Sukuk default/near default and governance failure: the need for a strong and sound governance framework (the role of Securities Commissions and other regulatory authorities)
This study examined the relationship between corporate governance failures in sukuk issuer's company/ originator's company and sukuk defaults/ near defaults thus calling for the attention of Securities commission and other regulatory authorities on the need for sound and vibrant corporate governance framework. There were five (5) celebrated sukuk cases reported outside Malaysia region in 2009 while nine (9) cases of sukuk default were reported in Malaysia same year. The year 2009 was dubbed sukuk default year as there were fifteen (15) reported cases of sukuk defaults out of which nine (9) cases were reported in Malaysia alone (Mohammed Khnifer 2010). It was established that Corporate governance failures among other factors contributed significantly to those sukuk defaults as most of the cardinal points on which sound governance framework rests on were violated by Issuer/Originator companies, which ranges from Full Disclosures and Transparency in all business affairs, corporate governance culture and character to be exhibited by Board members, Independence of Auditors, protection of the interest of all stakeholders i.e not only shareholders as observed in some cases. While some of the companies posited shariah non-compliance of the sukuk transaction as justification to avoid payment on their due obligations however the US & UK Courts came to the rescue of the sukuk holders. While Sukuk holders with respect to Malaysia default cases were lucky by not going through prolong and rigorous court cases by utilizing options of restructuring and other various dispute resolution schemes provided by the Malaysia Regulatory authorities, those sukuk investors in the GCC countries were not that lucky. Hence, all regulators in the industry need to be reviewing their corporate governance code and framework regularly.
Corporate governance , Sukuk default , Islamic bond
Adisa, M. K. (2022). Sukuk default/near default and governance failure: the need for a strong and sound governance framework (the role of Securities Commissions and other regulatory authorities) (Master dissertation). INCEIF, Kuala Lumpur. Retrieved from https://ikr.inceif.org/handle/INCEIF/3759