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Special Purpose Structures

Special Purpose Vehicles (SPV’s) or Special Purpose Entities (SPE’s) are usually established solely for a particular purpose, transaction or series of transactions rather than for the benefit of a person, charity or a corporation. The purpose can be virtually anything but SPV’s are most often created for the sole purpose of acquiring certain assets or derivative exposures and issuing liabilities that are thereby linked solely to those assets or exposures.

Special purpose vehicles (SPVs) can be established to contain intellectual property (IP) supporting brands. Intangible Business values intellectual property for transfers to special purpose structures, and as a basis for subsequent charging by special purpose structures for the use of the IP.

Placing a brand in special purpose structures can have a number of benefits. The management of the IP can be improved greatly as it helps focus on the commercial development of the brand itself. This is articulated quite directly as different business units will have to pay for the use of the brand. This requires them to appreciate the brand more as they are directly paying for the it’s use.

Special purpose structures can also be used to ring-fence intellectual property, examples being when it is used as security to raise finance and to isolate it from other business risks such as insolvency. Another use is to transfer IP value to an SPV which is then used as security by pension funds to offset  pension deficits. Another benefit of such special purpose vehicles is that there can be tax benefits depending on the tax rules for taxing income and allowing IP amortisation.

SPV’s are most often limited liability companies or limited partnerships but, more and more, special purpose trusts are used and Jersey has specific legislation catering for “purpose” trusts.

 Special Purpose Structures have also been used in numerous varieties of commercial transactions including securitisations, ship and aircraft financing and employee share ownership plans.

The purpose of locating these legal entities offshore is often to take advantage of fiscal neutrality when ownership of the main client operating subsidiaries is multi-national. In addition to reducing tax, SPV’s can also remove assets or liabilities from balance sheets, transfer risk and (in securitisations) allow the effective sale of future cash flows.