A Special Purpose Vehicle/Entity (“SPV”) is a business entity that has a special limited purpose. SPVs are often created to protect assets and separate liabilities of a parent or subsidiary company. Each SPV, which may share the same managing and sponsoring entity (an “SPV Organizer”), has its own operating structure, ownership structure, balance sheet, and is financially independent of any other SPV with the same SPV Organizer. While an SPV can be any entity type, they are usually either a limited liability company (LLC) or a limited partnership (LP).
An Assure SPV allows investors to pool funds into an SPV, allowing this investment vehicle to acquire and manage a specific asset (or multiple assets). Assure’s SPV product is a simple and flexible way to structure an investment fund.
Assure’s SPV in many ways mirrors the structure of SPV’s used by venture funds. They fill an allocation by finding additional investors and pooling them in a separate entity from the venture fund’s core fund. All capital is usually called upfront, eliminating the need for capital calls through the life of the fund. Other key features include:
• Removing audit and financial statement obligations;
• Allowing for unique waterfall provisions and economics specific to an investment;
• Giving investors the opportunity to choose specific investments;
• Allowing investors to pool capital to meet minimum investment requirements; and
• Providing the SPV sponsor with carried interest or other performance fees.
SPV Structure Provides Simplicity
The SPV structure simplifies an SPV Organizer’s investment strategy by providing straightforward entity set-up, concise and clear management/operational procedures, and comprehensive post-closing processing for each SPV Organizer’s investment fund.
a. Simplicity through the Series limited liability company Structure
Using a Series LLC saves time and money. Several states have made it possible to create series LLCs. Delaware was the first to allow series LLCs. Other states followed, including Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, Utah, Wisconsin, Washington D.C., and Puerto Rico. A series LLC is a type of limited liability company in which the certificate of formation for the “master” company provides for the establishment of one or more designated “series” entities, with each series’ assets, operations, debts, liabilities and obligations segregated and accounted for independently from the master and from other series formed pursuant to the master.
b. Easy and Economical Entity Set-Up Process
As part of Assure’s fund administration, an SPV Organizer receives professional and high-quality assistance in setting up an investment structure designed for volume. Assure provides experience and expertise in setting up and maintaining the administrative obligations of investment funds. Through Glassboard, Assure streamlines the entity set-up process by:
(1) filing a certificate of incorporation with the applicable state agencies;
(2) providing off-the-shelf operating agreements for regular or series LLCs;
(3) handling the administrative filings for the master, including maintenance of the registered agent, franchise tax fees, dissolution, and final tax reporting;
(4) providing off-the-shelf operating agreements for each series entity set-up under the master, specifying that each series is designed to invest in one or more portfolio company securities (each subsequent series becomes effective upon the creation of the series operating agreement through Glassboard).
Once the structure is set-up, Assure, through Glassboard is equipped to facilitate the creation of series investment entities at volume with a management structure that is efficient and cost-effective. If an SPV has unique needs, Assure is fully capable of working with the SPV Organizer and its counsel to modify the structure and documents, as necessary.
SPV Structure Provides Flexibility
SPV’s can be used to facilitate investments into various types of assets and the SPV structure can be modified to meet specific needs. For example, an SPV can be used to invest into startups, real estate, private funds, or other assets.
a. Asset Types
SPV’s are used to invest in various asset types, from startups raising seed capital, to the purchase of secondary shares in pre-IPO companies. Assure can administer SPV’s for various assets and asset classes, and the SPV structure is flexible to accommodate different investments.
b. SPV Structure
SPV Organizers can have unique needs, and an SPV provides the SPV Organizers to tailor the structure and economics to meet those needs. These include:
• Simple or complex waterfall provisions accounting for preferred returns, hurdles, and other profit allocations;
• Providing members with specific rights, such as redemption, voting, and pro-rata rights;
• Timing of distributions; and
• Regulatory requirements.
Assure has helped SPV Organizers form over 3,700 SPV’s, and we have seen almost every variation and asset class. The use of SPV’s is only growing. Assure is equipped to help you in every phase of the life of an SPV.
Assure is the leading provider of outsourced administrative and transaction services for the private investment marketplace. The company offers professional, high-quality services and innovative software that streamlines setting up, closing and managing back-office fund administration for angel and private asset investing. Assure’s experience and volume significantly outpaces other fund administrators. Their approach, which allows clients to structure and close deals faster, cheaper and with more transparency, helped pave the way for the ascendance of the “super angels,” special purpose vehicles and micro VCs. The company has worked with more than 200 clients, including AngelList, EquityZen, Equidate, Tribeca Angels, Bitwise and Village Global, structuring and closing over 3,500 deals with $2.0 billion assets under management. Assure offers a full suite of services including special purpose vehicle administration, fund accounting and fund taxes, cryptocurrency fund administration, Exempt Reporting Advisor (ERA) services, KYC/AML services, and 506(c) accreditation. For more information about Assure, visit www.assure.co.