Saudi CMA issues draft rules for special purpose entities

The Capital Market Authority (CMA), Saudi Arabia’s market regulator, issued on Sunday new draft rules and by-laws regulating special purpose entities (SPEs).

The new rules relate to SPEs aiming to raise finance through issuing debt instruments, including asset-backed securities, asset-linked recourse securities, or debt-based recourse securities, the CMA added in a statement.

The activities of SPEs are only restricted to issuing shares to its initial shareholders on establishment, or to shareholders as part of capital increase processes. SPEs can also issue debt instruments and invest, manage and realize the issuance proceeds of such instruments.

In addition, the rules state that SPEs should be headquartered within the kingdom. Their capital should be divided into non-divisible cash shares of equal value.

Initial shareholders will pay in cash the full nominal value of their shares. The SPE’s full nominal value could be deposited in cash with a local bank.

An SPE should have only one sponsor, who will record sufficient information about the sponsorship in compliance with the rules.

Comments and proposals will be received by the market regulator for 60 days until July 28, the statement added.