Sukuk documentation and transaction mechanics
Produced in partnership with Dentons LLP
Sukuk documentation and transaction mechanics

The following Banking & Finance practice note Produced in partnership with Dentons LLP provides comprehensive and up to date legal information covering:

  • Sukuk documentation and transaction mechanics
  • Form of transactions
  • Key considerations
  • Sukuk al Ijara
  • Sukuk al Mudaraba
  • Sukuk al Wakala
  • Sukuk al Murabaha
  • Main documentation—key differences
  • Programme Agreement/Subscription Agreement
  • Agency Agreement
  • More...

This Practice Note provides an overview of the key considerations that an Obligor should take into account in selecting an appropriate structure for the issuance of Sukuk, the main documentation relating to the key structures and the key terms that would be incorporated into such documentation. This Practice Note also sets out the drivers behind the dominance of the Sukuk market in recent years and the legislative developments that have contributed to such growth in the market. For further information on Sukuk transactions and the background to the transaction structures set out below, see Practice Note: The structure and elements of a Sukuk transaction.

Form of transactions

Sukuk instruments are instruments that enable holders to take direct ownership of an underlying asset or pool of assets and not have to pay interest. However, similar to conventional bonds, Sukuk transactions may take a number of forms including:

  1. stand-alone issuances/programmes—Sukuk transactions may be issued on a stand-alone basis or, from time to time, as drawdowns under Sukuk issuance programmes known as Trust Certificate programmes

  2. hybrid Sukuk—Sukuk may be issued in the form of hybrid transactions constituting regulatory capital, including Tier 1 and Tier 2 transactions, or corporate hybrid offerings, and

  3. asset-backed Sukuk—Sukuk transactions may also be secured on any portfolio of assets capable of producing a measurable revenue stream, such as real estate-backed securities secured on a portfolio

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