SPV Considerations:

A Special Purpose Vehicle tends to be used for one (or a limited number of) objective(s), which differentiates SPVs from private investment funds.

For example: 

  • Deal-by-Deal Investment, to invest in unlisted companies and startups.
  • Holding Entity, for holding illiquid assets (such as fine art or yachts).

SPVs can either set up as a standalone entity, structured as a company, or as part of an umbrella structure, with one 'cell' (Segregated Portfolio) serving as a virtual SPV.

Comparing SPVs and SPCs:

The advantages of setting up a standalone SPV include: 

  • Cost (at Formation): A standalone entity will be cheaper on an individual basis as compared to an umbrella structure. 
  • Branding: A Segregated Portfolio ("SP") is required to be referred to in conjunction with the SPC structure (e.g. Global Ventures SPC acting solely for the account of PropTech UK SP).
  • Ease of Ownership Transfer: As a SPV is a standalone entity, the management/equity ownership of the structure can be easily transferred to a third-party (whereas SPs are ultimately attached to the SP). 

The advantages of setting up a Segregated Portfolio Company ("SPC")include: 

  • Cost (in terms of Multiple SPs): The setup of the SPC will initially be more expensive than setting up a standalone SPV. However, in the case of multiple SPs, there are immense savings (in terms of Cayman Islands-level disbursements, such as the Registered Office, Registered Agent and the Cayman Islands General Registry fees). 
  • Timeline: The setup of a SPV will take around 1–1.5 calendar weeks, whereas a SP can be formed rapidly in hours or half a day via a written resolution. 
  • Operational Efficiency: Managing many standalone SPVs can be operationally challenging (and expensive). With a SPC structure, the administrative & governance-related actions can be centralised. 
  • Scaling: On balance, from a costs (across multiple SPs) and timeline perspective, a Segregated Portfolio Company will allow SPC managers to rapidly scale and grow their operations. 

In conclusion, if the SPV is to be used for a new venture or a limited number will be set up, standalone may be suitable. 

However, where multiple SPVs are contemplated or the Sponsor/SPC Manager has aggressive or exponential growth plans, a SPC may prove to be interesting. 

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