Insights

How to comment

The consultation ends on 24 September 2014. You may submit your comments to the MFSA by email on elofaro@mfsa.com.mt.

Outline

Securitisation Cell Companies: A securitisation cell company is a company established for the purpose of securitisation transactions having the power to establish within itself one or more cells for the purpose of securitisation transaction. An SCC is a single legal person and the creation by a securitisation company of a cell does not create, in respect of that cell, a legal person separate from the securitisation cell company.

Cells constitute separate patrimonies of securitisation cell companies: Regulation (4)(3) of the draft regulations provides that assets and liabilities of each cell comprised in a securitisation cell company will be treated as a patrimony separate from the assets and liabilities of each other cell of the securitisation cell company, and also separate from the assets and liabilities of the securitisation cell company itself.

Assets and liabilities of securitisation cell companies: The assets and liabilities of securitisation cell companies with cells are as follows:

• non-cellular assets: being assets not attributable to any cell established by a securitisation cell company;
• cellular assets: being assets attributable to a cell established by a securitisation cell company;
• non-cellular liabilities: being liabilities not attributable to any cell established by a securitisation cell company;
• cellular liabilities: being liabilities attributable to a cell established by a securitisation cell company.

No cross-contamination: Regulation 10 of the draft regulation provides that cellular assets attributable to a cell of a securitisation cell company shall only be available to the creditors of the company who are creditors in respect of that cell and who are thereby entitled to have recourse to assets attributable to that cell. In addition, cellular assets attributable to a cell of a securitisation cell company shall be absolutely protected from the creditors of the company who are not creditors in respect of that cell and who accordingly are not entitled to have recourse to the cellular assets attributable to that cell.

Where liability arises which is attributable to a particular cell of the securitisation cell company, only those cellular assets attributable to that cell will be used to satisfy the liability, and any cellular assets not attributable to the relevant cell shall not be used to satisfy the liability.

Securitisation transactions: A securitisation cell company may enter into a securitisation transaction, provided that securitisation assets allocated to a cell originate from the same originator. A securitisation cell company may not enter into securitisation transaction in respect of non-cellular assets of the cell company.

Reinsurance special purpose vehicles: A securitisation cell company may only carry on business as reinsurance special purpose vehicle only once it has obtained prior authorisation from the competent authority. The fully-funded requirement that insurance special purpose vehicles are required to meet in terms of the Reinsurance Directive and the forthcoming Solvency II capital rules would apply in respect of each cell. Therefore the maximum aggregate exposure attributable to a cell may not exceed the cellular assets attributable to the same cell at all times.

Establishment of cells:  A cell may be established by means of a resolution of the board of directors of a securitisation cell company resolving to establish a cell for the purpose of a securitisation transaction. It is possible, although it appears not to be necessary, to link the establishment of a new cell with the issue of a new class of shares. Each class of shares linked to a particular cell would be known as cell shares. The proceeds of an issue of cell shares would constitute the first cellular assets attributable to the cell in respect of which they are issued. No minimum share capital requirement would apply for the establishment of a cell. A dividend may be paid to the holders of cell shares, known as a cellular dividend, which is calculated by reference only to profits attributable to the cell in respect of which the cell shares are issued.

Regulatory approval of cells in reinsurance special purpose vehicles: A cell of a reinsurance special purpose vehicle organised as a securitisation cell company may be established by means of a resolution of the directors of the company once regulatory approval is obtained. The draft regulations empower the MFSA to issue rules setting out the application requirements for the approval of cells.

Issue of financial instruments linked to cells:  The draft regulations provide that it would be possible for a securitisation cell company to issue financial instruments in respect of any of its cells in one or more tranches, the proceeds of the issue of which would be comprised in the cellular assets attributable to the cell in respect of which the financial instruments are issued.

Tranching: A cell company may issue financial instruments in respect of a cell in one or more tranches.

Multi-currency issuances: Financial instruments issued in respect of a cell may be denominated in different currencies. In this case, the directors of a securitisation cell company would be required to choose the base currency of the cell and draw up accounts in respect of the cell.

Accounting: The directors of the securitisation cell company are required to draw up accounts in respect of the securitisation cell company in the currency of its non-cellular capital. The directors of a securitisation cell company shall also maintain proper accounting records of the assets and liabilities of each cell in the base currency of that cell.

Winding-up: The draft regulations contain provisions aimed at ensuring the orderly winding-up of cells and the treatment of cells as separate patrimonies of the securitisation cell company.

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