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Opening Bank Account For Special Purpose Vehicle (SPV) [GLOBAL GUIDE]

If you are looking to open a bank account for Special Purpose Vehicle (SPV) then keep reading on, as we are going to give a step by step guide.


A Special Purpose Vehicle (SPV), also known as a Special Purpose Entity (SPE), is a legal entity created for a specific, often singular, and well-defined purpose. SPVs are typically established to isolate and protect assets, risks, or financial obligations from the parent company, thus providing a degree of financial and legal separation.


Why Special Purpose Vehicles (SPVs) Are Popular?


SPVs serve various purposes in business and finance, helping entities to perform transactions, separate cash flows, or risk associated to new or existing ventures. Below we discuss the most common reasons why SPVs are so popular:


Risk isolation: They are used to isolate and manage specific risks associated with a project or financial transaction. By segregating these risks, the SPV shields the parent company from the direct impact of any potential failure or default. Moreover, SPVs are easier to close down, once the project or investment transaction is completed.


Securitisation: SPVs are frequently used in securitization transactions. They purchase and hold financial assets (such as loans, mortgages, or receivables) and then issue securities backed by these assets to investors, such as private bonds. This process helps in diversifying risk or separating certain assets from the parent company’s balance sheet. In addition, SPV can be used to implement a certain financial transaction, where several investors are taking part in the investment process and SPV becomes a tool to enable a certain structure that could not be achieved on a parent company level, due to balance sheet complexities.


Real estate: SPVs are commonly used in real estate to separate investment risks in different properties or projects. They can help in obtaining financing, managing risk, and ensuring that the financial performance of one property doesn't affect the others within the portfolio.


Project finance: For large projects like infrastructure development or construction, SPVs are often used to manage the finances, risks, and ownership structures associated with the project. This helps in attracting investors and managing the project's finances independently.


Tax: Some companies use SPVs for tax planning or to take advantage of favorable tax treatments available in specific jurisdictions. Often, jurisdictions such as Gibraltar, BVI, Cayman Islands, Panama, become home for SPVs.



What About Regulations Of SPVs?


The regulations governing Special Purpose Vehicles (SPVs) can vary significantly by country and region. These entities often fall under the purview of financial, corporate, and securities laws that are in place to govern their formation, activities, and reporting requirements.


Regulations often stipulate the allowable activities and purposes for which SPVs can be established. They typically require that the SPV's purpose be specific and well-defined, such as securitization, project financing, or risk isolation. Later on, well done structure and availability of information will help in due diligence process with banking institutions, especially for account opening.


Moreover, regulatory bodies such as the Securities and Exchange Commission (SEC) in the United States or the Financial Conduct Authority (FCA) in the UK might oversee SPVs to ensure compliance with the applicable laws and regulations, especially of SPVs are going to serve investors, end clients, that might be vulnerable to financial risks associated to the SPVs activities.


Opening Bank Account For SPV. Step By Step Guide.


Opening a bank account for a Special Purpose Vehicle (SPV) involves several steps that can vary based on the country, bank, and specific requirements. If you are looking for an up to date list of banks that are SPV friendly, reach out to us and we will send it to you via email. However, here's a general step-by-step guide that may help in the process:


Determine bank account requirements: depending on the specific underlying purpose of your SPV, you should clearly define the requirements for the bank account. Is it going to collect incoming funds from investors and then will be allocated to purchase assets or property, or the SPV will collect dividends and reinvest them, and so on. Banks want to know the requirements of the account and how account will be used once opened.


Prepare necessary documentation: collect all required documents for opening the bank account. Here is the most common list of documents that will be required by a reputable bank:


· Memorandum and Articles of Association; or Articles of Incorporation

· Certificate of Registration/Incorporation; or Certificate of Formation

· Official list of directors

· Share certificate(s); or Any commercial registry document containing information on the beneficial ownership

· An ownership organisation chart - signed

· IDs for all Ultimate Beneficial Owners

· Proof of the trading address: Bank statement or Utility bill (water, electricity, gas, landline phone) dated within 6 months.

· Defined purpose of the SPV

· Purpose of the account, expected monthly volumes, currencies and countries involved

· VAT number (if apply)


Choosing a bank: Choosing a right bank can be a difficult, especially for SPV. However, we have discussed a process of choosing a good bank in this article. Moreover, we can suggest several banks that are onboarding SPVs globally, reach out to us for more information.


Filling out the application: Fill out the necessary forms and provide the required documents. The bank may also conduct due diligence to verify the provided information. We highly advise not to exaggerate on volumes to achieve a more favorable pricing. Ongoing due diligence might flag lower than projected volumes and that could lead to account closure or significantly increased fees later on.


Comply with regulatory requirements: Be prepared for the bank to conduct anti-money laundering (AML) and know-your-customer (KYC) checks as part of their due diligence process. We strongly recommend to answer any questions from banks compliance department in as much detail as possible. We have witnessed multiple cases where applications get rejected due to the fact that applicants do not provide details required, don’t try to explain their business and structure specificities.


Activation: Once account is approved, the bank will provide account details, including account numbers and online banking access if applicable. We recommend to set-up online banking and save the contact details of dedicated account manager or dealer.


It's important to note that the process might vary from bank to bank. Due to varying regulatory requirements and the specific nature of SPVs, some banks might have specific preferences or limitations regarding the types of SPVs they're willing to work with. If you’d like us to take a look into your case and share our experience, let us know by filling out the contact form on our website and we’ll get back to you within several business days.


Conclusion.


Opening bank account for Special Purpose Vehicle (SPV) is not an easy task. It requires understanding the diverse regulatory landscape and the significance of detailed documentation once filling out the bank account opening application. From the strategic choice of a compliant banking partner to meticulous due diligence, our experienced team stands ready to offer tailored guidance and insights for a successful SPV banking journey. Reach out to us for expert assistance in streamlining the process and ensuring compliance in this complex financial realm.

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