The Regulations Governing the Issue of Ijarah Sukuk
(Approved by the Securities and Exchange High Council on…..)
In the applying the paragraph 4 of article 4 of the Securities Market Act ratified in November
2005, the regulations governing the issue of Ijarah Sukuk comprising 25 articles and 10
notes were approved on January 25, 2011 by the Securities and Exchange High Council as an
amendment to the financial instruments standards of the Ijarah Sukuk adopted in January
21, 2008 by the Securities and Exchange High Council.
Chapter One – Definitions
Article 1- The definitions given for terms and phrases used in article 1 of Securities Market
Act of I.R.I, ratified in November 2005 and in article 1 of the Law for Development of New
Financial Instruments and Institutions passed in November 2009 for facilitation of
implementing the overall policies of article 44 of the Constitution shall be used for the same
purposes in the present regulations. Other terms used herein are defined below:
A- Ijarah Sukuk means the transferable securities which are issued as per the guidelines
herein. Each certificate of Ijarah Sukuk proves the joint ownership of its holder in the
underlying assets of Ijarah Sukuk issuance.
B- The Central Assets Management Company means a financial institution which is formed
in accordance with the rules governing the activities of SPVs (special purpose vehicles)
approved on 11/5/89 by the Securities and Exchange High Council.
C- Originator means a legal entity for which the SPV issues Ijarah Sukuk to provide its
funding resources in the form of Islamic contracts or agreements.
D- Asset means any movable or immovable asset/property with the particulars specified in
the present regulations which may underlie the Ijarah Sukuk Issuance.
E- Seller means a legal entity that sells assets to the SPV.
F- Guarantor means a legal entity that guarantees payment of rents and, as the case may
be, purchase price of the leased assets by the originator to the SPV.
G- Selling agent means a legal entity that offers Ijarah Sukuk on behalf of the issuer for
sale.
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H- Paying agent means the Central Securities Depository and Settlement Company that
makes payments associated with securities to the investors at the stipulated maturities.
I- Economic life means a period of time that an asset is economically expected to be used
by one or several users or the number of manufacturing units or similar units that are
anticipated to be acquired by one or several users in the process of using assets.
J- Rules and regulations mean the laws and approvals of the Council of Ministers, the
Securities and Exchange High Council, the Organization (SEO) as well as the national
accounting and auditing standards as communicated by the SEO.
Chapter Two – Organs or bodies for Ijarah Sukuk Issuance
Article 2- The originator shall meet the following requirements:
A- The non-governmental legal entity that:
1- has been legally formed as joint-stock or cooperative entity;
2- the total cash flow derived from its operations has shown uptrend ( been
positive) in the two recent fiscal years;
3- its maximum total liabilities to assets ratio is ninety (90%) percent;
4- the opinion expressed by the company inspector and auditor concerning the
financial statements for the two recent fiscal periods should not be "modified"
or "disclaimer";
B- The public or governmental legal entities which include:
1- the ministries
2- the legal entities which are subjected to the provision of article 4 of the Public
Accounts Law
Note- The state corporations and agencies to which the application of laws and public rules
shall require stating or specifying their names such as the National Iranian Oil Company
(NIOC) and the Oil Ministry's affiliated and associated companies, Industries Development
and Renovation Organization of Iran (IDRO) and its affiliates, Iranian Mines and Mineral
Industries Development and Renovation Organization (IMMIDRO) and its affiliates, shall be
subject to the provisions of paragraph A of this article.
Article 3- The issue of Ijarah Sukuk shall be authorized solely by the SPV.
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Article 4- The seller may be the originator or another legal entity.
Article 5- The guarantor shall be introduced by the originator and shall be appointed merely
from among the banks, financial and credit and financial institutions regulated by the
Central Bank of I.R.I., insurance companies, investment banks, investment companies or
public entities as being acceptable to the SEO.
Note 1- The guarantor shall be independent of the originator and his/its independence shall
be confirmed by the originator's auditor.
Note 2- Where the Ijarah Sukuk has a credit rating, it shall not be required to appoint a
guarantor.
Article 6- The originator's auditor should have been chosen from among the SEO's trusted
auditing firms at the time of presenting a project to be financed by issuing Ijarah Sukuk and
the last fiscal year preceding to this project.
Article 7- The selling agent of Ijarah Sukuk shall be chosen by the originator from among the
banks and credit and financial institutions regulated by the Central Bank, investment banks,
and brokerage firms of the Tehran Stock Exchange or Iran Farabourse.
Article 8- The Central Securities Depository and Settlement Company shall, upon receipt of
amounts from the issuer, pay the rent and, as the case may be, the interest on reinvesting a
portion of such rent and the proceeds derived from assets sale at the specified maturities.
Article 9- The market-maker of Ijarah Sukuk shall be introduced by the originator and shall,
in the case of capital adequacy, be appointed with the SEO's approval.
Article 10- The underwriter shall be introduced by the originator and shall, in the case of
capital adequacy, be appointed with the SEO's approval.
Chapter Three - Assets Conditions
Article 11- The assets underlying the issuance of Ijarah Sukuk shall meet the following
conditions:
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A-
General Specifications:
1- utilization of the assets within the area of originator's activity which shall result in
cash flows or prevent cash outflows;
2- there shall not exist any legal, contractual or judicial restrictions or whatsoever on
transfer of the assets as well as the accrued interests and the rights thereupon;
3- possession and exercise of ownership rights thereof shall not impose any restriction
whatsoever on the SPV;
4- there will not exist any joint ownership;
5- transfer of assets to another party will be possible;
6- the assets shall, until the time of transferring the assets ownership to the issuer,
have proper and adequate insurance coverage.
B-
Type of acceptable assets
The assets acceptable for issuance of Ijarah Sukuk are as follows:
1- land;
2- buildings and installations;
3- machinery and equipment;
4- means of transportation
Note 1- Where the originator is acting as a manufacturing company and the cash flow
arising from the given assets for the finance project is not measurable, the originator shall
have the capacity to pay its/his rents out of the operational activities.
Note 2- In case the originator and the seller are not the same person, the joint assets may,
underlie the Ijarah Sukuk issuance on the condition of ownership transfer of total assets.
Note 3- The assets value and its economic life shall be appraised by the experts designated
by the Association of Official Experts of the Judiciary.
Note 4- The issuer shall have to deliver the documents, deeds and contracts of assets
ownership to the Central Securities Depository and Settlement Company (a public jointstock entity) on behalf of the securities holders.
Note 5- The approximate assets value shall not be lower than fifty (50) billion rials.
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Article 12- The conditions for assets insurance cover for the term of the lease shall be
stipulated in the lease contract.
Chapter Four - Conditions and Terms of Ijarah Sukuk
Article 13- The types of lease contracts acceptable for issuance of Ijarah Sukuk are as
follows:
1- lease-purchase (lease-based possession) contract;
2- lease contracts with authority to sell assets on the due date of rent payment at the
fixed price.
Article 14- Upon issuance of Ijarah Sukuk, the client-attorney relationship shall be
established between the issuer and buyer of Ijarah Sukuk. The issuer shall, on behalf of the
buyers, have to spend the funds derived from sales of Ijarah Sukuk on acquiring the assets
connected with the issue and leased them to the originator. Possession of Ijarah Sukuk shall
be deemed as the acceptance of the issuer's procuration and such procuration shall remain
valid and irrevocable until the final settlement of Ijarah Sukuk.
Article 15- The holders of Ijarah Sukuk shall not be allowed to request the division of the
assets underlying the issuance of Ijarah Sukuk.
Article 16- The maturity of Ijarah Sukuk shall not exceed the remaining period of the assets
economic cycle.
Article 17- The originator shall not, directly or indirectly, be allowed to purchase the Ijarah
Sukuk issued for the purpose of raising its finance.
Article 18- The periods for paying the profit arising from the Ijarah Sukuk shall be specified
in the prospectus at the originator's request.
Article 19- The payments related to the Ijarah Sukuk shall be made in two manners:
1- full payment of rents on the due dates until the final maturity;
2- partial payment of rents on the due dates until the final maturity and clearance of
the remainder at the final maturity.
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Note- The final profit arising from rentals management until the final maturity shall be
calculated at the maturity of Ijarah Sukuk and paid to the holders.
Chapter Five - Conditions for Issuance of License
Article 20- In addition to the provision of article 6 of the regulations for securities
registration and public offering approved on December 22, 2006 by the Securities and
Exchange High Council, the registration statement shall, as the case may be, contain the
following items:
(1)
the originator's particulars which include:

name and type of legal personality;

registration with the Companies Registration Authority;

duration of company;

composition of shareholders/owners;

particulars of directors containing their full identification date and experiences;

the area of business activity;
(2)
originator's audited financial statements for the two recent fiscal periods;
(3)
the report of the originator's board of directors on the recent fiscal period to be
presented to the general meeting;
(4)
the report on the risk analysis associated with the originator's area of activity;
(5)
the credit rating, if any;
(6)
the term and type of lease contract, amount of rent and manner of payment to the
investors.
(7)
the report of the expert(s) as selected by the Association of the Official Experts of
the Judiciary on the assets appraisal and valuation;
(8)
the auditor's special report concerning the fulfillment of the conditions of the assets
general specifications (subject of paragraph A of article 11)
Article 21- The licensing of the Ijarah Sukuk issuance shall be subject to the conclusion of
necessary contracts between the organs within the framework of provisions specified by the
SEO.
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Article 22- If the assets allotted for Ijarah Sukuk issuance are not separable into specified
units, it shall be mandatory to employ the underwriter(s) for offering the Ijarah Sukuk. The
underwriting of the Ijarah Sukuk issuance for separable assets into specified units shall not
be mandatory at the originator's request and with the SEO's approval.
Article 23- If there are any active authorized rating agencies and where there is no
guarantor, the Ijarah Sukuk shall, prior to obtaining the issuance license, have to receive
credit rating(s) from such agencies.
Note- The Ijarah Sukuk which are issued by operation of the law or by the public or state
organizations and entities shall not be required to obtain credit ratings.
Chapter Six - Other Provisions
Article 24- If the originator has not been registered with the SEO, it/he shall, upon raising
the funds through the Ijarah Sukuk issuance, have to provide the following information to
the SEO:
(1) the audited annual financial statements within a maximum period of four months as
of the end of fiscal year;
(2) the material information, as the case may be, under article 13 of the executive
regulations on the disclosures of companies registered with the SEO and approved
on July 25, 2007 by the SEO’s board of directors, inter alia:
1- the events affecting the activities, financial standing and outcomes of the
originator's performance;
2- the decisions and conditions influencing the capital structure and raising the
funds for the originator;
3- the change in the originator's ownership structure;
4- the material information affecting the securities price issued to raise the finance.
Article 25- The standards governing the financial instruments of Ijarah Sukuk approved on
January 21, 2008 by the Securities and Exchange High Council shall be repealed.
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