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MFSA Securitisation Cell Companies Regulations

MFSA Releases Securitisation Cell Companies Regulations

One of the most anticipated legislative enactments has been the Securitisation Cell Companies Regulations, enacted on the 28th November 2015, and welcomed as an important milestone in the securitization and reinsurance industry.

At the outset, a Securitisation Cell Company (SCC) is a body corporation constituted or converted as such, with the function of segregating the cellular assets of the Company. An SCC is a single legal person, yet the cell created by an SCC, does not create, a legal person separate from the SCC. In a way the creation of a cell within an SCC, is not dissimilar to the creation of a cell in a Protected Cell Company (PCC) – also used in the insurance industry.

However, the main thrust for an SCC is that of creating a legal framework seeking to achieve the following:

  • Enter into securitization transactions in furtherance and pursuant to the Securitisation Act – Chapter 484 of the Laws of Malta; or
  • Assume risks as a special purpose vehicle for the purpose of reinsurance, from a transferring undertaking through the ceding of reinsurance contracts.

There are however, a series of set rules, for SCCs to abide by. At the outset:

  • SCC are limited in their scope and contractual abilities by their non-cellular assets. SCCs may not enter into any forms of securitization transaction or risk transfer arrangements beyond their non-cellular assets;
  • The Cellular assets of a cell must be held as separate and identifiable from other assets and liabilities of other cells. The cellular assets shall comprise the proceeds of a cell, share capital, attributable reserves etc;

Effectively, this means that the assets of a cell are not available to the creditors of other cells. Creditors have no recourse to the assets of other cells, nor may they enforce their rights vis-à-vis non-cellular assets. The same principle prevails in the case of insolvency. The insolvency attributable to one cell, has no bearing, nor spill-over effect towards the solvency of other cells.

  • Since, a cell is incapable of separate legal personality from the SCC, it may only come into existence, through a board resolution of the directors of the SCC.
  • Irrespective of whether the cell shall act as a securitization vehicle, or a reinsurance SPV, the prior consent of the MFSA shall be always necessary.
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