Special Purpose Vehicle

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What is a Special Purpose Vehicle?

A Special Purpose Vehicle (SPV) is a company / legal entity with a limited purpose or focus. It is created by a corporation to conduct a specific or temporary activity. It is normally, but not necessarily, owned almost entirely by the sponsoring corporation. It must be distanced from the sponsor both in terms of management and ownership (not 100%), because if the SPV were to be owned or controlled by the sponsor, the SPV would be consolidated with the rest of the firms for regulatory, accounting, and bankruptcy purposes and there would be no difference between a subsidiary and an SPV.

Usages of Special Purpose Vehicles. Applications

Some common uses of such SPVs are (depending on the jurisdiction):

• Conducting large and risky projects without putting the parent firm at risk.
• Off-Balance Sheet Financing.
• Operating in ways that are "barely legal".
• A special Joint-Venture for sharing intellectual property.
• Securitizing loan portfolios of banks.
• Securitizing financial assets such as auto loans, credit card and hire purchase receivables, finance leases, aircraft operating leases, real estate mortgages.
• Owning, transferring or financing a single asset with its associated permits and contract rights (such as an aircraft, a ship, a building or a factory).
• Separating different layers of equity infusion in complex financings.
• Protection from tax or legal consequences of the activities of the SPV (reinvoicing subsidiaries and offshore insurance companies).

Many SPVs are incorporated in countries such as the Cayman Islands, The Channel Islands, Luxembourg, etc.

Establishing a Special Purpose Vehicle. Process

The process of creating a special purpose vehicle is typically handled by lawyers and accountants who specialize in this type of activities. They provide specialist know-how to ensure that the entire process to set up the SPV is handled in a way which complies with the applicable laws.

Because an SPV is a legal entity, the exact laws, rules and/ or guidelines that are applicable will differ per jurisdiction.

Also called Special Purpose Entity or Special Purpose Corporation.

Forum Forum about Special Purpose Vehicles. 🔥 Special Purpose Vehicle versus Structured Investment Vehicle and Structured Financial Operating Company What is the difference between an SPV, an SIV (Structured Investment Vehicle) and a Structured Financial Operating Company (SFOC)? Is the difference only in the length of maturity?... 16   Protect Legitimate Special Purpose Vehicles SPVs have come on the spotlight of anti-money laundering legislation. There is a need to protect legitimate cross-border SPVs from anti-money legislations and scrutiny.... 6   Examples of a Special Purpose Vehicle Can you give an example of a special purpose vehicle? Many thanks.... 5   Special Purpose Vehicles in Risk Management SPV's seem to be more active within the scope of risk management than anywhere else in the business. So can SPV's be considered a form of risk outsourcing?... 4   Abuse of Special Purpose Vehicles A vehicle that can cause much mayhem once control is lost by the steering party. In developing countries some governments have found this vehicle suitable to carry out so called developmental work. Th... 3   Special Purpose Vehicles in Projects Could someone please describe SPVs within a project management context? How do SPVs enhance project management work?... 2   How to Set Up a Special Purpose Vehicle? How to form a special purpose vehicle? What are the process steps? Thanks for any thoughts...... 2   1 comments Start a new topic about Special Purpose Vehicles Sign up for free

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Best Practices The best, top-rated topics about Special Purpose Vehicles. Here you will find the most valuable ideas and practical suggestions. 🥇 Special Purpose Vehicle Regulations What are the main rules and regulations for special purpose vehicles? Thanks...... 9   5 comments

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