|
A special purpose entity (SPE) (sometimes, especially in Europe, "special purpose vehicle") is a body corporate (usually a limited company of some type or, sometimes, a limited partnership) created to fulfill narrow, specific or temporary objectives, primarily to isolate financial risk, such as bankruptcy. A special purpose entity may be owned by one or more other entities and certain jurisdictions may require ownership by certain parties in specific percentages. Often it's important that the SPE not be owned by the entity on whose behalf the SPE is being set up (the sponsor). For example, in the context of a loan securitisation, if the SPE securitisation vehicle were owned or controlled by the bank whose loans were to be secured, the SPE would be consolidated with the rest of the bank's group for regulatory and accounting purposes, which would defeat the point of the securitisation. Therefore many SPEs are set up as 'orphan' companies with their shares settled on charitable trust and with professional directors provided by an administration company to ensure there is no connection with the sponsor.
Uses Some of the reasons for creating special purpose entities are: Accounting guidance Under US GAAP, a number of accounting standards apply to SPEs, most notably FIN46R that sets out the consolidation treatment of these entities. There are a number of other standards that apply to different transactions with SPEs. Under International Financial Reporting Standards(IFRS), the relevant standard is SIC12 (Consolidation—Special Purpose Entities). See also | ||||||||
|
| |||||||||
 |
|
| |