Jan 07 2013
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Sukuks can be issued to the extent of net worth
Muscat: The Capital Market Authority (CMA), which is now seeking feedback on its draft sukuk regulation, said that a joint stock company or a special purpose vehicle (SPV) can float Islamic debt instrument or sukuk. The draft regulation made it clear that the SPV will not be subject to taxation. "This has alleviated a major misconception in the market," said Khalid Yousaf, Director-Islamic Finance Advisory Services, KPMG in Oman.
Other major highlights of thedraft regulation are formation of a Sharia Supervisory Board with at least three members, permission to go for either public issue or private placement of the instrument, mandatory listing of sukuk instrument on the bourse and rating of sukuk instrument is the discretion of the issuer. The members appointed to the Sharia Supervisory Board should be competent to perform their functions. However, unlike Islamic banks, the Sharia Supervisory Board can be of the lead arranger or an outside party like an advisory firm, who can be hired on a transaction basis.
Another interesting aspect of the draft regulation is that the issuer can follow either the International Financial Reporting Standards or AAOIFI standards. "Any annual financial accounts included in a prospectus prepared in connection with a proposed issue of sukuk must be audited by an independent CMA-accredited auditor in accordance with the International Financial Reporting Standards (IFRS) or other standards acceptable to the CMA, which may include the standards of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI)," said the draft regulation.
"It will have implications for selecting the IT systems and internal book-keeping required for sukuk transactions," noted Yousaf. Yousaf added that the sukuk regulation also introduced regulations on trust. "Previously, there were no trust laws in Oman. Now they have introduced financial trust laws, which would work with special purpose vehicle, particularly for sukuks. Assets can now be transferred to a trust for the benefit of the beneficiaries."
The draft regulation also well defined the structure of an SPV for the interest of sukuk holders. "The structure has been well defined for SPVs to hold assets in trust for the benefit of the sukuk holders."
Highlights of draft regulation
1) SPV will not be subject to tax
2) A joint stock company or an SPV can issue sukuk
3) Sharia Supervisory Board need to have minimum three members
4) Sharia Supervisory Board can be of the lead arranger or an outside party like an advisory firm
5) Sukuks can be issued either as a public offer or private placement
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