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Glossary:Special-purpose entity (SPE)

From Statistics Explained

(Redirected from Glossary:FVC)

A special-purpose entity, abbreviated as SPE and sometimes also called special-purpose vehicle (SPV) or financial vehicle corporation (FVC), is:

  • a legal entity (an enterprise or sometimes a limited partnership or joint venture) formally registered with a national authority and subject to the fiscal and other legal obligations of the economy in which it is resident,
  • established to perform specific functions limited in scope or time, with one or a few primary creditors,
  • having no or few non-financial assets and employees, little or no production or operations and sometimes no physical presence beyond a "brass plate" confirming its place of registration,
  • related to another corporation, often as a subsidiary and often resident in a territory other than the territory of residence of the related corporation (lacking any physical dimension, the residence of a SPE is determined by the economic territory under whose laws it is incorporated or registered),
  • its core business function consists of financing its group activities or holding assets and liabilities of its group, that is the channelling of funds from non-residents to other non-residents, and with only a minor role for managing and directing activities.

There can be different reasons for setting up a SPE:

  • to protect a company from financial risk, often in the context of a large project;
  • to separate different layers of equity infusion in complex financing operations;
  • to own and more easily dispose of assets and associated permits and rights;
  • to engage in a public-private partnership relying on a project-finance structure.

As there is no universally accepted definition of a special-purpose entity yet, not all abovementioned characteristics or reasons have to be apply to called such.

A multinational enterprise (MNE) often diversifies its investments geographically through a SPE; examples are financing subsidiaries, conduits, holding companies, shell companies, shelf companies and brass-plate companies.

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