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Simple English definitions for legal terms
special-purpose vehicle
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A quick definition of special-purpose vehicle:
Special-Purpose Vehicle: A special-purpose vehicle is a type of entity that is created for a specific purpose, such as to hold assets or manage a project. It is often used in finance and investment to help investors achieve their goals. Think of it like a tool that is designed for a specific job, like a hammer for building a house.
A more thorough explanation:
SPECIAL-PURPOSE VEHICLE
A special-purpose vehicle is a type of company that is created for a specific purpose, such as to hold assets or manage a project. It is also known as a special-purpose entity.
- A real estate investment trust (REIT) is a special-purpose vehicle that invests in real estate properties and generates income for its investors.
- A project finance company is a special-purpose vehicle that is created to finance a specific project, such as a power plant or a highway.
These examples illustrate how a special-purpose vehicle is created for a specific purpose and is separate from the companies or individuals involved in the project or investment. It allows for better management and organization of the assets or funds involved.