Abstract

Sukuk are active Islamic finance instruments offered in various jurisdictions and have experienced various events in the recent years. Several Sukuk defaults in 2009 highlighted a number of Sharī´ah and legal issues that are necessary to be discussed. As a part of the prerequisites to fulfil Sharī´ah requirements, compliance to the relevant laws is also a necessity. Among the issues that will be touched upon is ownership of the asset of the Sukuk which will include discussion about ‘al Qabd’ (taking possession). Next, rights of the Sukuk holders will be discussed to see whether their interests are well protected and in this context the concept of asset backed will be differentiated from that of the asset based securities. Discussion on the contentious purchase undertaking in Sukuk dealings will follow in order to highlight its status and effect on the Sukuk and parties to the transactions. Then, the practice of tranching in Sukuk issuance will be discussed followed by legal documentation of Sukuk issues. In the end, the paper will present way forward for Sukuk, so that these issues are further addressed for better Sukuk issuance.

Keywords

Sukuk; Sukuk Defaults; Sukuk Trading; Islamic Finance Instrument; Purchase Undertaking; Tranching in Sukuk Islamic Capital Market; Maqasid.