The Capital Market Authority's (CMA's) Board approved a set of amendments aimed at enhancing the governance of special purpose entities and streamlining their regulatory procedures. The amendments will take effect as of their publication date, with a grace period granted for compliance with certain approved provisions.
The amendments aim to
enhance the attractiveness of special purpose entities as legal Entity for
issuing debt instruments or investment units by facilitating their establishment
procedures and enabling securitization transactions through them. This will
contribute to deepening and supporting the development of the sukuk and debt
market, as well as enabling the growth of the asset management industry. In
turn, this is expected to positively impact the creation of new investment
opportunities.
According to the approved amendments, one of the key enhancements focused on broadening the base of issuers with respect to the legal form of the sponsor of a special purpose entity, provided that this does not conflict with the laws and regulations applicable to the entity's activity. The amendments also allowed the entity to issue debt instruments through an exempt offering, in addition to the currently available options of public and private offerings.
Moreover, among the amendments was enabling special purpose entities to carry out securitization transactions by adding a dedicated chapter on the originator in securitization operations to the Rules for Special Purposes Entities.
The scope of the approved amendments also included clarifying the authorities of board members of entities issuing debt instruments, as well as the authorities of the investment fund manager when the fund is structured as a special purpose entity under the articles of the By-Laws.
In addition, the approved amendments enhanced the governance of special purpose entities, including assigning the trustee the responsibility of representing the interests of debt instrument holders and developing the provisions related to their dismissal. They further introduced a requirement for the independence of board members of the entity from both the sponsor and the originator, and developed the procedures for dissolving the entity.
Special purpose entities licensed prior to the publication date of the amended rules must submit the By-law to the CMA in accordance with the updated and approved template available on the Forms page of the CMA's official website, within a period not exceeding (180) days from the date of publication of this announcement. Additionally, special purpose entities licensed prior to the publication date of these rules are granted a grace period of ninety (90) days from the date of publication to comply with paragraphs (b) and (c) of Article 20 of these rules.
The number of licensed special purpose entities recorded significant growth by mid-2025, reaching a total of 1,239 entities, an increase of 87.2% compared to mid-2024.
This growth in the number of licenses is attributed to the expansion of FinTech companies authorized to offer debt instrument offerings under the FinTech Lab framework, in addition to the growing interest from small and medium-sized enterprises in leveraging these instruments as effective and alternative financing channels.
This follows the CMA's publication of the “Draft to Enhance the Governance of Special Purpose Entities and Facilitate Their Procedures" on the Unified Electronic Platform for Consulting the Public and Government Entities (Public Consultation Platform) affiliated to the National Competitiveness Center and the CMA's website for public consultation for a period of (30) calendar days.
The amended Rules for Special Purposes Entities and the Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority can be accessed through the following links:
Amended Rules for Special Purposes Entities
The Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority