An acronym for special purpose vehicle; an entity (legal entity) that is specially established to fulfill a certain narrow or temporary purpose, rather than to function as a full fledged, broad purpose entity. Such a special purpose includes risk considerations, collateralization, asset protection/ isolation, etc.
A special purpose vehicle (SPV) is typically a subsidiary set up by a parent to isolate or fence financial risk. It has a separate legal status that helps secure its assets and obligations even if the parent heads into any sort of financial distress such as bankruptcy.
SPVs take the form of a limited company or a limited partnership, among others. These entities can be formed by private companies or public entities.
SPVs usually develop, own and operate special projects or carry out specific functions while effectively isolating financial risk from that of the parent entity and mitigating bankruptcy risk, etc.
