What is a special purpose vehicle?


Quick Answer

A special purpose vehicle is a corporation or limited partnership created to achieve a narrow set of objectives. These objectives can involve transferring debt from a parent corporation, sheltering the parent company from financial liability and achieving anonymity in the ownership of assets.

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Full Answer

Special purpose vehicles are also known as special purpose entities. Rarely engaged in the creation of goods and services, special purpose vehicles function almost entirely as vessels for buying, selling and financing assets. They are structured to be bankruptcy-remote, which means that the liabilities and assets of the special purpose vehicle and parent company are exclusive of one another. If one declares bankruptcy, the assets of the other remain intact.

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