The Capital Market Authority (CMA) is seeking public feedback on proposed amendments to the rules for special purpose entities (SPEs) in Saudi Arabia, according to a statement. The full draft(pdf) is available for consultation on Istitlaa until Tuesday, 29 April.

The rationale: The proposed amendments would, if passed, expand the debt and sukuk issuance options by introducing exempt placements for asset-backed and asset-linked recourse debt instruments. Under the regulations, sponsors must be legal entities that comply with all regulations. Limited liability companies would no longer be eligible to sponsor public placements.

What changed? Sponsors, affiliates, and creditors are prohibited from having undisclosed claims on an SPE’s assets. Trustees must be legal persons, and if they handle asset custody, they must be licensed capital market institutions. The new rules also ensure that creditors cannot take control of SPE assets unless explicitly agreed upon.

Trustees will now be responsible for representing debt investors. If a trustee fails to meet its obligations, investors or the sponsors may request a replacement. The CMA also has the authority to intervene and appoint a new trustee if necessary.

ALSO- Once a company sells assets to an SPE, it cannot take them back or interfere with their control. Additionally, investors who buy debt instruments from the SPE cannot demand repayment from the original company unless it was agreed upon in advance. The Board of Directors of an SPE must be independent of the sponsor. If the board has three or more members, the majority must be independent.

As for financial structure, investment-focused SPEs will have variable capital based on investor contributions, while other SPEs will have fixed capital recorded in unit-holder registers. SPEs must also obtain CMA approval before declaring bankruptcy. If an SPE is no longer needed, it can request early dissolution — subject to CMA approval.

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