A special purpose company (SPC), also known as a special purpose vehicle (SPV) or special purpose entity (SPE), is a legal entity that is created for a specific and limited purpose. It is typically established to isolate financial risk, protect assets, or facilitate complex financial transactions. SPCs are commonly used in various industries and sectors, including aviation, finance, real estate, securitization, and project financing.
SPC's are frequently used for aircraft financing. In Fleets Analyzer they can be identified by filtering on Owner Company Type = 'Special Purpose Company', and/or including the Owner Company Type column in a search.
Here are some key characteristics of a special purpose company:
1. Limited Purpose: An SPC is formed with a specific objective or purpose in mind. This could include holding certain assets, managing risks associated with particular projects or investments, raising capital through securitization, or facilitating mergers and acquisitions.
2. Legal Separation: One of the primary reasons for creating an SPC is to legally separate its activities from those of its parent company or other entities involved in the transaction. This separation helps protect the parent company's assets from potential liabilities arising from the SPC's operations.
3. Ring-Fencing Assets and Liabilities: The assets owned by an SPC are typically ring-fenced from the parent company's balance sheet and other affiliated entities' obligations. Similarly, any liabilities incurred by the SPC are generally limited to its own resources rather than affecting the broader corporate structure.
4. Risk Isolation: By establishing an SPC, companies can isolate specific risks associated with certain projects or investments without exposing their entire business to those risks. This allows them to manage risk more effectively while maintaining overall corporate stability.
5. Tax Efficiency: In some cases, setting up an SPC may provide tax advantages depending on local regulations and jurisdictions where it operates. Companies often establish these entities in locations that offer favourable tax treatment for specific types of transactions.
6. Financing Flexibility: Special purpose companies can be used to raise funds through debt issuance or securitization structures such as asset-backed securities (ABS) or collateralized debt obligations (CDOs). These structures allow companies to access capital markets more efficiently by packaging their assets into tradable securities.
7. Regulatory Compliance: Depending on the industry and jurisdiction involved, there may be regulatory requirements governing the establishment and operation of special purpose companies. Compliance with these regulations ensures transparency and accountability in their activities.