What is a Special Vehicle Purpose (SPV)?
What is SPV?
A Special-Purpose Vehicle, or SPV, is a separate legal entity, typically in the form of private limited company in Singapore, that is created for a specific, narrow purpose – usually for investment.
It has gained popularity amongst startups and VCs at the funding stage.
Benefits of using a SPV
From the startup side
As the company on the receiving end of a SPV investment, having it as an investment vehicle means that the company technically only needs to deal with one investor (ie the SPV company).
This can prevent unnecessary influence from investors on day-to-day basis.
Moreove, startups can attract higher number of investors who are may be more risk averse, as the sum needed is much lower compared to typical funding session.
From the investor side
- Risk sharing: creating an SPV allows companies or individuals to legally isolate the risks of an investment, and then share this risk with other investors. Many angel investors may also feel more comfortable with a SPV that is headed by a manager with experience in the field.
- Asset transfer: certain types of assets can be hard and tedious to transfer. By creating a SPV that owns an entity’s assets, transferring assets can be done by selling it as a whole.
- Property sale: if the taxes on property sales are higher than that of the capital gain, a company may create a SPV that will own the properties for sale. It will allow them to sell the investment vehicle instead of the properties and pay tax on the capital gain instead of the property sales tax.
How do you create a SPV?
Legally, it can be limited partnerships, limited liability companies, trusts or corporations.
There are no special requirements to create a SPV in Singapore that differentiate it from incorporating any other company as it’s merely a vehicle- it all comes down to the intent of the shareholders about how they wish to use it.