Heter Iska (Exemption Contract)
The Heter Iska enables two Jews to complete a permitted transaction that is similar to one prohibited under Jewish law (Halacha). It was developed by Rabbis in order to structure business transactions to avoid the prohibition of ribis, the lending of money by a Jew to another Jew for interest. The Heter Iska is based upon the borrower and lender agreeing to be partners in a business venture, whereby one partner invests money and the other uses his entrepreneurial skills to manage the venture.
The investor-partner thereby earns “profit” attributable to his portion of the joint business venture, and the sharing of such profit by the manager-partner would not constitute payment of interest upon a loan. This Halachic arrangement thus has characteristics of both a loan and a trust.
At Latimer Lee, we have experience of dealing with all manner of agreements that include a Heter Iska and we are happy to arrange for any draft documents to be reviewed by your Rabbi or a Rabbi we recommend (additional charges might apply).
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