The Securitisation Cell Companies Regulations (S.L. 386.16) which were enacted on the 28th November 2014 provide for an effective and robust legal framework for segregation of different sets of assets and risk instrument within a single special purpose vehicle, the Securitisation Cell Company, permitting the creation of multiple securitisation transactions without incurring any risk of cross-contamination between the different creditors and investors of the individual cells.
To date the Maltese regulator, the Malta Financial Services Authority has 36 notified securitisation vehicles, and one reinsurance vehicle.Furthermore 17 cells have been granted a licence.
Key features of Securitisation Cell Companies
A Securitisation Cell Company (SCC) is a company constituted or converted as such and creating within itself one or more cells for the purposes of segregating and protecting the cellular assets of the company. A SCC is at all times a single legal person and the creation by a SCC of a cell does not create, in respect of that cell, a legal person separate from the SCC.
A SCC can be set up either for the purpose of:
- Entering into securitisation transactions in accordance with the Securitisation Act (Cap. 484 of the Laws of Malta); or
- Assuming risks as a reinsurance special purpose vehicle from a ceding undertaking through reinsurance contracts or assuming insurance risks through similar arrangements in accordance with the Reinsurance Special Purpose Vehicles Regulations (S.L. 403.19).
It is important to note that a SCC may not enter into securitisation transactions or risk transfer arrangements in respect of its non-cellular assets. of assets
Segregation and insulation
The underlying principle of a SCC is the 'insulation' of assets and liabilities within a cell. Cellular assets of a particular cell must be separate and identifiable from other cellular assets and non-cellular assets of the SCC. The cellular assets of a cell company comprise the assets of the company attributable to the cells of the company which shall comprise: assets represented by the proceeds of a cell, share capital and reserves attributable to the cell, and all other assets attributable to the cell.
The assets and liabilities of a cell are segregated from those of other cells and those assets are not available to creditors of other cells. A creditor of a cell has rights to the assets of that particular cell only and has no recourse to the assets of other cells or the non-cellular assets. Where any liability arises which is attributable to a particular cell of the SCC, the cellular assets attributable to that cell are those exclusively used to satisfy the liability. Any liability not attributable to a particular cell of a SCC is the liability solely of the company's non-cellular assets, provided that apportionments may be made out of the assets attributable to the individual cells towards the costs of the day-to-day administration of the SCC. Furthermore, in the case of insolvency, the insolvency of one cell has no effect on the solvency of the other cells.
Creation of Cells
A cell is established by means of a resolution of the board of directors of the SCC resolving to establish a cell for the purpose of entering into transactions mentioned above. An SCC may issue cellular shares in respect of each cell which it creates, however no minimum capital requirements for the establishment of a cell apply. In the case of an SCC authorised to enter into insurance-linked securities transactions, prior regulatory approval for the establishment of the cell is required.
A SCC established to act as a Securitisation Vehicle prior to commencing business in respect of any cell, is required to give notice to the MFSA in terms of the Securitisation Act whilst a SCC acting as a 'public securitisation vehicle' requires the MFSA's prior approval prior to creating a cell.
A SCC may only carry on business as a reinsurance special purpose vehicle with the prior authorisation of the MFSA in terms of the Reinsurance Special Purpose Vehicles Regulations, and a cell may only be created with the prior approval of the MFSA.
Management of Cells
The management of individual cells is vested in the board of directors of the core, which would be common to the SCC. It is the practice that the shareholders of each cell would nominate a member on the board of directors of the SCC.