partnerships, agencies, and operations.
Section 47 allows privatization of ownership of the Islamic Bank, and provides that limitations on the transfer of shares do not apply to the shareholdings of the National Government, Social Security System, Government Service Insurance System, Philippine National Bank, and Development Bank of the Philippines.
Section 52 repeals inconsistent acts, executive orders, administrative orders, proclamations, rules, and regulations or parts thereof, and includes a separability clause preserving the remaining provisions if any provision is held invalid.