Special Purpose Vehicle

Definition

Special Purpose Vehicle (Or Entity). A Special Purpose Vehicle (SPV) is set up specifically to issue a Security or securities. It is set up by a company or a group of companies for some purpose such as to create instruments that are off the company's balance sheet or to issue Participation Note for investors in another jurisdiction.

It is a bankruptcy-remote entity that is used to isolate or securitise assets. It has often held the off-balance sheet.

The SPV is formed for a specific reason and exists for a specific period of time and is then disbanded.

Further notes

Special Purpose Vehicles are also referred to as Bankruptcy remote entities, as they isolate financial risk.

For Participation Notes: slightly different purpose but the same kind of vehicle. The only investment made by the SPV is that they buy in the stock. These are the same kind of entity in all of the contexts in which they exist.