Beneficial Ownership in Sharī‘ah and Modern law: A case of Sovereign and Quasi-Sovereign Ijārah Ṣukūk Structures in Pakistan, Bahrain, and Malaysia

The concept of beneficial ownership has been tremendously used in the sovereign and Quasi-sovereign ijārah ṣukūk structuring on a mega scale. This paper aims to examine the meaning of beneficial ownership and its recognition in the light of classical and modern Islamic jurisprudence. It overviews the laws related to beneficial ownership in the Pakistani, Bahraini, and Malaysian legal regimes, and further elaborates Sharīʿah appraisal of beneficial ownership focusing on its characteristics in Sharīʿah. The findings of this study present that the legal status of ownership as per Sharī‘ah is a need-based phenomenon and not a mandatory requirement. Hence, if the transaction fills the ahkam (commands) for milkiyah and tamlikat (ownership) then the transfer of ownership is a compulsory element for the sale consequences. Moreover, it also explains that the use of beneficial ownership in sovereign and quasi-sovereign ijārah ṣukūk structures is acceptable in principle because the valid sale transaction that occurs between the originator and SPV effectively transfers ownership to later, as it is described in ṣukūk prospectuses as ‘beneficial interest. Finally, it may also be justified in the context of hurriyat al-tasurruf (right to dispose-off the asset) and ‘qualified ownership’. Keywords Beneficial ownership, legal title, ijārah ṣukūk, Sharī‘ah appraisal