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