Debt issuers using special purpose entities (SPEs) now have a new framework to work with, as major amendments to the rules governing debt-specific SPEs (pdf) come into effect, according to a press release. The updated framework, first floated for consultation in March, is effective immediately, with grace periods of 90 to 180 days for existing SPEs to update their by-laws, governance structures, and reporting standards to comply with the new requirements.

Why it matters: The changes are designed to make it easier to set up SPEs, faster to issue debt, and safer for investors while broadening the market for companies of all sizes. Adoption is already accelerating: The number of licensed SPEs hit 1.2k by mid-2025, up 87% y-o-y, driven largely by fintechs, SMEs, and alternative lenders using SPEs as funding vehicles.

One of the biggest changes is the expansion of sponsor eligibility, allowing any legal entity including limited liability companies (LLC), fintechs, and SMEs to set up an SPE as long as they comply with their governing laws. This reverses the previous ban on LLCs acting as SPE sponsors, giving smaller players and nontraditional issuers access to domestic sukuk and structured debt markets, which were previously more limited to larger corporates and institutions.

Issuers also gain more flexibility in how they can raise debt. SPEs were previously restricted to issuing debt through either public offerings or private placements. The amendments introduce exempt offerings, allowing issuers to tap specific categories of qualified investors through a faster, lighter regulatory process. By reducing disclosure burdens and accelerating time-to-market, the exempt route is expected to make structured debt more accessible and attractive to a broader pool of issuers.

True sale principle: For issuers pursuing securitizations, the new framework embeds the true sale principle for the first time, significantly strengthening investor protections. Companies that securitize assets must now fully transfer ownership of those assets to the SPE, with originators and their creditors losing any rights to reclaim them. Investors’ recourse is limited strictly to the SPE, shielding them from financial risk related to originators.

Governance requirements for SPEs have also been tightened. Trustees now have a clearly defined mandate to represent debtholders and oversee SPE operations, including appointing directors, selecting custodians, and safeguarding investor rights.

SPE boards must now also be independent of both sponsors and originators, a shift from the previous requirement for independence from the sponsor alone. Transparency obligations have increased, with SPEs required to maintain comprehensive governance and sponsorship records for at least 10 years and meet stricter disclosure timelines in cases of breaches, accounting irregularities, or changes to directors and custodians.

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