73:. If the asset users, or the asset lenders, owned (or legally controlled) the SPV equity, then the SPV would be consolidated into their group accounts. This is something that the lenders to the SPV have to avoid as they are mostly banks and only want to give in loans. Users of the asset may want to avoid if their borrowing limits may have been reached (or they want a regulatory/liability firewall between themselves and the asset(s)).
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408:
134:. The SPV lenders will want to ensure their securitisation vehicle is prevented from entering into a bankruptcy process thus losing control over the assets for an extended period, due to financial failings of the asset user(s), or the 3rd party equity owner itself. The lenders will want to take immediate control of the assets if a user(s) goes bankrupt
422:
149:
Often only a small number of shares are created for a nominal sum (the exact specific amounts depending on the specifics of the jurisdiction) as the "equity" of the SPV. These shares are then independently purchased by the 3rd party entity in question using their own funds to complete the purchase
137:
Conflicts/Control. The 3rd party must not be capable of damaging or attacking the SPV, taking a biased view on behalf of one party (i.e. lender or user) outside of the written agreements created on establishing the SPV, or even acting in a completely rogue manner, that would harm the interests of
187:
market is large (circa US$ 10 trillion in assets) and involves multinationals getting assets financed by global banks structured in SPVs created by global law and accounting firms. The orphaned SPV structures they use are understood and accepted in many jurisdictions, by regulators and taxing
127:
Tax
Integrity. The 3rd party must be credible, and legally separate from all other parties in the SPV, that the various national taxing authorities won't challenge the SPV under general anti-avoidance rules, and effectively force it back "on-balance sheet", rendering the SPV useless to the
76:
Orphaned SPV structures allow lenders to separate the asset finance, from the asset user(s), thus enabling them to move the asset to other users(s) should the situation arise (e.g. bankruptcy of a user), without having to recreate a new SPV and/or reraise new loans.
157:
due to their particular robustness to avoiding bankruptcy (not legally possible for it to enter a bankruptcy process), however, this had led to some public concerns over the integrity of the overall orphaned SPV structure (e.g.
346:
62:(the asset user(s), and the lender(s) financing the assets). While this 3rd party legally "owns" the equity of the SPV, the way in which their ownership is structured gives them no control over the SPV.
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of the SPV is deliberately handed over to an unconnected 3rd party who themselves have no control over the SPV; thus the SPV becomes an "orphan" whose equity is controlled by no one.
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Given the above, the orphaned SPV equity is usually held by a nominee share trustee company on trust pursuant to a
Declaration of Trust (and never via an individual).
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Unfortunately, the global acceptance of the main orphaned SPV structures has attracted the attention of users who are not seeking to conduct standard tax-transparent
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Specialist law firms provide such trust services (can often be a subsidiary of the law firm advising on the main SPV and/or securitisation transaction).
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The SPV is generally a limited liability company issued in either an offshore location (e.g. the Cayman
Islands SPV) or an onshore location (e.g.
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via orphaned SPVs, is a classic abuse of orphaning. This is why orphaning is not available in all jurisdictions, and where it is offered in non-
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transactions, but who have other aims and objectives which regulators and tax authorities did not envisage orphaned SPVs being used for.
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Ireland is the largest EU location for orphaned SPVs, and the above abuses have drawn warnings from the former Deputy
Governor of the
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An orphaned SPV is, by definition, an artificial creation as everybody knows who "controls" the SPV. There are instances outside of
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The key considerations in deciding what 3rd party entities are used to "own" the orphaned SPV equity are driven by:
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228:, showed Russian financial entities were using the anonymity of orphaning, as well as the inherent complexity of
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784:
778:
760:
423:"Vulture funds using Matheson Law Firm in-house charities to avoid paying Irish tax, says TD Stephen Donnelly"
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were closed by the Irish
Government, material amounts of tax revenues were lost to the Irish exchequer.
107:(i.e. where there are domestic taxes), it is strictly controlled and monitored by taxing authorities.
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where orphaned SPVs, and the ability to separate "true" owners from "legal" owners, can be used for
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is held by a 3rd party with no legal relationship to the two main parties engaging in the
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transactions, to circumvent various international sanctions in moving money globally.
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99:. For example, restructuring equity into debt, and then relocating this debt to a
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451:"Stephen Donnelly Welcomes Charity Regulator Clampdown on Section 110 Charities"
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510:"Orphan structures: holding companies accountable when owners don't exist"
437:"Irish Charities Regulator rejects Matheson Charities in Section 110 SPVs"
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654:
558:"NAMA forced to pay €160m tax bill after Section 110 loophole closed"
216:
100:
409:"Law Firm Matheson Uses Irish Charities to help Hedge Funds cut tax"
711:
577:. Professor Jim Stewart Trinity College Dublin. 27 February 2018.
631:"Former Regulator says Irish politicians mindless of IFSC risks"
88:
SPVs would cease to be useful or effective to their creators.
179:
Irish
Section 110 Special Purpose Vehicle (SPV) § Abuses
224:
In 2017–2018, academic research by
Professor Jim Stewart in
603:"More than €100bn in Russian Money funneled through Dublin"
378:"Orphan structures – bankruptcy remoteness under Irish law"
169:
is emerging as a preferred option in some jurisdictions.
645:"Irish SPVs more a worry for other countries than State"
544:"Loophole lets firms earning millions pay €250 in Tax"
525:"Ireland confronts another tax scandal closer to home"
589:"How Russian Firms Funnelled €100bn through Dublin"
188:authorities as vehicles in which to conduct global
150:(cannot be paid for directly by the main parties).
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162:in Ireland), and has now been stopped in Ireland.
808:
16:Legal entity where the equity is owned by no-one
617:"Ireland is top Eurozone jurisdiction for SPVs"
670:
211:, to buy Irish distressed assets during the
572:"Global Finance and the Russian Connection"
465:"Non-charitable purpose trusts in Guernsey"
677:
663:
84:transactions, and without orphaning, most
65:The driver for orphaning is to enable the
591:. The Sunday Business Post. 4 March 2018.
560:. The Irish Independent. 2 February 2017.
296:"Cayman Islands Orphan SPVs in Shipping"
34:closely associated with creating SPVs ("
809:
684:
528:. Financial Times. 11 September 2016.
484:. Morgan Stanley. 2017. Archived from
215:to avoid Irish taxes. By the time the
658:
619:. Irish Independent. 19 August 2017.
512:. Open Global Rights. 2 August 2017.
80:Orphaning is at the heart of global
647:. The Irish Times. 13 January 2017.
609:
207:funds used orphaned SPVs, known as
203:In 2016, it was discovered that US
13:
767:Collateralized mortgage obligation
352:. Arthur Cox. 2014. Archived from
14:
838:
318:. Grant Thornton. September 2015.
279:"Creating and Understanding SPVs"
633:. The Irish Times. 5 March 2018.
605:. The Irish Times. 4 March 2018.
532:from the original on 2022-12-11.
330:"Cayman Islands Securitisations"
42:transactions where the notional
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595:
581:
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546:. The Irish Times. 6 July 2017.
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785:Collateralized fund obligation
779:Collateralized loan obligation
773:Collateralized bond obligation
761:Collateralized debt obligation
479:"Global Securitisation Market"
415:
411:. Irish Times. 27 August 2015.
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384:
370:
347:"Establishing SPVs in Ireland"
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49:
1:
453:. Fianna Fail. 27 April 2017.
439:. Irish Times. 28 April 2017.
335:. Conyers Dill Pearman. 2016.
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153:Some jurisdictions have used
425:. Irish Times. 14 July 2016.
167:Non-Charitable Purpose Trust
138:the main parties in the SPV.
7:
242:
10:
843:
702:Securitization transaction
380:. Global Law Office. 2017.
176:
730:
692:
172:
110:
827:Types of business entity
744:Mortgage-backed security
301:. Walkers. January 2017.
54:In an orphaned SPV, the
36:Special Purpose Vehicles
238:Central Bank of Ireland
69:transaction to be held
392:"Jersey Orphaned SPVs"
249:Irish Section 110 SPVs
226:Trinity College Dublin
213:Irish financial crisis
738:Asset-backed security
397:. Hatstone Law. 2014.
259:Bankruptcy Remoteness
132:Bankruptcy Remoteness
117:Irish Section 110 SPV
791:Senior stretch loan
755:Credit default swap
731:Types of securities
796:Structured product
707:Credit enhancement
686:Structured finance
32:structured finance
30:are terms used in
804:
803:
750:Credit derivative
467:. Lexology. 2014.
155:Charitable Trusts
71:off-balance sheet
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817:Offshore finance
717:Orphan structure
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20:Orphan structure
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313:"SPV Taxation"
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254:Purpose Trusts
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192:transactions.
190:securitisation
185:securitisation
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86:securitisation
82:securitisation
67:securitisation
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40:securitisation
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722:Shell company
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491:on 2018-03-17
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359:on 2018-03-16
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493:. Retrieved
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361:. Retrieved
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284:. PwC. 2012.
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183:The global
50:Description
811:Categories
495:2018-03-14
363:2018-03-14
265:References
177:See also:
105:tax havens
24:Orphan SPV
217:loopholes
101:tax haven
28:orphaning
530:Archived
243:See also
160:Matheson
128:parties.
712:Tranche
38:") for
173:Abuses
111:Owners
56:equity
44:equity
787:(CFO)
781:(CLO)
775:(CBO)
769:(CMO)
763:(CDO)
757:(CDS)
746:(MBS)
740:(ABS)
575:(PDF)
489:(PDF)
482:(PDF)
395:(PDF)
357:(PDF)
350:(PDF)
333:(PDF)
316:(PDF)
299:(PDF)
282:(PDF)
165:The
119:).
26:or
22:or
813::
678:e
671:t
664:v
498:.
366:.
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