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 28^th 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.