CMA issues draft amendment to special purposes entities for public consultation

The Capital Market Authority (CMA) issued a resolution to publish the draft amendment to the rules of special purposes entities for public consultation for a period of 60 days ending July 29, 2020.

The amendments are part of the CMA’s strategic objectives to develop the capital market, in accordance with the Capital Market Law.

The move further aims to build an advanced capital market that is open to the world and capable of attracting local and international capital, as well as playing an active role in meeting the economy’s financial needs.

The main elements of the draft include:

a) Providing fund managers with an additional option to establish a special purpose entity to grant the investment fund a legal personality, while having the option of carrying on the current contractual relationships between fund managers and unit holders.

b) Amending the structure of the special purpose entity that offers debt instruments by registering its shares in the name of the trustee instead of shareholders, where the trustee will be responsible for protecting the entity’s assets, appointing members of the board of directors, determining their remuneration, and appointing an auditor which will protect the entity’s assets and the interests debt instruments holders.

c) In addition to Saudi joint stock companies, authorized persons, local banks and finance companies, limited liability companies were enabled to become a sponsor of the special purpose entity that issues asset-backed debt instruments, as the sponsor is responsible for submitting an application to the CMA for the special purpose entity license, as well as sponsoring all its financing transactions and complying with all the rights and claims of debt instruments holders, according to the type of instrument, and complying with disclosure requirements as applicable.

The CMA said it will receive the opinions of relevant and interested persons by email, indicating all comments will be taken into consideration for ratifying the final draft.

The draft amendments can be viewed through the following link: https://cma.org.sa/RulesRegulations/Consulting/Documents/Rules_for_Special_Purposes_Entities_en.pdf