IBANK 10.2.27 Conditions for bankruptcy remoteness

(1) The conditions for bankruptcy remoteness include those set out in subrules (2) to (5).
(2) If the issuer becomes bankrupt, the issuer's assets are to be distributed in accordance with the law or a court order (rather than in accordance with the contractual arrangements involving the issuer).
(3) The transaction documents for the sale of the underlying assets to the sukuk holders must include:
(a) separateness covenants to ensure:
(i) bankruptcy remoteness of the issuer's assets; and
(ii) non-consolidation of the securitised assets held by the issuer with the assets of the originator or the issuer's parent in case of bankruptcy of any of them;
(b) non-competition declarations under which the investors and the issuer agree that neither will compete against the other in filing for bankruptcy; and
(c) bankruptcy declarations under which the originator, investors, providers of credit enhancements, providers of liquidity facilities and other parties agree not to initiate involuntary bankruptcy proceedings against the issuer.
(4) The issuer must declare, in its constitutional documents and in the transaction documents, not to initiate voluntary bankruptcy proceedings.
(5) The covenants and declarations in this rule must be supported by a written and reasoned opinion of a qualified legal counsel. The legal opinion must conclude that the covenants and declarations are enforceable.
Inserted by QFCRA RM/2017-1 (as from 1st April 2017).