CA-8.2.9
There are four key criteria for a transaction to be considered as a "true sale" that transfers legal title to the SPV for the benefit of the Sukuk investors:
(a) The transfer must be such that it cannot be re-characterised by a court or other body as a secured loan, or otherwise be avoided in a bankruptcy or insolvency proceeding involving the originator of the assets (such as pursuant to a fraudulent transfer in anticipation of bankruptcy or a preference payment);
(b) The bankruptcy or insolvency of the originator must not affect the assets that have been transferred to the issuer/SPV. This, in turn, means that the issuer will be able to enforce collection and other rights against the source of the income (the payer) without hindrances resulting from the bankruptcy or insolvency of the originator;
(c) The transfer must then be perfectible at the election of the issuer; and
(d) The sale must be free and clear of all prior overriding liens.
January 2015