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Overview of Sukuk Regulation in Turkey

In Turkey, issuing sukuk is regulated by Turkish Capital Market Board Communiqués. The communiqué dated 01/04/2010 is the first regulation that arranges the principle framework of sukuk transactions in Turkey.

To issue sukuk, an entity shall be constructed exclusively for that purpose as a joint stock company. The entity should have special structure in terms of their management and shareholder’s rights. They cannot engage in the operations other than the purpose of issuing sukuk.

In other words, an entity, that would like to issue sukuk, should incorporate a separate Asset Leasing Company and transfer its assets to ALC. Moreover, an Asset Leasing Company shall not possess assets transferred/bought from different entities.

Furthermore, the article of incorporation of Asset Leasing Companies should include certain terms indicated under the regulation and should be approved by the Turkish CMB. The article of incorporation should particularly include the term of that; “when the payment of the sukuk could not be made due to any reason, the income of the asset sales would be belong to the sukuk holders in respect of their corresponding shares”. The regulation strictly prohibits Asset Leasing Companies from selling the assets to any third parties other than the first initial owner. Asset Leasing Companies can issue only one type of sukuk at the same time as well.

It is allowed to issue sukuk in initial public offerings in Turkey and to resell them in the secondary market. To publicly offer sukuk in capital market, issuers have to obtain approval and have it registered within the Turkish CMB. The public offerings should be exacted by the certified intermediary firms.

For the publicly traded sukuk, Asset Leasing Companies have to yearly publish their financial statements.  In addition, Asset Leasing Companies should inform its sukuk holders regarding the total sukuk payments in each 3 months for the publicly traded sukuk and in 6 months for privately traded sukuk.