Tuesday, November 23, 2021

SPECIAL PURPOSE VEHICLE

 

A special purpose vehicle/ special purpose entity (SPE)/off-balance sheet vehicle is a subsidiary created by a parent company with its own balance sheet to isolate financial risk. Its legal status as a separate company makes its obligations secure even if the parent company goes bankrupt. For this reason, a special purpose vehicle is sometimes called a bankruptcy-remote entity. Major loophole with this is Parent companies  become a financially devastating way to hide company debt, as seen in 2001 in the Enron scandal.

 




Innovative finance topics along with their simple meanings

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