Consult with client to help determine optimal SPV or fund structure and setup.
• Form regular or series LLC or LP, as appropriate.
• Register entity in the applicable state.
• Obtain an EIN on behalf of the entity.
• File a foreign entity registration in all applicable states.
• Hire an effective registered agent for the entity.
• Provide useful template SPV of fund documents, including operating agreement/ limited partnership agreement, PPM and subscription agreement.
SPV Fund Financing
• As needed, review investment documents and suggest adjustments or side letters.
• Set up a bank account to aggregate commitments, as needed.
• Record the receipt of documentation and wire transfers from investors.
• Maintain files for each investor, create and maintain a ledger of investor information.
• Track investor ownership percentages and expense allocations.
• As needed, assist with multiple closings.
SPV Fund Investing
• Assist in closing transactions by obtaining and aggregating executed documents and transmitting capital to company or sponsor.
• Make appropriate book entries reflecting the use the proceeds from the sale of SPV or fund interests to investors.
• Account for the wiring of funds to the portfolio companies or sponsors.
• As needed, assist with follow-up (pro rata) investments.
SPV Special Purpose Vehicle
What is a Special Purpose Vehicle?
A special purpose vehicle (SPV) is a subsidiary of a company which is protected from the parent company's financial risk. It is a legal entity created for a limited business acquisition or transaction, or it can be used as a funding structure. It is sometimes called a special purpose entity (SPE).
An SPV has assets, liabilities, and a legal status outside of the obligations of the parent company. The primary purpose of an SPV is to carry out a specific business activity outside of the parent company, therein protecting the parent company from risks such as bankruptcy and insolvency issues.
Why is a Special Purpose Vehicle Important?
SPVs are formed as limited partnerships, trusts, corporations, or limited liability companies. They adopt the legal protections of the particular business entity. An SPV is created for independent ownership, management, and funding of a company.
An SPV, for example, can be created to produce a lease that is expensed on the company's income statement rather than recorded as a liability on the balance sheet. An SPV allows companies to secure assets, isolate assets, create and invest in joint ventures, isolate corporate assets, and perform any other specific financial transactions.
Reasons to Consider Using Special Purposes Vehicles
Has a single purpose -- It is used to carry out financial transactions, such as asset purchases, joint ventures, or to isolate the company's assets or operations from the parent company. Special purpose vehicles can be on the book or off-book entities.
Protects funds and assets -- Allows the parent company to maintain improved management of its assets and liabilities. It also lowers the parent company's risks, acquires a higher credit rating, lowers funding costs, and gives greater financial flexibility with lower capital requirements.
Protects against bankruptcy and creditors --Allows the parent company to make high-risk financial transactions or future investments without endangering the solvency of the entire company. If the special purpose vehicle loses the investment or files for bankruptcy, the actions do not affect the parent company.
Easy financing options -- Provides a way for a company to raise cash and to transfer risky debts
Less statutory requirements -They are not exposed to the same regulations as the parent company, which offers the SPV more freedom to operate.
Investment Strategy -- Allows the parent company to feel out an investment opportunity before the parent company jumps into the investment. It could return double yields or limits the parent company's risk depending on how the investment is fairing.
Gives the parent company options -- Can keep projects secret from competitors or parent company investors who may not approve of the particular transaction or asset allocation.