Special Purpose Vehicle

Description of Special Purpose Vehicle. Explanation.

Definition Special Purpose Vehicle. Description.

A Special Purpose Vehicle (SPV) is a company 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, there is no difference between a subsidiary and an SPV.
 

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

• Conducting large and very risky projects without putting the parent firm at risk.

• Operate 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.

• Aircraft and ship financing.

• 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.

Also called Special Purpose Entity.

Compare with: Tax Haven  |  Joint-Venture  |  Start-up Company  |  Ring Fencing  |  Acquisition Integration Approaches  |  Strategic Alliance  |  Spin-Off  |  Divestiture

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End of description Special Purpose Vehicle. An explanation.