What is an SPV?

A special purpose vehicle (SPV), also known as a special purpose entity (SPE), is a legal entity that’s created for a specific business or investment purpose, such as holding and managing assets, facilitating complex business deals, ring-fencing liabilities, and isolating associated risks.

An SPV can help protect the overall financial health of the company that established it.

An SPV is typically established as a separate legal entity, such as a corporation, limited liability company (LLC), or trust. Many are also set up to be “bankruptcy remote,” so any financial turmoil from the parent company doesn’t directly impact the assets held within the SPV.

In some cases, SPVs are structured in such a way as to take advantage of favorable tax treatment for specific transactions.

SPVs are commonly used to hold and manage specific assets like real estate, loans, and intellectual property. They’re also commonly used in complex financing structures.

Whatever the use case, SPVs must adhere to regulatory requirements and legal frameworks based on their jurisdiction and the nature of the transactions in which they’re involved.

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