A Special Purpose Vehicle or an SPV is a corporate entity used by a parent company for independent ownership, management, and funding, as well as protection of its projects from operational insolvencies.
For example, in the event of bankruptcy, an SPV secures obligations of the parent company. This legal function is defined by a specially designed asset/liability structure.
Typical SPV uses include:
Securitization – can be used by an originating party to securitize loans or other receivables by creating an SPV, which purchases these assets by issuing debt, secured on their underlying assets.
Real Estate – used to acquire title to real property and limit resource of mortgage lenders depending on the location of the asset.
Financing – used to ring-fence investments, permitting financing without increasing the debt level of the parent company and/or exposing its assets to cross-liabilities.
Asset transfer – Can be used to transfer assets along with associated material agreements, which may permit the transfer of all or part of the ownership of the enterprise while keeping intact material agreements, which may be necessary to maintain the value of the asset.
Risk sharing – Can be used to raise capital at favorable rates in certain situations, with creditworthiness determined by the available collateral of the SPV, rather than the credit rating of the parent company.
IP – Used to separate valuable IPs into a standalone SPVs that have minimal liabilities and to raise funds and enter into license agreements with third parties.
Abu Dhabi Global Markets SPVs – Setup Benefits
The ADGM SPV regime is designed and implemented as a flexible, robust, simple and cost-effective solution for businesses, seeking to improve their operational and financial structure. Transparent fee structure and efficient due diligence process make ADGM a preferred jurisdiction choice for those with SPV requirements.
One of the main benefits of an SPV with Abu Dhabi Global Markets is an option to register a ‘Restricted Scope Company’ SPV where public disclosure is limited (available to those clients who meet certain criteria).
The ADGM SPV regime is underpinned by ADGM’s international legal and regulatory platform, its independent courts with outstanding legislation and common law* judges, and a favorable tax environment.
In addition, ADGM allows the use of an agent/ corporate service provider to manage the SPV and to provide the registered office address, eliminating the need to have a physical office space.
Looking to find out more about SPV, and how it may be useful for your own business?
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