Gulf Finance House is under scrutiny from the Islamic finance industry over whether its proposed takeover of Leeds United Football Club is compatible with Sharia principles.
The Islamic bank, which is already facing questions over its finances, may be forced to hive off pubs, restaurants and betting points at the northern English club's stadium to allow the proposed deal to proceed.
GFH Capital, a subsidiary of Gulf Finance House, announced it was arranging a deal for the acquisition of Leeds United last month.
Elland Road, the club's stadium, contains betting points alongside pubs and restaurants where bacon rolls, sausages and alcohol are served.
Gambling, drinking of alcohol, and consumption of pork products are prohibited under Sharia.
Their presence at the stadium does not necessarily scuttle the deal. But such assets would complicate the process of obtaining a fatwa to approve the transaction, said Sheikh Bilal Khan, a Sharia scholar at Linklaters, the law firm.
"There are various hurdles to pass before anything can happen," he said. "There's a lot of potential complications that could arise because of the non-compliant assets involved."
GFH Capital may be forced to ring fence the problematic assets under a separate entity, he added.
He declined to give an opinion on whether the deal would comply with Sharia law.
Even a small amount of prohibited revenues had the potential to impose additional costs on the buyer, said Harris Irfan, the managing partner at Cordoba Capital, a Sharia advisory firm.
"Generally speaking, such deals would not be approved if more than 5 per cent of total revenues came from non-compliant sources," he said.
"If less than 5 per cent, they would still have to 'cleanse' themselves of the impure income periodically" through charitable donations, Mr Irfan added.
For most investment banking deals, scholars will ask to be allowed to monitor Sharia compliance of underlying assets over time as a condition for granting a fatwa, said Asim Khan, the managing director of Khalij Islamic, an advisory firm.
"The asset may be non-Sharia at the time, but the scholars may have approved a plan such that within an approved time frame after acquisition the asset may become Sharia-compliant," he said.
GFH Capital says it has done its due diligence, but declined to state whether or not a fatwa approving the deal had been obtained.
A spokesman for Leeds United declined to comment.
Income from forbidden sources accounted for less than 5 per cent of total revenue, said a GFH Capital spokesman.
"Scholars have a tolerance level with regards to non-compliant income and as part of our due diligence we were very careful in order to assess the full implications of investing in Leeds United Football Club," he said.
"A plan has already been implemented to ensure the club stays within guidelines going forward," the spokesman said.
Quite how GFH Capital intends to comply with Sharia remains unclear.
Leeds United's catering contract for its pubs, restaurants and corporate hospitality was outsourced to a third-party firm in June, soon after Gulf Finance House opened negotiations with Ken Bates, the club's current owner.
Leeds United does not directly operate betting points but partners with an online website, sportingbet.com.
Several similar deals have been attempted unsuccessfully in the past.
GFH Capital says it will be the first Islamic bank to invest in the sports industry and English football, which it views as important for the industry to "diversify from its traditional comfort zone of real estate".
* With additional reporting by Duncan Castles