The Capital Market Authority Board approved the amendments to the Rules for Special Purposes Entities, after taking into consideration
the feedback from experts and the public after the publication of the draft amendments to the Rules for Special Purposes
Entities on the website of the Authority and the Saudi
Stock Exchange (Tadawul). The amendments shall be
enforced starting from the date of their publication, which was on 28/1/2021
AD. , and the Listed Companies & Investment Products Deputy, represented by
Sukuk and Debt Instruments Issuance 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 for debt
instruments and investment units 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 from CMA under The Rules for Special Purposes Entities for debt instruments and investment units, 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
- Financing through an alternative source other than loans from bank and financial institutions, by issuance of debt instruments through Special Purposes Entity.
- 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.
- Provide the legal personality for the investment fund.
- Protecting the rights of investors in Special Purposes Entity from bankruptcy of related parties such as the sponsor in the event of issuing debt instruments or the investment fund manager in the event of issuing investment units.
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:
- 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.
- 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 instruments :
Means a debt instrument issued by a special purposes entity under whose terms:
- The entitlement of holders of the debt instrument to a return is defined by the ratio of the returns generated by the special purposes entity's assets.
- 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:
- The entitlement of holders of the debt instrument to a return is not determined by the returns generated by the special purposes entity's assets.
- 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.
- Par value to be paid to the holders of the debt instrument at or before the maturity of the security.
Authorisation to Establish Special Purposes Entity
Issuance of debt instruments:
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 Sukuk and Debt Instruments Issuance Department in the Authority along with By-laws of Special Purposes Entities according to the standardized form approved by the CMA.
Issuance of investment units:
To obtain a license to establish a Special Purposes Entity , the fund manager shall fill out the section on establishing a Special Purposes Entity in the investment fund establishment 's form, in addition to submitting the By-law for the Special Purposes Entity according to the form approved by the authority, and sending it to the Investment Product Issuance Department in the Authority.
For inquiries and more information, you can contact the Authority on the following phone or e-mail:
Email: SPE@cma.org.sa
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