Disclaimer & Affiliate disclosure: The information provided on this post is for general informational purposes only and should not be considered financial or legal advice. Always consult with a financial advisor or attorney before making any financial decisions. Some of the links in this post are affiliate links, meaning, at no additional cost to you, we will earn a commission if you click through and make a purchase.
A Special Purpose Vehicle, also known as a Special Purpose Entity, is a subsidiary set up by the parent firm to protect itself from financial risk.
This subsidiary is a legal entity in its own right, with its own financial statements.
Bankruptcy Remote Entity is another name for SPV. The SPV will not have any bankruptcy responsibilities towards itself if the parent business goes bankrupt.
It can be used to take on a risky venture while minimising the financial impact on the parent firm and its investors.
Isolation from bankruptcy, financial risk mitigation, convenience of conducting business, and capital raising are just a few of the advantages of SPVs.
Before investing, investors should examine the financials of parent firms and SPVs.
