Special Purpose Vehicle (SPV)

Mechanism

Investors hold interests in the vehicle, which holds the portfolio company's securities and appears as its record holder.

Formation and Tax Classification

A Delaware limited liability company has one or more members (6 Del. C. § 18-101). Unless it elects otherwise, a domestic eligible entity with two or more members is a partnership and one with a single owner is disregarded as separate from its owner (26 CFR § 301.7701-3(b)(1)).

Investment Company Act Exclusions

The Advisers Act defines a private fund as an issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Investment Company Act (15 U.S.C. § 80b-2(a)(29)). Section 3(c)(1) excepts an issuer beneficially owned by not more than 100 persons, or 250 persons in the case of a qualifying venture capital fund, that does not presently propose to make a public offering (15 U.S.C. § 80a-3(c)(1)). A qualifying venture capital fund meets the Rule 203(l)-1 definition of a venture capital fund and has no more than $12,000,000 in aggregate capital contributions and uncalled committed capital (15 U.S.C. § 80a-3(c)(1)(C); 17 CFR § 270.3c-7).

Section 3(c)(7) excepts an issuer owned exclusively by qualified purchasers that does not propose to make a public offering (§ 80a-3(c)(7)(A)). A natural person is a qualified purchaser with at least $5,000,000 in investments; a company owned by two or more related natural persons qualifies at the same $5,000,000; a trust qualifies through its trustee and settlors, who must be qualified; and any other person qualifies when it owns and invests on a discretionary basis at least $25,000,000 (15 U.S.C. § 80a-2(a)(51)(A)(i)–(iv)).

Securities Act Exemption

Interests in the vehicle need a securities exemption. Rule 506(b) allows no more than 35 purchasers in any 90-calendar-day period, requires each purchaser who is not an accredited investor to have, alone or with a purchaser representative, sufficient knowledge and experience in financial and business matters (17 CFR § 230.506(b)(2)(i)–(ii)), and bars general solicitation or general advertising (17 CFR § 230.502(c)). Accredited investors are excluded from the count of 35 (17 CFR § 230.501(e)(1)(iv)).

A natural person is accredited with net worth above $1,000,000, alone or with a spouse or spousal equivalent and excluding the primary residence; with income above $200,000 in each of the two most recent years ($300,000 jointly) and a reasonable expectation of the same level in the current year; by holding a professional credential the SEC has designated; or as a knowledgeable employee of the issuing private fund (17 CFR § 230.501(a)(5), (6), (10), (11)). The issuer files Form D no later than 15 calendar days after the first sale (17 CFR § 230.503(a)(1)).

An entity is accredited when all of its equity owners are accredited investors (17 CFR § 230.501(a)(8)), and an entity that is not accredited and was organized to acquire the securities offered counts each beneficial owner as a separate purchaser (17 CFR § 230.501(e)(2)).

On October 5, 2026 the SEC published five notices (91 FR 63314, 63335, 63345, 63357 and 63368) seeking comment, until December 4, 2026, on designating under Rule 501(a)(10) a FINRA exam, a CPA license, a CFP certification, a CFA designation, and the Series 79 and 86/87 licenses. None changes a threshold above unless the SEC issues an order.

Adviser Registration

Section 203(m) of the Advisers Act exempts from registration an adviser that acts solely for private funds and has assets under management in the United States below $150,000,000, but it must still file reports on Form ADV as an exempt reporting adviser (15 U.S.C. § 80b-3(m)(1)–(2); 17 CFR § 275.204-4). Rule 203(m)-1 measures private fund assets as regulatory assets under management under Item 5.F of Form ADV (17 CFR § 275.203(m)-1(a), (d)).

Worked Example

Assume a sponsor manages a hypothetical $100 million fund and organizes an SPV to buy $10 million of preferred stock in one private company, with 32 investors, 30 accredited and 2 not. Under section 3(c)(1) the count is 32 beneficial owners against a limit of 100 (250 for a qualifying venture capital fund, since $10 million is under the $12 million ceiling). Under Rule 506(b) the 30 accredited investors are excluded, leaving 2 purchasers against a limit of 35, assuming no other sales within 90 days.

Because 2 purchasers are not accredited, the issuer must furnish them the information Rule 502(b) specifies a reasonable time before sale (17 CFR § 230.502(b)(1)); a vehicle sold only to accredited investors has no such duty.

Under Rule 203(m)-1, if regulatory assets under management equal committed capital, private fund assets are $110 million, which is $40 million below the $150 million ceiling.

What It Means for a Limited Partner

A holder of an SPV interest owns an interest in the vehicle, not in the portfolio company, so the rights that matter are those written in the vehicle's governing agreement and the exclusion on which it relies. The exclusion sets who may own: a section 3(c)(7) vehicle admits only qualified purchasers, and a section 3(c)(1) vehicle caps beneficial owners at 100, or 250 for a qualifying venture capital fund, and tax treatment follows its classification.

An entity that owns an interest counts as one person, unless it holds 10 percent or more of the vehicle's voting securities and is, or but for the exclusions would be, an investment company, in which case its own security holders are counted (15 U.S.C. § 80a-3(c)(1)(A)).

In Life Sciences and Healthcare

Clinical investigation of a previously untested drug is generally divided into three phases (21 CFR § 312.21), giving financings natural milestones. The NVCA's October 2025 model Stock Purchase Agreement incorporates mechanics for tranched, milestone-based closings that the prior standard form had not supported (NVCA, Model Legal Documents; Foley & Lardner LLP, October 2025). A vehicle holding such a position owns an investment whose later closings depend on events it does not control, so its governing agreement must say how those closings are funded.

Governing Authority and Sources

• Investment Company Act: 15 U.S.C. § 80a-3; 17 CFR § 270.3c-7.
• Qualified purchaser: 15 U.S.C. § 80a-2(a)(51).
• Advisers Act: 15 U.S.C. § 80b-2(a)(29); 15 U.S.C. § 80b-3(m); 17 CFR § 275.203(m)-1; 17 CFR § 275.204-4.
• Regulation D: 17 CFR § 230.501; § 230.502; § 230.503; § 230.506.
• Delaware and tax: 6 Del. C. § 18-101; 26 CFR § 301.7701-3.
• Clinical phases: 21 CFR § 312.21.
• SEC notices (Oct. 5, 2026): 91 FR 63314; 91 FR 63335; 91 FR 63345; 91 FR 63357; 91 FR 63368; Morrison & Foerster LLP.
• NVCA tranche mechanics: NVCA, Model Legal Documents; Foley & Lardner LLP.

Frequently Asked Questions

What is an SPV in finance?

An SPV is a separate legal entity formed to acquire one investment for its owners, often organized as a Delaware limited liability company. Investors hold interests in the vehicle, which holds the portfolio company's securities, so the company has one record holder.

What is an SPV investment?

An SPV investment is an interest in the vehicle, not in the underlying company. Rights come from the vehicle's governing agreement, and the vehicle relies on section 3(c)(1), with up to 100 beneficial owners (250 for a qualifying venture capital fund), or section 3(c)(7), which admits only qualified purchasers.

How is an SPV different from a fund?

The difference is scope: a commingled fund holds a portfolio, while an SPV holds one investment. An SPV that pools owners' capital under section 3(c)(1) or 3(c)(7) is also a private fund under the Advisers Act, so the same exclusions, counting rules and adviser thresholds apply.

Related Reference

Pillar: Growth Equity. Related: Co-Investment, Capital Call, and Key Person Provision.