What Protects LP Capital Beyond the Assignment Itself

Not investment advice. Capital is at risk.

What this protects against: SukukFi Ltd's own insolvency or misconduct, and a shareholder acting against the trust. What it does not protect against: the underlying debtor simply failing to pay.

That second sentence matters more than the first. Keep it in view through everything below, because it is easy for a legal structure with several layers to read as more comprehensive than it is. This post covers the layers. It does not cover, and does not touch, whether an Approved Debtor pays its invoice.

The assignment is the headline, not the whole structure

The deed of assignment does the obvious work. Before capital moves, the Telecom Client assigns the receivable to SukukFi Ltd, the Assignee, and a notice of assignment goes to the debtor. That takes the receivable out of the Telecom Client's own estate. If the Telecom Client fails, the receivable was never its asset to lose.

What sits underneath that assignment gets less attention, and it is doing real work of its own. Two things: what the Assignee is allowed to be, and who holds the receivable once it arrives.

An assignee that cannot become anything else

SukukFi Ltd exists for one purpose. Its articles of association restrict its objects to taking, holding as trustee, administering and enforcing assignments of receivables, and applying the proceeds accordingly. Everything else is closed off, not by convention but by the constitution itself.

The prohibitions are absolute and drafted to resist being talked around. The Company shall not, in any circumstances, and notwithstanding any consent, resolution, direction or authority however given, trade, open or operate a bank account, borrow, give a guarantee or indemnity, grant security over its assets, employ anyone, or hold any asset other than the assigned receivables and their proceeds. A director who tries to exercise a power inconsistent with those restrictions has that decision treated as void however it was taken, and the shareholders' own reserve power under the model articles is expressly carved out from authorising it.

Read that list again with an insolvency lawyer's eye. Every item on it is a way a company normally accumulates the liabilities and encumbrances that turn into other creditors' claims. An entity that cannot borrow has no lenders competing for its assets. An entity that cannot grant security has no secured creditor standing ahead of the trust. An entity that cannot hold any asset beyond the assigned receivables has nothing else for a claim to attach to.

Why this is company law, not a contract you have to trust

A restriction like this could just as easily live in a side letter, and side letters get breached. It does not. It is filed.

Section 31(2) of the Companies Act 2006 lets a company enter a restriction on its objects on the public register at Companies House. Once entered, a director who takes the company outside that restriction is not merely in breach of an internal rule. The act itself is ultra vires, beyond what the company's own constitution permits it to do, and that is a matter of company law rather than a promise between contracting parties.

The financing agreement ties funding directly to that filing. No Funding Event may be requested, approved or funded, and no capital advanced, until notice of the restricted objects has actually been entered on the register. Not once the articles are signed. Once Companies House has recorded them.

That sequencing exists because a signed document and a public filing are not the same protection. The first is what the parties agreed. The second is what the world can check.

A trust declared straight to the token holders

The second layer is about where the receivable sits once it is assigned, not just who cannot touch it.

The financing agreement declares that the Assignee holds each assigned receivable, and all collections on it, on trust for the Participants in the relevant vault, meaning the holders of that vault's participation tokens. The trust runs directly to them. A person becomes a beneficiary by holding the token and stops being one by ceasing to hold it, with no further document required to update who the trust is for.

There is no intermediate holding company in that chain, and no separate corporate vehicle sitting between the trust property and the people the trust is for. Fewer links means fewer places an insolvency practitioner, administrator or unrelated creditor could plausibly argue the receivable actually belongs to them instead. The Assignee's own articles say the same thing from the other direction: the trusts are unaffected by who owns the company, and a change in who holds the Assignee's shares does not touch what the Assignee holds on trust or who it holds it for.

The gap that was still open, and why it needed closing

Every one of those protections binds the Assignee and its directors. None of them, by themselves, bind the person who owns the Assignee's shares.

That gap is not hypothetical here. The Assignee's shares currently sit with an individual, as an interim position pending their transfer to the group's own holding company. Ownership has to sit somewhere while that transfer is arranged, and right now it sits with a person rather than an entity built for the purpose.

An individual shareholder is not a party to the financing agreement in that capacity. He did not sign it as the Telecom Client, the Assignee, or the platform operator did. So if he tried to exercise a shareholder's power in a way the trust does not permit, amending the articles, removing a director, dealing in the shares, the Telecom Client would have no direct contractual claim against him for it. The restrictions the Assignee operates under do not, on their own, reach the person who owns it.

That is a real hole, and it comes from a specific, disclosed cause: an interim ownership arrangement, not a defect nobody noticed.

Closing it with a deed the shareholder signs personally

The fix is a separate instrument: the Member's Deed of Undertaking. The individual shareholder executes it personally, as a deed, in favour of the Telecom Client directly, and the financing agreement makes it a precondition. No funding event can occur before that deed has been delivered.

Under it, the shareholder undertakes, for as long as any assigned receivable remains outstanding, not to pass or agree to any resolution amending the Assignee's articles, not to transfer or charge any share in the Assignee other than to the group's own holding company, and not to exercise any shareholder power in a manner inconsistent with the trusts on which the Assignee holds the receivables. He separately acknowledges he holds no beneficial interest in the trust property himself, and undertakes not to apply, or consent to any application, to have the Assignee struck off or dissolved while a receivable remains outstanding.

Because it runs directly from the shareholder to the Telecom Client, the deed reaches exactly the party the corporate restrictions could not. It is enforceable by the party the structure exists to protect, not routed through the company whose independence was the problem in the first place. It also does not disappear quietly: once the shares actually reach the group's holding company, and that entity gives an equivalent undertaking of its own, the individual is released from the ongoing obligations, but his acknowledgement that he never had a beneficial claim to the trust property survives regardless.

Where this stops, and it stops earlier than it might sound

None of this changes the underlying credit position. The financing agreement's own drafting is explicit that shareholders retain the statutory power to amend a company's articles by special resolution under section 21 of the Companies Act 2006, whatever a deed says about it. An amendment made in breach of these undertakings is still legally effective as a matter of company law. It is a breach of contract and of the deed, giving rise to a claim and, given the difficulty of putting a value on this kind of breach, a case for an injunction. It is not a legal impossibility.

And none of this is insolvency-remote. Nobody involved in drafting it has described it that way, and this post will not either. What it does is narrower and more specific: an assignee legally confined by its own filed constitution to holding trust property and nothing else, a trust declared directly to the people the structure exists for, and a deed that closes the one gap where an interim ownership arrangement would otherwise have left a person outside the reach of any of it.

What it does not do is make an Approved Debtor pay. That risk sits entirely outside this structure, and it is covered by underwriting and credit assessment, not by articles of association or a shareholder's deed. Confusing the two is the one mistake this post is written to prevent.

Read the risk considerations SukukFi publishes for capital providers for how counterparty risk is assessed and disclosed, or see the live vault.

Yields are targets, not guarantees.