YZ Ltd. desires to form a Special Purpose Vehicle (SPV) to start a new project. Brief the company on the benefits of forming a SPV.

Benefits of Special Purpose Vehicle (SPV) Ownership of Assets: An SPV allows the ownership of a single asset, often by multiple parties, and allows for ease of transfer between parties. Minimum Statutory Requirement: Depending on the choice of jurisdiction, it is relatively cheap and easy to set up an SPV. Clarity of Documentation: It is easy to limit certain activities or to prohibit unauthorized transactions within the SPV documentation. Tax Benefits: SPVs are often used to make a transaction tax-efficient by choosing the most favorable tax residence for the vehicle. SPVs are a method of financial engineering schemes which have as their main goal the avoidance of tax. Legal Protection: By structuring the SPV appropriately, the sponsor may limit legal liability in the event that the underlying project fails. Accounting Reasons: Debts raised & losses incurred through an SPV are not reflected in the balance sheet of the sponsor, so it reflects a pleasant picture and enhances the debt-raising ability of the sponsor. Separation of Risk: The key advantage is that it helps in separating the risk and freeing up the capital. As a result, the SPV and the sponsoring company are protected against risks like insolvency, which may arise during the course of operation. Securitization of Assets: The SPV also allows securitization of assets without disturbing the managerial relationship. Under the arrangement, any predictable income stream generated by secured assets can be securitized.