The Saudi Arabian Capital Market Authority (CMA) is proposing to lift the corporate shield for SPVs typically used for issuing Sukuk in a bid to deepen the market.
The CMA said draft amendments on SPVs governance, made available for feedback from stakeholders by the 29th April 2025, aims to further “strategic objectives of developing the Sukuk and debt instruments market and enabling the growth of the asset management industry.”
Apart from enhancing liquidity and creating new investment opportunities, the CMA said it aims to expand the range of eligible issuers as the amendments will also allow special purpose entities to offer debt instruments through exempt offerings, in addition to the existing public and private offering options.
A key proposal reads: “The originator in securitization transactions shall sell the securitized assets or transfer the associated rights to the special purpose entity through which asset-backed debt instruments or asset-linked recourse debt instruments will be offered.
“Neither the originator nor its creditors shall have the right to dispose of the assets after they have been sold or the rights after they have been transferred.”
Another critical requirement set by the CMA now with the proposed amendments to the Rules for Special Purposes Entities is for any sponsor of the SPV – that has issued or intends to issue debt instruments – must be a legal person.
The proposed Article 11 a) 2) specifically states that if the SPV is issuing “debt-based recourse debt instruments, asset-linked recourse debt instruments through a public placement, the sponsor must not be a limited liability company”.
This change effectively removes any Saudi joint stock company, a capital market institution licensed to carry on securities business related to the business of special purposes entity, a local bank or a finance company from being a Sukuk-issuing SPV sponsor.
Article 12 further qualifies: “Neither a sponsor, nor any of its affiliates or any of its creditors, may have any interest in, or claims against, the assets of the SPV” – other than earlier-declared claims fully and fairly disclosed in the SPV’s documentation. This qualification also extends to the SPV trustee and its affiliates under amended Article 15.
Additional responsibilities are being imposed on the trustee, who must be a legal person. The SPV trustee “shall be responsible for representing the holders of the debt instruments issued by the entity”.
Should the trustee be deemed to have failed in carrying out such duties accordingly, the sponsor and debt instrument holders may request the CMA to appoint a replacement trustee.
In issuing this set of draft amendments, the CMA said “a total of 464 entities (were) established between 2018 and 2023. This number has more than doubled, reaching 945 active entities by the end of the fourth quarter of 2024.”
Separately, the CMA is slightly easing the investor requirements for the Nomu parallel market by scrapping the 10 transactions per quarter criteria and reducing the completed transactions amount by SAR10 million (US$2.67 million) to SAR30 million (US$8 million) during the past 12 months.
