Setting up an SPV is all about location, location, location

Special purpose vehicles (SPVs) have become a go-to corporate entity for companies that want to isolate financial risk, ring fence assets or raise capital. As separate legal identities, they let businesses experiment with transactions that might otherwise be considered risky or unpredictable. Due to these advantages, they have become a key business tool.

But – like other corporate entities – the success or otherwise of an SPV is not just about what you create or why, but also where. Some jurisdictions don’t allow the incorporation of SPVs at all, and those that do have different strengths and specialisms.

Here, Jason Gerlis, Ocorian’s Global Head of Corporate Services, explains why location really does matter in entity creation and compares the appeal of some of the world’s most popular SPV domiciles.

Rules, obligations and SPVs

To set up an SPV anywhere you’ll likely have to appoint directors and shareholders, prepare company details and draft legal documents. You’ll almost certainly have to pay a registration fee.

If the basics of entity creation are much the same around the world, other factors around choosing location are not. Jurisdictions have different rules and obligations, and often different tax treatments for corporate entities. The location of your HQ, the purpose of your SPV and the preferences of your investors also need to be taken into account.

There’s a lot to consider. SPV structures differ between locations, and so does the rigour of local regulatory regimes. Depending on the jurisdiction, reporting obligations might include a requirement to file accounts, undergo audits and hold an AGM. Alternatively, there might be hardly any reporting obligations.

The time to incorporation can also vary, from 24 hours in some jurisdictions with ‘express’ services to 10 business days elsewhere. A company secretary is required in some locations but not in others.

13 key SPV jurisdictions

When choosing a jurisdiction for your SPV, it is important to consider relative strengths. Some jurisdictions have hard-won reputations for housing SPVs with a certain structure or function, offering specialist local expertise and a complementary regulatory framework. Others offer easier access to particular markets. In every case, the size and sophistication of the local service provider ecosystem should be a key consideration.

Here are 13 popular SPV locations and some of their strengths:

Ireland

Ireland is renowned as an attractive jurisdiction for US-based businesses and fund managers wanting a foothold in the European Union, and is also popular for companies raising finance and listing debt. It currently houses nearly 4,000 SPVs in total. It offers access to EU passporting for funds and a strong regulatory environment that reassures overseas investors and companies, among other advantages. 

Luxembourg

Luxembourg offers a tax-friendly environment, including double taxation agreements with the US, China and 84 other countries worldwide. International businesses set up entities in Luxembourg to minimise their tax burden and optimise their financial operations, and because of the country’s reputation as a sophisticated global financial centre. The country’s financial prowess means many SPVs are focused on raising investment and capital.

Cayman Islands

Cayman’s appeal rests on tax neutrality, a light-touch regulatory regime and the ease of incorporation. It is a major centre for SPVs of all kinds, with many used to facilitate structured finance and asset-based finance transactions. Cayman’s robust legal system is based on English common law, and it boasts a wide specialist service provider ecosystem. 

Delaware

Delaware is the jurisdiction of choice for businesses looking to establish a presence in the US. It has a long-established reputation as a major corporate hub. Investors and lenders see Delaware as a stable, trusted jurisdiction, with flexible governance requirements and an advantageous tax treatment, among other benefits.

UK

London has been a centre of finance since the 17th century, and the UK has a long-established reputation for high standards of corporate governance and transparency. SPVs are created for a wide range of purposes, though many involve real estate or infrastructure investment. A UK SPV is considered a robust vehicle for ring-fencing risk.

Bermuda

Bermuda has become known as a centre for entities that house insurance-linked securities, though SPVs are also set up as holding companies that serve a range of industries, from energy and mining to aviation and retail. Bermuda is a tax neutral jurisdiction and, as a British Overseas Territory, enjoys a reputation for strong and stable governance.

UAE

While SPVs can serve numerous purposes in UAE, they are most commonly used for the structuring of real estate investments, capital raising and intellectual property management. UAE is home to two of the world’s most sophisticated financial services centres – the Dubai International Finance Centre (DIFC), and Abu Dhabi Global Market (ADGM) – and offers a well-established regulatory framework.

Mauritius

Mauritius has developed into a jurisdiction of choice for fund managers and investors looking to establish a presence in Africa. The country is ranked highly for market transparency, the robustness of its regulatory environment and favourable tax laws, and is regularly used for structuring vehicles that facilitate impact funding across the continent.

Jersey

Jersey is a well-established and well-located SPV domicile with strong links to major financial centres in the UK and EU. It offers strong and consistent government, robust regulations and a long track record in fiduciary services, alongside tax neutrality for the vast majority of entities. A wide range of company structures means businesses can usually find exactly the right fit for their needs.

Netherlands

Companies establish SPVs in the Netherlands for many reasons, but the nation has a reputation for supporting innovative businesses in life sciences, pharmaceuticals and agrifood. It is also a leading player in Europe’s march to sustainability. A favourable corporate tax structure and a number of specific incentives encourage R&D.

Hong Kong

Hong Kong is an obvious choice of SPV domicile for companies that are looking for a gateway to China, and for Chinese companies looking to international markets. It is a full-service financial centre in the middle of Southeast Asia, with a large ecosystem of specialists in Chinese corporate law and business culture.

SPVs are often set up to channel international investment into Chinese markets.

Singapore

Singapore is seen as a gateway to the wider Asia-Pacific, and it consistently ranks as one of the world’s most business-friendly locations. With a low corporate tax rate and a reputation as a highly stable and well-regulated jurisdiction, Singapore is a go-to domicile for international investors looking to establish a presence in the region.

British Virgin Islands

The British Virgin Islands (BVI) is a long-established jurisdiction for investments in emerging markets. The islands are home to nearly 400,000 active companies, and SPVs are generally established as equity holding entities. A British Overseas Territory, BVI operates a legal framework based on English Common law and offers a high degree of commercial confidentiality and privacy to investors.

You can find a handy comparison table for the main SPV jurisdictions in our full jurisdictional guide.

Service providers make the difference

All of these jurisdictions have well-developed service provider ecosystems. That’s important because most companies outsource at least some of the work of establishing and maintaining SPVs to third-party providers. It makes life a lot easier, reducing the complexity of SPV management and the strain on in-house resources.

Wherever you choose to domicile your corporate entities, look for a service provider with the experience, scale and cross-border expertise to meet your needs. Ocorian offers a complete entity oversight and administration service from key jurisdictions around the world. We can take over the establishment and management of your SPV completely or fill in gaps in your in-house provision.

In short, Ocorian makes SPVs easier to set up, manage and dissolve, wherever you operate in the world. Contact us for more information.

Download our Jurisdictional Guide to SPVs below: