A Special Purpose Vehicle (“SPV”) is a distinct legal entity established by an organization for a particular activity or business goal. It has independent assets and liabilities and is a separate subsidiary business. It functions separately from the parent company. This kind of supplementary company structure is helpful for many intricate, multi-entity organizations.
Given their advantages, incorporating an SPV requires a clear understanding of the legal framework and procedural steps involved. The following section outlines the key steps to establish an SPV in India.
STEPS ON INCORPORATING SPV
- Determine the type of legal entity suitable for the SPV: The primary step is to set up a Special Purpose Vehicle (SPV) to choose the entity under which it will operate. The most commonly chosen entities for SPVs in India are Private limited Company and Limited Liability Partnerships, based on the objectives and operational requirements of a business.
- Name Reservation: For an SPV to function, it became pertinent to have a distinct name of its own. The suggested name or names shouldn’t be identical to, resemble, or be perplexingly akin to the names of any already registered business.
- Obtain Director Identification Number (DIN) and Digital Signature for all proposed directors: All potential directors must meet the aforementioned condition in order for the company’s incorporation procedures to begin.
- Draft Incorporation Documents: Memorandum and Articles of Association to be drafted & finalized for the incorporation of SPV. In case of SPV as a Limited Liability Partnership (“LLP”) agreement has to be drafted and finalized. All such documents should outline the scope and operation of SPV via “Object clause”.
- File Incorporation Documents:
- For Private Limited Companies:
- File Form SPICe+ Part B along with required documents:
- MOA and AOA
- Proof of registered office
- Identity and address proof of directors
- Consent letters from directors (Form DIR-2)
- Pay the requisite fees as prescribed
2. For Limited Liability Partnerships:
- File FILLP (Form for Incorporation of LLP) with required documents:
- Proof of registered office
- Identity and address proof of designated partners
- Subscriber’s sheet signed by the partners
- Pay the requisite fees as prescribed under the LLP Rules, 2009.
- Obtain the Certificate of Incorporation: For both entities, upon verification of documents, the Registrar of Companies (ROC) issues the Certificate of Incorporation, which includes the Corporate Identification Number (CIN) for companies or the LLP Identification Number (LLPIN) for LLPs.
- Apply for PAN and TAN: Apply for the Permanent Account Number (“PAN”) and Tax Deduction and Collection Account Number (“TAN”) through the SPICe+ form for companies or separately for LLPs through the Income Tax Department.
- Open a Bank Account: Open a bank account in the SPV’s name to facilitate financial transactions. Provide the Certificate of Insurance (“COI”), PAN, and other Know Your Customer (“KYC”) documents to the bank.
- Comply with Sector-Specific Regulations: If the SPV operates in sectors like infrastructure, real estate, or renewable energy, ensure compliance with additional regulations, such as approvals from regulatory authorities (e.g., RERA for real estate projects).
CONCLUSION
An SPV in India involves a number of legal and procedural steps, but it is a well-structured process that the Ministry of Corporate Affairs (“MCA”) has facilitated through its digital platforms. Following these steps and ensuring compliance with the applicable laws, businesses can establish SPVs for the efficient and secure achievement of their objectives.
HOW WE CAN HELP?
- Our Team of professionals can provide comprehensive direction on India’s regulations, ensuring full compliance with India’s legal framework for businesses.
- Our specialists can offer expert advice on India’s tax regulations and ensure compliance with respect to the same.
- Our specialists can help in preparing and drafting all essential documents required.
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