Establishing a Special Purpose Vehicle (SPV) in Hong Kong
Usual form of SPV and how it is set up
A special purpose vehicle (“SPV”) may take the form of a corporation, trust, partnership or unincorporated entity. The Companies Ordinance provides a legal framework for establishing companies and this includes SPVs.
Legal status of SPV
A SPV incorporated in Hong Kong has its own legal personality and, when used, is typically incorporated as an orphan, that is, its shares are held on trust for charity.
Regulatory requirements that apply to SPVs
There are no particular regulatory requirements which a SPV needs to meet in and of itself. The structure of the transaction dictates whether any regulatory approvals or other licences are required.
The choice of SPV can be made for a number of reasons, including, for example, tax, investor preference, regulatory or licensing requirements and the jurisdiction in which the counterparties to the transaction are located. SPVs are usually established to undertake activities, for example, trade, commerce, craftsmanship, a profession, a calling or other activity carried on for the purposes of gain.
A vehicle may be created to accomplish a narrow and well-defined objective (e.g., to effect a lease, research and development activities or a securitisation of financial assets).
SPV is usually owned
SPVs often are created with legal arrangements that impose limits on the decision-making powers of their governing board, trustee or management over the operations of the SPV. Frequently, these provisions specify that the policy guiding the ongoing activities of the SPV cannot be modified, other than perhaps by its creator or sponsor.
The sponsor (or entity on whose behalf a SPV was created) or the creator may in substance control the SPV.
If you would like to know more, please contact Bestar.