Special Purpose Vehicle (SPV)

An SPV is a legal entity typically used to serve as a counterparty with the main corporation. In finance it often used for securitization, but it has also been used to hide risky corporate behavior/transactions and conceal corporate relationships.

Case: The most notorious case of special purpose entities being used to distort a company’s obligations is Enron, which filed for bankruptcy in 2001. Enron used SPVs to lower the appearance of its debt load and overstate earnings and equity.