The creation of a new subsidiary will also entail day-to-day management and costs in the future both in terms of filing (e.g.B. annual accounts) and internal governance (e.g. B separate board of directors from the APA and reporting obligations). If there is no appetite to retain the SPV in the longer term, potential buyers may wish to discuss with their consultants the extent to which it might be possible to transfer the SPV`s land assets (but within the group) after the liquidation of the SPV. If the transaction involves the purchase of a company (or a majority stake in a company), the buyer acquires a new subsidiary in his group. The internal governance and treasury teams should be consulted at an early stage to examine whether the agreement of a third party might be necessary. Not all SPVs are built in the same way. In the United States, SPVs are often limited liability companies (LLCs). Once LLC has purchased the risk assets from its parent company, it normally pools the assets into tranches and sells them to meet the specific credit risk preferences of different types of investors. The increase in stamp duty on real estate transactions implies certain duties: with the increase in stamp duty on real estate transactions, it has become much more common for real estate to be held in particular brands (SPV`s) and then traded through a sale of shares in the SPV itself.
In the case of a UK company, the stamp duty on share sales is 0.5%, which saves 3.5% of the purchase price. A total saving of 4% may be possible if the SPV is not a UK company. How to argue about savings of this magnitude? In addition to SPV acquisitions, we also see opportunities to sell or buy stakes in joint venture vehicles, either as a new part of the joint venture or when an existing part of the joint venture is acquired. While this article focuses primarily on the acquisition of the full stake in a VPS, certain principles also apply, for reasons of fluctuation, to these joint venture activities. As a general rule, warranties would be provided « unless disclosed », so that a buyer cannot claim a breach of the warranty if the warranty was found to be false, but the buyer was already aware of the matter as previously disclosed by the seller. However, if a contingent risk or contingent liability has been disclosed, that risk may be protected by specific compensation. A special purpose entity may be a « remote entity from insolvency », since the entity`s activity is limited to the purchase and financing of certain assets or projects. In addition, the SPV is required to complete a confirmation declaration with the Companies House at least once a year, or, in the event of a change in the capital of the SPV, shareholder information and SIC codes, an advance declaration could be filed. Potential buyers should also consider, together with their tax advisors, the extent to which a possible tax debt (actual or conditional) resulting from the SPV can be offset by a possible stamp duty saving resulting from the difference between the stamp duty rates to be paid for the acquisition of shares in a VPS (0.5%) compared to the higher stamp duty rates to be paid when acquiring land. If a stamp duty saving is to be made, a seller may even try to negotiate a share of that savings as part of the price.
A large part of the negotiations on the terms of the SPA concern the price and extent of the contractual protection granted by a seller to the buyer with regard to the SPV in the form of guarantees and indemnifications. The viability of a business SPV purchase versus a real estate purchase, including possible structuring after closing, requires careful tax scrutiny and potential buyers should consult with their tax advisors at an early stage. . . .