| 6.1 | The Board of a Company is ultimately responsible for the Company’s compliance with Islamic Shari’ah Provisions. The Board is expected to be aware of Shari’ah Non-Compliance Risks and its potential impact on the Company. Accordingly, the Board is responsible for establishing and implementing a Shari’ah governance framework that is commensurate with the size and complexity of the Company’s operations and its risk appetite, to ensure its compliance with Islamic Shari’ah Provisions.
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| | The Shari’ah governance framework shall incorporate the three lines of defense approach comprising the business line, Internal Shari’ah Control function, and Internal Shari’ah Audit function.
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| 6.2 | The Board must nominate ISSC members to the general assembly which has the authority to establish the ISSC and to appoint its members.
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| 6.3 | The Board must, in coordination with the ISSC, ensure the development, approval and implementation of internal policies related to the Company compliance with Islamic Shari’ah Provisions.
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| 6.4 | The Board must maintain an effective communication with the ISSC, and conducting meetings to discuss issues pertaining compliance with the Islamic Shari’ah Provisions, with at least one meeting per financial year.
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| 6.5 | The Board must refer to the ISSC for all Shari’ah matters related to the Company’s activities, operations and code of conduct.
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| 6.6 | The Board must ensure that the annual Shari’ah report issued by the ISSC is submitted to the HSA for review and approval before presenting it to shareholders at the general assembly.
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Board’s Risk Committee
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| 6.7 | The Board’s Risk Committee (“Risk Committee”) must
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| a. | supervise and monitor management of Shari’ah Non-Compliance Risks, and set controls in relation to this type of risk, in consultation with ISSC and through the Internal Shari’ah Control Division.
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| b. | approve the establishment of framework for management of Shari’ah Non-Compliance Risks as part of the overall risk management system of the Company, and must review it and oversee its implementation by the Senior Management.
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| c. | ensure there is an information system that enables the Company to measure, assess and report Shari’ah Non-Compliance Risks. It must also ensure that reports are submitted on a timely manner to the Board and Senior Management, in suitable formats for their use and understanding.
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Board’s Audit Committee
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| 6.8 | The Board’s Audit Committee (“Audit Committee”) must:
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| a. | evaluate the effectiveness of the Company’s internal policies that were approved by the ISSC and designed to monitor compliance of the Company with Islamic Shari’ah Provisions.
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| b. | assess the effectiveness and adequacy of Internal Shari’ah Audit and its contribution in ensuring Company’s compliance with Islamic Shari’ah Provisions. The Audit Committee’s responsibility includes the following:
| - | Assess the independence, effectiveness and adequacy of Internal Shari’ah Audit scope and programs.
| | - | Review the reports prepared by the Internal Shari’ah Audit Division to ensure that all necessary measures have been undertaken.
| | - | Facilitate the work of the Internal Shari’ah Audit Division.
| | - | Hold regular meetings with the head of the Internal Shari’ah Audit Division with a minimum of two meetings in a financial year.
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| c. | review the scope, results, and adequacy of the External Shari’ah Audit review (if applicable). In addition, the Audit Committee’s responsibility includes the following:
| - | Facilitate the work of the External Shari’ah Auditor.
| | - | Review the reports prepared by External Shari’ah Auditor to ensure that the Senior Management have taken all necessary measures in this regard.
| | - | Hold meetings with the External Shari’ah Auditor with a minimum of once in the financial year.
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| 6.9 | It is recommended that the Audit Committee invites a member of the ISSC to attend the meetings when discussing the Internal Shari’ah Audit report to ensure compliance of the Company with the resolution of the ISSC concerning the content of the report. The Audit Committee and the member of ISSC cannot change the ISSC’s resolution in this regard.
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