Setting up an SPV
When expanding and operating internationally you may find it useful to set up an SPV or temporary entity for the purpose of acquiring and/or financing specific assets.
A Special Purpose Vehicle (SPV) is a separate legal entity created for a specific business reason – such as isolating financial risk from parent company/s or creating a temporary company to manage a specific asset. Each SPV has its own legal status and its own assets and liabilities, so can continue operating even if the parent company has issues.
SPVs are used for a number of reasons (including risk sharing, securitisation of loans/debt, transferring assets or for property sales, ease sale of assets included in the SPV, liability protection), and their typical legal forms are partnerships, limited partnerships, trusts or joint ventures.
Over the years there’s been a distinct rise in the use of SPVs and it’s easy to understand why. They not only provide legal and financial protection for the parent company, but they’re (relatively) easy to set up, they have direct ownership of specific assets, and can provide tax savings.
The SPV launch process varies by jurisdiction, making some locations much more difficult to launch in than others. Implementing an SPV, in your home country or abroad, can be more complex than you think – each country has its own rigid rules and processes to follow. Further, country-specific regulations and compliance can vary greatly, and many countries will expect strong governance and transparent reporting around SPVs.
Alongside the benefits of SPVs, though, are some risks to be aware of:
It’s also important to bear in mind, regardless of the jurisdiction you’re considering, that complying with customer due diligence, Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations can be a lengthy, time-consuming process and you may need to source all kinds of documentation and information upfront.
Regulatory changes can cause significant headaches for companies using SPVs
SPVs don’t share the reputation of the parent company, therefore financing can be more challenging
SPVs generally have lower access to capital as they don’t have the same capital flow as the parent company
Ongoing Administration
Multiple international SPVs means an exponential increase in the required accounting, administration, and simply managing ongoing operations; managing multiple SPVs will become increasingly difficult to juggle on a daily basis. When focusing on your international expansion, you also need to address regulatory and compliance needs, and ensure strong due diligence. This can very quickly become complex, particularly when there’s more than one jurisdiction involved.
Working with a trusted global third-party partner can be hugely advantageous. You need a team who are familiar with your chosen jurisdiction/s, have strong expertise in SPV administration across various different sectors, and know how to get them set up as efficiently and effectively as possible. You’ll also need experienced and knowledgeable local directors for both guidance and substance, and your global partner should be able to help source trusted director candidates.
Find a provider that’ll not only help you decide the best type of structure to suit your needs, but is knowledgeable on local tax requirements, has strong relationships with other vendors to help coordinate (i.e. law firms, regulators, banks, etc.) and can produce timely reports and documentation that you need to make the launch process (and the ongoing administration of your SPV) as efficient and seamless as possible.
Auxadi are experts when it comes to SPV administration. We offer an end-to-end approach for the launch and ongoing management of your SPV/s across a wide variety of sectors and jurisdictions, and you can access the data on all your SPVs, in real time, through our unique, purpose-built MySPV technology platform.
We’re on hand to take care of the time consuming regulatory, tax, and administrative tasks that your SPV requires, and we’ll provide timely and accurate consolidated reporting on all your entities. And, no matter the country you’re looking to enter, we guarantee the same quality of output and the same excellence of service. We guarantee to make your life easier.
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