Special Purposes Entities

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​The Capital Market Authority Board approved The Rules for Special Purposes Entities as well as the Special Purposes Entity By-law, after taking into consideration the feedback from experts and the public after the publication of these documents on the website of the Authority and the Saudi Stock Exchange (Tadawul).On 1/4/2018, The Rules for Special Purposes Entities entered into force, and the Listed Companies & Investment Products Deputy, represented by the Special Purposes Entities Department  is regulating the licensing of Special Purposes Entities, in addition to the supervision of the sector of Special Purposes Entities in regard to registration, offering and management, as well as monitoring any associated activities.

What is the Special Purposes Entities 

The Special Purposes Entity is an entity established and licensed to issue debt instruments from CMA under The Rules for Special Purposes Entities, and shall have legal personality and financial autonomy , and it shall cease to exist with the end of the purpose for which it was established for, in accordance with the Rules and Regulations issued by the Capital Market Authority.

 
Main Purposes of Establishing a Special Purposes Entity
  1. Financing through an alternative source other than loans from bank and financial institutions, by issuance of debt instruments through Special Purposes Entity.
  2. Assigning the issuance of debt instruments to an entity established for this purpose and it shall cease to exist with the end of the purpose for which it was established for.
  3. Transfer assets to a Special Purposes Entity to transfer the risks associated with the assets.
  4. Appearance of liabilities in the financial statements of the Special Purposes Entities instead of the financial statements of the sponsor or shareholders (off-balance sheet).
  5. Protecting the rights of investors in Special Purposes Entity from bankruptcy of related parties such as the sponsor or shareholders.

 

Types of Debt Instruments Issued by the Special Purposes Entities 
   • Asset-backed debt instruments
        Means a debt instrument issued by a special purposes entity under whose terms: 
  1. The entitlement of holders of the debt instrument to a return is wholly dependent on the returns generated by the special purposes entity’s assets.
  2. The sponsor is not obliged to the holders of the debt instrument (whether by guarantee or otherwise) to pay any amounts
   • Asset-linked recourse debt
   ​     Means a debt instrument issued by a special purposes entity under whose terms:
  1. The entitlement of holders of the debt instrument to a return is defined by reference to the returns generated by the special purposes entity’s assets.
  2. The sponsor is obliged to the holders of the debt instrument (whether by guarantee or otherwise) to pay all amounts due on the debt instrument
   • Debt-based recourse debt instruments
   ​     ​Means a debt instrument issued by a special purposes entity under whose terms:
  1. The entitlement of holders of the debt instrument to a return is not defined by reference to the returns generated by the special purposes entity’s assets.
  2. The sponsor is obliged to the holders of the debt instrument (whether by guarantee or otherwise) to pay all amounts due on the debt instrument.
  3. Repayment of all capital is to be made to the holders of the debt instrument at or before the maturity of the security.

 

Authorisation to Establish Special Purposes Entity
To obtain CMA license to establish a Special Purposes Entity an application to establish and license a Special Purpose Entity form and an application to register a director of  a Special Purpose Entity should be filled out and submitted to the Special Purpose Entities Department along with By-laws of Special Purposes Entities according to the standardized form approved by the CMA. 
 
For more information, please contact the Special Purposes Entities Department at:
Tel. : +966 (11) 490 6101
E-mail: SPE@cma.org.sa​​​

 
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Special Purposes Entities