![Securities industry decides to organize ad hoc entity to support state position Securities industry decides to organize ad hoc entity to support state position](https://i0.wp.com/www.albayan.ae/polopoly_fs/1.4909150.1721814979!/image/image.jpeg_gen/derivatives/original_640/image.jpeg?w=1200&resize=1200,0&ssl=1)
Today, the Securities and Commodities Authority issued a decision to regulate special purpose vehicles (SPVs), as part of its ongoing efforts to improve the regulatory framework for the securities industry in the country, align with international best standards and practices, and support the UAE’s position as a leading global destination for business and investment.
The decision issued by the Authority’s Board of Directors aims to support the efficiency of securitization and sukuk systems, strengthen the investment fund sector in the country and provide alternative financing opportunities for joint-stock companies, which in turn leads to improving the stability and growth of local financial markets.
His Excellency Muhammad Ali Al-Shurafa, Chairman of the Board of Directors of the Authority, said that the decision taken comes within the framework of the Authority’s commitment to strengthening the legal and regulatory structure of financial markets and providing innovative and flexible mechanisms that meet the needs of the market and support its ability to face economic challenges and changes.
He stressed the Authority’s continued commitment to enhancing the competitiveness of the UAE’s financial markets and strengthening the country’s position as a sustainable global financial centre.
Her Excellency Dr. Maryam Butti Al Suwaidi, CEO of the Authority, said that the decision is an important positive step to boost securitization processes, sukuk issuances and the investment fund sector. It also allows public joint stock companies to transfer assets to special purpose vehicles, which helps strengthen their ability to issue sukuk and tools. Other debts are backed by these assets, which in turn attracts more investment in local financial markets.
The Authority explained that the decision comes pursuant to Federal Decree-Law No. (32) of 2021 on commercial companies, which gives the Authority the power to issue special texts to regulate special purpose companies, and that the regulation was developed after reviewing international best practices and in consultation with industry, experts, advisors, specialists and stakeholders.
The decision consists of 14 articles, dealing with the scope, classification of the ad hoc entity, its nature, and articles relating to the procedures for applying for the establishment and approval of the entity, the obligations of the entity manager, the cases and procedures for the expiration of the entity and its liquidation, in addition to the powers of the authority related to supervision, inspection, violations and sanctions.
The decision defines a “special purpose vehicle (SPV)” as a company created for the purpose of separating the obligations and assets associated with a specific financing transaction from the obligations and assets of the person who created it, and used in credit, borrowing, securitisation, issuing bonds and transferring risks associated with insurance, reinsurance and derivatives transactions.
According to Article (2) of the Decision, its provisions apply to the special purpose entity established in the country, the qualified special purpose entity established in a free zone of the country, the founder and director of the special purpose entity, the auditor, advisors and service providers of the special purpose entity and any entity or person associated or related to the special purpose entity, while its provisions do not apply to the special purpose entity established by federal or local government agencies or companies wholly owned by any of them, unless they are intended for the public, and to the special purpose entity established in a financial free zone of the country, as well as to an unqualified special purpose entity established in a free zone of the country.
The decision also specifies the persons who may establish an ad hoc entity, such as securitisation companies, investment management companies, investment funds, joint stock companies and a natural or legal person, in accordance with the provisions of the decision.
The decision included the entity’s management mechanism, which is carried out by the “entity manager”, as it must comply with a number of provisions, the most important of which is the prohibition for the entity to engage in purposes, tasks or works other than those for which it was created, with the exception of works that are complementary or incidental to these tasks or objectives, as well as the management and governance of the entity, and refraining from carrying out mergers, conversions to another legal form or division of the ad hoc entity and ensuring that the entity complies with the requirements contained in the relevant legislation.
According to the decision, the founder submits an application to the Authority for its approval regarding the establishment of the ad hoc entity and for obtaining a license to carry out its objectives on the form prepared for this purpose, accompanied by documents and information supporting the application, and proof of compliance with the conditions and requirements specified therein.
The Authority will also make its decision to approve or reject the application within a period not exceeding (5) working days from the date of submission of a duly completed application, it being understood that in the event of rejection, the Authority will indicate the reasons therefor.