A special purpose company is a company that issues securities that are subject to the rules and provisions of the Kuwait Capital Markets Authority, and carries out its activities based on a license issued by the authority, and is established by one person, and the number of founders or shareholders during the company’s existence does not exceed three persons, and it enjoys financial and independent legal personality. The company ends with the end of the purpose for which it was established.
The Kuwait Capital Markets Authority regulation stipulated several conditions for establishing special purpose companies, which are as follows:
The legal form of the company and its legal personality
The special purpose company shall take the form of a joint stock company, and the provisions of this form in the Companies Law shall apply to it unless there is a special provision in the company’s contract. The phrase (special purpose company) shall be added to the company’s name in all papers, publications and correspondences that the company carries out. It enjoys an independent legal personality from the date of issuing the license from the Capital Markets Authority.
The capital of a special purpose company
The capital allocated to the company or the incorporation expenses must not be less than 100 Kuwaiti dinars, and the company’s capital does not have to be proportional to the rights or obligations it transfers or the total value of the securities it issues.
Duration of partnership
The legislator required the special purpose companies to have a period not less for the sukuk or bonds they issue.
The purposes that the company may exercise
The Capital Markets Authority regulation restricted the purposes of special purpose companies to the purposes related to the issuance of bonds or sukuk as indicated in their contract. The regulation also prohibited the company from practicing any other purposes even if they were similar to its purposes, and the company shall be dissolved by the force of law once the purposes for which it was founded expire.
Preparing and writing a special purpose company contract
The contract of the special purpose company must be in writing and it is not required to be transcribed in an official instrument. The same provision applies to any amendment that occurs to the contract, and the company contract must be prepared according to the form approved by the Capital Markets Authority.
The regulations of the Kuwait Capital Markets Authority prohibited the founders from neglecting to include the mandatory data that the form required to be included in the company’s contract, and allowed them, outside the scope of the mandatory conditions, to take all or some of the provisions of the form or to add to it any other conditions.
No amendment may be made in the memorandum of association of a special purpose company without the approval of the Capital Markets Authority.
Obtaining a license from the Capital Markets Authority
To establish and carry out the activity of a special purpose company that issues securities, it is required to obtain a license from the Capital Markets Authority, and the company conducts its business without the need to issue a commercial license in accordance with the Law of Shops Licensing.
Registering the share capital of a special purpose company
The Capital Markets Authority regulation stipulates that the capital shares of special purpose companies are to be registered on the trust pipeline in the name of any of the persons whom the Capital Markets Authority approves of owning shares in the company’s capital, in particular the following:
- An authorized person or a person registered with the Authority and their subsidiaries.
- Law Office.
- Obligor or originator of bonds.
The Capital Markets Authority may reject any of these entities by a reasoned decision, if they do not have the required qualifications, experience or independence.
Establishment of the company for the purpose of issuing Sukuk
In the event the company is incorporated for the purpose of issuing sukuk, it may engage in one or more of the following activities:
- Issuing sukuk, acting as a trustee or agent, or performing all other activities or tasks related to issuing sukuk.
- Owning or possessing the sukuk assets or disposing of them on behalf of the sukuk holders.
- Managing and using the assets for which the sukuk were issued.
- Distribution of bond returns and their redemption value.
- Conclusion of contracts with the originator, obligor and other participants in the issuance.
- Any supporting activities that are complementary to the aforementioned activities.
- Any other activity approved by the Capital Markets Authority.
Incorporation of the company for the purpose of issuing bonds
In the event that the company is established for the purpose of issuing bonds, it may engage in one or more of the following activities:
- Issuing bonds, acting as a trustee or agent, or performing all other activities or tasks related to the issuance of bonds.
- Granting the obligor a loan equivalent to the total subscription amount.
- Distribution of bond returns and their redemption value.
- Any supporting activities that are complementary to the aforementioned activities.
- Any other activity approved by the Capital Markets Authority.
Company headquarters and employees
The company is exempted from the condition of having a fixed headquarters, provided that it has a chosen and fixed domicile in which notifications, correspondences and announcements are made, and it does not have employees working for it and a file with the Ministry of Social Affairs and Labor for the purpose of recruiting foreign workers.
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