Jun 25, 2019

Bonds

  Bonds

Participating Bonds are securities which are published by the government, governmental companies, municipalities, institutions and public-service organizations and companies affiliated to such organizations, public and private joint stock companies and producing cooperative companies at a specified nominal value and for a specified period for supply a part of financial resources required for civil or profit-directed plans of the government or for supply of the financial resources required for creation, completion and development of profitable producing, constructional and service-provision plans or producing entities.

Features 

1)     Participating bonds are bearer and transferrable bonds, which may mature after two to five years.

2)     On-account profits are paid to the holders for the defined periods (usually three months, without grace period), pro rata nominal value of each participating bond.

3)     After expiration of participation, the actual amount of profit payable to the holders will be calculated pro rata the nominal value and period such bonds have been kept. In the event that such final determined profit exceeds the on-account profits, then, the resulting differential will be finally settled to the holders in compliance with the relevant regulations. Further, if the project turns out disadvantageous, then, the publish will be liable to compensate the costs and the holders of such bonds will remain harmless.

4)     After the maturity of participating bonds, participation is deemed expired and the principal fund will be returned to the holders of such bonds. It is obvious that no profit will be accrued to the holders after expiration of participation.

5)     Holders have the option of selling their bonds prior to their maturities; in such case, the bonds are redeemed at their nominal value, plus the accrued profit, calculated on daily basis.

Types of Participating Bonds

1)     Government Bonds: These bonds are issued in order to supply the financial resources of civil or profit-directed plans of the government, and their amount is set in the budget and Ministry of Economic Affair & Finance warrants repayment of the principal fund and on-account profit, as well as the realized profit.

2)     Participating Bonds issued by the Governmental Companies and other Institutions: Such participating bonds are issued for the plans other than civil and profit-directed plans of the government; rather, in include governmental service-provision profitable constructional plans. Further, their authorizations are issued by the Central Bank of I.R. of Iran. Furthermore, the publishers of such bonds are obliged to undertake repayment of the principal fund and accrued interest, and provide the agent bank with the required instruments for guaranteeing repayment of the principal amount and final profit accrued to bonds.

3)     Participating Bonds issued by Central Bank of I.R of Iran: Subject to compliance with the Usury-Free Banking Operation Law, Central Bank of I.R of Iran is authorized to issue participating bonds upon approval of the Monetary and Credit Council of the Central Bank.