When to Use a Special Purpose Vehicle in New Zealand

If you’re building a startup, buying an asset, raising money, or taking on a high-risk project, you’ve probably heard someone mention “special purpose vehicles”.

They’re often talked about like a magic bullet for risk and investment - but an SPV is really just a legal structure that needs to be set up and run properly to work the way you intend.

In this guide, we’ll break down what special purpose vehicles (SPVs) are, why NZ businesses use them, and the key legal considerations to get right from day one.

What Are Special Purpose Vehicles (SPVs) In New Zealand?

Special purpose vehicles (SPVs) are separate legal entities created for a specific project or purpose - commonly to isolate risk, hold a particular asset, or bring in investors in a clean and structured way.

In plain terms, an SPV is a “ring-fenced” entity. Rather than running everything through your main trading business, you set up another entity to do one thing (or hold one thing), with its own bank account, contracts, and legal obligations.

Most commonly in New Zealand, an SPV is set up as a company (for example, a limited liability company registered under the Companies Act 1993). But depending on what you’re doing, an SPV could also be a limited partnership or a trust structure.

Why Use A Separate Entity At All?

When your business does multiple things, the risk can “spill over”. If something goes wrong in one project, it can affect everything you own and operate.

With special purpose vehicles, you can separate:

• Assets (like IP, property, equipment, or a particular product line)
• Liabilities (like debt, warranties, or project-specific risk)
• Investors (so new investors are investing into a specific venture, not your entire business)
• Contracting (so suppliers, landlords, and customers contract with the SPV for that activity)

That separation can be powerful - but only if you keep the SPV genuinely independent and properly documented.

When Should NZ Businesses And Startups Use Special Purpose Vehicles?

There’s no “one size fits all” moment to create an SPV. The right time depends on your commercial goals and risk profile.

That said, here are common scenarios where special purpose vehicles make sense for NZ businesses and startups.

1. Holding High-Value Assets (Like IP Or Property)

Many businesses use SPVs to hold assets that matter long-term - for example:

• commercial premises
• plant and equipment
• software and intellectual property
• brand assets like domain names and trade marks

The logic is that if your trading entity is sued or goes into financial distress, the key assets are not automatically on the line (assuming everything has been structured properly and there are no guarantees or security interests undermining that separation).

If your SPV is being used to hold valuable IP, it’s also important to think about assignments and licences - for example, having the IP held in one entity and licensed to the trading company under an IP Licence.

2. Isolating Risk For A New Venture Or Product Line

Let’s say your existing business is stable, but you’re launching a new product line with higher regulatory or safety risk. Running that new venture through an SPV can help keep liabilities contained to that entity (so long as the separation is maintained in practice).

This is especially common where the business is:

• testing a new market
• entering a regulated sector
• taking on a large one-off contract
• trialling a new business model

Just remember: you don’t automatically eliminate risk by creating a new entity. If your main business (or you personally) sign guarantees, give indemnities, grant security, or blur the lines between entities, the “ring fence” can weaken fast.

3. Bringing In Investors For A Single Project

Special purpose vehicles are often used when investors want clarity about what they’re investing in.

For example, instead of issuing shares in your existing operating company (with all its history, obligations, and unrelated activities), you might create an SPV that:

• owns a specific project or product
• has a clear cap table
• has its own shareholders rights and rules

In that setup, it’s common to put in place a tailored Shareholders Agreement and, where relevant, a Company Constitution so everyone is clear on voting, exits, dividends, and how future fundraising works.

It’s also important to remember that bringing in investors can trigger New Zealand financial markets and securities law requirements - for example, rules under the Financial Markets Conduct Act 2013 (FMCA) about offers of “financial products” (including shares) and when disclosure documents, licensing, or reliance on an exemption may be required. Getting the fundraising structure right early can avoid expensive rework (and compliance risk) later.

4. Project Finance Or Asset Finance

Where a lender is funding a specific asset (or project), they may prefer an SPV because it keeps the financials clean and makes it easier to take security over the relevant assets.

This can show up in:

• construction and development projects
• equipment finance arrangements
• acquisitions where a buyer sets up a special purpose vehicle for the purchase

In these cases, you’ll want to be especially careful about the finance documents, guarantees, and any security registrations. “Limited liability” on paper doesn’t help much if you’ve signed personal guarantees for the SPV’s obligations or granted security over assets held elsewhere in the group.

How Do You Set Up An SPV (And What Structure Should You Choose)?

Most SPVs in New Zealand are companies, because they’re familiar, widely supported by banks and investors, and generally straightforward to administer.

But the best SPV structure depends on what you’re doing and who’s involved.

Option 1: SPV Company

A company SPV is often the default choice. It can:

• enter contracts in its own name
• own assets
• hire staff or contractors
• bring in shareholders
• limit liability to the company (subject to guarantees and other arrangements)

If you’re creating a company SPV, you should consider how decisions will be made and documented - including whether you need a constitution, shareholder controls, and director governance. If you’re still deciding whether a company is right for you generally, getting a Company Set Up done properly can save you a lot of clean-up later.

Option 2: Limited Partnership (For Investment Structures)

Limited partnerships are sometimes used for investment deals because they can separate “managers” (general partners) from passive investors (limited partners).

This can be attractive when you want investors to have limited involvement in management, while still being economically invested in the project.

However, limited partnerships have their own rules and compliance requirements, and they need careful structuring to ensure everyone understands control, liability, and exit arrangements.

Option 3: Trust SPV (For Holding Assets)

Some businesses use trust structures to hold assets (for example, property or IP). This can sometimes form part of asset-holding or long-term planning - but it’s not a guarantee of “asset protection”, and outcomes depend heavily on the specific facts, how the trust is run, and whether there are guarantees, security arrangements, or other claims that reach the assets.

Trusts come with their own complexities - including trustee duties and record-keeping - and they’re not a “set and forget” option. You’ll want tailored advice before using a trust as an SPV.

A Practical Tip: Keep The SPV’s Purpose Narrow

An SPV works best when its purpose stays specific.

If your SPV starts doing multiple unrelated things (or gets used as a general trading entity), you can lose the benefits you were aiming for - and you can create confusion about who owns what and who is responsible for which liabilities.

Key Legal Considerations When Using Special Purpose Vehicles

This is the part most founders don’t hear enough about: special purpose vehicles aren’t just about forming an entity. They’re about running it properly and documenting the relationships around it.

Here are the legal issues to focus on.

1. Governance: Directors’ Duties And Decision-Making

If your SPV is a company, it will have directors. Directors owe duties under the Companies Act 1993 (for example, to act in good faith and in the best interests of the company).

This matters because SPVs are often owned by, managed by, or closely linked to other entities. It can create real tension if a director is making decisions that benefit the “group” but not the SPV itself.

To keep governance clean:

• document key decisions (especially anything involving related parties)
• be clear on who has authority to sign contracts
• consider a constitution and shareholders agreement where there are multiple owners

2. “Ring-Fencing” Only Works If You Keep It Separate

A common mistake is setting up an SPV, then treating it like it’s not really separate.

For example, problems can arise if:

• the SPV doesn’t have its own bank account
• the SPV’s invoices and expenses are paid by another entity without any documentation
• staff and contractors aren’t clearly engaged by the right entity
• contracts are signed under the wrong company name
• assets are used across entities without a licence or agreement

This isn’t just a “paperwork” issue - it can affect enforceability of contracts, tax treatment, and risk allocation if something goes wrong. In more serious cases, poor separation (and related-party dealings that aren’t properly documented) can also undermine the practical protection you were expecting from having a separate entity.

3. Contracts: Make Sure The Correct Entity Is Signing

This is one of the most practical legal issues with SPVs.

If you intend the SPV to hold the risk (or the asset), then the SPV must usually be the party signing the relevant contracts - not you personally, and not your main trading company.

Depending on your structure, you may need:

• service agreements between the SPV and your trading company
• licences for IP, equipment, or premises
• management agreements (if one entity manages the operations for another)
• shareholder arrangements and investor rights documents

Where your SPV is employing staff (or you’re shifting staff between entities), you’ll want to make sure you have the right Employment Contract in place with the correct employer name, and that your HR documents reflect how the group operates.

4. Funding, Guarantees, And Security Interests

Many businesses set up special purpose vehicles expecting limited liability - then accidentally give it away by signing guarantees or security documents.

Some common examples include:

• directors giving personal guarantees for the SPV’s lease
• a parent company guaranteeing the SPV’s obligations
• security interests registered over assets held by another entity in the group

None of these are automatically “bad” - sometimes they’re commercially necessary to get the deal done. The key is understanding what you’re agreeing to, because it can change the risk profile significantly.

5. Compliance: The SPV Still Has Real Legal Obligations

An SPV isn’t a shell you can ignore. If it’s operating (even on a limited basis), it needs to comply with the same kinds of laws any NZ business must follow.

Depending on what the SPV is doing, this might include:

• Privacy Act 2020 obligations if it collects personal information (for example, customers, investors, or employees)
• Fair Trading Act 1986 rules around misleading conduct and advertising (if it’s selling or marketing anything)
• Consumer Guarantees Act 1993 obligations if it supplies goods or services to consumers
• Health and Safety at Work Act 2015 duties if it has workers or controls a workplace

If the SPV is raising money or offering shares (or other financial products), you should also check whether the Financial Markets Conduct Act 2013 (FMCA) applies, including whether you need to rely on an exemption (for example, wholesale investor exclusions) and what disclosure and investor communications are permitted.

If the SPV collects personal information, having a clear Privacy Policy (and matching internal processes) is an easy way to start building compliance into day-to-day operations.

6. Tax And Accounting Alignment (Don’t Leave This As An Afterthought)

We’re not accountants, and this section isn’t tax advice - but practically speaking, SPVs can create tax and accounting complexity if they’re not set up with clear commercial logic and aligned advice.

For example, you’ll want to ensure:

• intercompany charges are documented and make sense
• asset transfers are recorded properly
• GST registration (or non-registration) is correct for each entity
• there’s a clear basis for any loans between related entities

It’s worth aligning your legal structure with your accountant’s advice early, so you don’t end up re-doing contracts or restructuring mid-stream.

Common SPV Mistakes (And How To Avoid Them)

Special purpose vehicles are meant to reduce complexity and risk. But if they’re set up without a plan, they can do the opposite.

Here are some common mistakes we see with NZ businesses and startups using special purpose vehicles.

Mixing Assets And Activities Between Entities

If your SPV owns an asset (like software, equipment, or property), but another entity uses it day-to-day, you should usually have a written agreement in place (such as a licence or services arrangement).

This helps avoid disputes later about:

• who really owns the asset
• who pays for maintenance and upgrades
• what happens if the entities separate (or one becomes insolvent)

Not Defining The Relationship Between The SPV And The “Main” Business

SPVs often exist in a wider group structure. If that relationship isn’t documented, you can run into issues with:

• cost allocation
• control and authority
• ownership of work product and IP created during the project
• who is responsible for regulatory compliance

Even when the businesses are owned by the same founders, writing this down can prevent future headaches - especially when you raise capital, bring on co-founders, or sell part of the business.

Using Generic Templates For Investor Or Governance Documents

SPVs often involve investment, ownership splits, and project-specific rules. This is exactly where generic templates can fall short - or create ambiguity that becomes expensive later.

If you’re issuing shares, bringing in investors, or setting special rights, it’s worth getting the documents done properly so they reflect what you actually agreed (and what will happen when things change). It’s also a good time to confirm your fundraising approach complies with any FMCA requirements that apply to the offer.

Forgetting The Exit Plan

Many SPVs are created to run a project, then get wound up or sold.

It’s smart to think early about:

• how profits will be distributed
• how and when the SPV will sell the asset or project
• what happens if one investor wants out early
• what happens if you need more funding later

These points are often handled in shareholder documents and investment terms, and they can make the difference between a smooth exit and a messy dispute.

Key Takeaways

• Special purpose vehicles (SPVs) are separate legal entities used to isolate risk, hold assets, or run a specific project in a ring-fenced way.
• In New Zealand, SPVs are commonly set up as companies, but depending on the deal they can also be structured as limited partnerships or trusts.
• Special purpose vehicles only “work” if they’re treated as genuinely separate - with their own contracts, bank accounts, records, and decision-making.
• Make sure the correct entity is signing contracts, employing staff, owning assets, and complying with laws like the Privacy Act 2020, Fair Trading Act 1986, and Health and Safety at Work Act 2015.
• If you’re bringing in investors, check whether the Financial Markets Conduct Act 2013 (FMCA) applies to your share offer or fundraising structure, including any disclosure or exemption requirements.
• SPVs often involve investors or shared ownership, so getting the right governance documents (like a Shareholders Agreement and Company Constitution) in place can prevent disputes later.
• Be careful with guarantees, security interests, and informal intercompany arrangements, as these can undermine the limited liability and risk separation you intended.

If you’d like help setting up special purpose vehicles for your business or startup - or you want a lawyer to review your SPV structure and documents before you sign - you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.