A special purpose vehicle (SPV) or a special purpose entity (SPE) is a legal entity created by a (sponsoring) firm for a specific and limited purpose: To house a risk, to carry out some transactions, to own assets, to minimize risks and to maximize profits for the sponsoring firm, sometimes by taking advantage of differences in the legal, regulatory or accounting environment.
There are usually no offices, management or employees. SPEs often consist of a set of legal documents. They can be financing subsidiaries, or a holding company, a limited liability company, a new corporation, a trust, or a partnership. Only imagination is the limit.
SPEs are usually “bankruptcy remote”. If the sponsoring firm has financial problems, its creditors cannot seize the assets of the SPE.
Are special purpose vehicles (SPVs) legal?
SPVs are perfectly legal, and almost all major (and well respected) corporations use them. It is not the … Read More