I have been asked about "SPV's" being used to run a helicopter rental business. The client had no idea what they were. I have also not heard of an SPV and have no idea what it is. Can anybody explain what an SPV is and/or offer any advice on the best legal framework for a helicopter rental business.
Tim Moorhouse
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property developer
a new client recently asked whether he should use a spv for buying one specific property - I could think of no real benefit unless just the obtaining of planning permission before selling this property on would taint the trading status of his existing property development company
Special Purpose Vehicle
An SPV is a special purpose vehicle, ie an entity (usually, but not necessarily, a limited liability company) set up for a specific purpose. They are frequently used by large groups of companies in complex financial engineering transactions, with the aim of ring-fencing particular activities from those of the rest of the group.
In the past they were often used to take debt off balance sheet, but as accounting standards have developed (see eg IAS 27 and SIC-12) that result is considerably more difficult to achieve.
More commonly now they are used for limited-recourse financing packages. A limited company is set up to carry on a particular trading activity, and finance is arranged in that company specifically to fund that activity. If the trade is unsuccessful, that company might fail but it would not drag down the rest of the group. The finance provider would have no right to go after the shareholder for any shortfall.