The Capital Market Authority (CMA) called upon relevant and interested persons participating in the capital market to share their feedback on the Draft to Enhance the Governance of Special Purpose Entities and Facilitate Their Procedures. The consultation period will last for 30 calendar days, ending on 01/11/1446H, corresponding to 29/04/2025.
The Draft aims to enhance the attractiveness of Special Purposes Entities as a legal Entity for issuing debt instruments and investment units by improving their governance and facilitating their procedures. This contributes to supporting the Capital Market Authority's strategic objectives of developing the sukuk and debt instruments market and enabling the growth of the asset management industry. The Draft will also support the deepening of the sukuk and debt instruments market and the diversification of issuances by expanding the range of debt issuers through Special Purpose Entities, which in turn will contribute to enhancing liquidity and creating new investment opportunities.
According to the proposed draft, the key developments focus on expanding the range of eligible issuers, provided this does not conflict with the relevant regulations related to the entity's activity. The amendments also allow the Special Purpose Entities to offer debt instruments through exempt offerings, in addition to the existing public and private offering options.
Moreover, among the amendments aimed at expanding the range of issuers is the enablement of Special Purpose Entities to carry out securitization transactions.
The proposed amendment also aims to simplify procedures for Special Purpose Entities and clarify the responsibilities of directors and the fund manager (for funds that take the form of a Special Purpose Entity) in the entity's By-Laws.
Additionally, the amendments aim to enhance the governance of Special Purpose Entities by requiring the trustee to be a legal entity, improving the provisions for the trustee's removal, ensuring the independence of board members from the sponsor and originator, and refining the procedures for dissolving the entity.
A Special Purpose Entity is defined as an entity that is established and licensed by the Capital Market Authority under the regulations governing Special Purpose Entities for issuing debt instruments or investment units. SPE has independent financial and legal entity, and the entity ceases to exist once the purpose for which it was established is fulfilled, in accordance with the rules and regulations issued by the Authority.
The capital market has witnessed a significant increase in the number of Special Purpose Entities, with a total of 464 entities established between 2018 and 2023. This number has more than doubled, reaching 945 active entities by the end of the fourth quarter of 2024.
The CMA emphasized that the comments of relevant and interested persons shall be taken into full consideration for the purpose of approving the final Proposed Amendments, which in turn shall contribute to the aim of enhancing and developing the regulatory environment. Opinions and comments can be received through any of the following:
§The Unified Electronic Platform for Consulting the Public and Government Entities (Public Consultation Platform), affiliated with the National Competitiveness Canter through the following link:
(istitlaa.ncc.gov.sa).
§The prescribed form through the following email: (Laws.Regulations@cma.org.sa).
The Draft can be viewed via the following link:
Amendments of the Rules for Special Purposes Entities, the Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority, and the By-Laws of the Special Purposes Entity
Prescribed form for providing comments
