SPV, the key to a successful investment
The SPV, Special Purpose Vehicle... An often unknown but powerful tool!
It provides investors with increased flexibility and efficiency in funding start-ups. This structure allows investors to participate in targeted investments in start-ups with high growth potential by contributing to the diversification of investment portfolios. Interested?
How does it work ?
Combined with the concept of the club deal, this flexible legal structure represents an alternative and collaborative way of investing. By creating an SPV to invest in a specific start-up, investors pool their funds and skills, thus strengthening their weight in the governance of the companies invested.
This type of investment vehicle is often set up in two legal forms:
The SAS (Simplified Joint Stock Company):
The SAS is with variable or fixed capital, it is adapted to various types of commercial activities.
It offers great freedom in the organization and governance of the company with the possibility of customizing the articles of association according to the needs of the shareholders.
It regularly makes itself eligible for the many reference tax schemes for investors (Madelin law (IR-PME), Midy schemes but also subscription by PEA (Equity Savings Plan)), which reinforces the attractiveness of this type of structure (as long as the securities issued by the target company are themselves eligible for this type of scheme).
The joint venture (SEP):
Unlike other types of companies, it is not registered with the Trade and Companies Register. It therefore has no legal personality. It is civil or commercial in nature depending on whether its purpose is civil or commercial.
The SEP is generally fiscally transparent for investors (no corporate income tax but income tax for each partner), but it makes all types of tax advantages null and void when investors subscribe (including IR-PME).
The SEP is a joint ownership, the liability is limited to the manager and the partners are liable indefinitely and jointly and severally if the SEP is conspicuous.
Both structures offer investors the opportunity to participate in targeted investments in start-ups.
Synthesis | ||
Labeled | SAS | SEP |
Type of SPV | SAS | Joint ownership without legal personality (based on the signing of a contract between the partners) |
Registration with the RC | Yes | No |
Who is responsible? | The chairman/Corporate officer | The manager |
Filing of an annual tax return? | Yes | Yes |
Management report, AGM... | Yes | No, but annual report of the manager |
What does the BA have? | Actions of the SAS | A right of joint ownership of the SEP's assets |
Who owns the shares of the start-up? | The SAS | The SEP |
Taxation at corporate income tax | Yes (excluding the parent-subsidiary tax regime*) | No |
Capital gains tax | Yes | No |
IR-SME advantage (i.e. a reduction in income tax of x% on the amount invested) | Yes | No |
PEA advantage (i.e. a non-taxation of capital gains on the "income" portion) | Yes | No |
Who decides on the resale? | The president (with the agreement of the partners: see shareholders' agreement) | The manager |
Possibility of partial exit | Yes, by the sale of the shares of the SAS | No, everything is liquidated at the time of dissolution |
Possibility of partial exit | The titles go to the heirs | The heirs remain linked to the SEP |
Dissolution/Liquidation | Liquidation by legal procedure | Liquidation by agreement between partners |
*tax optimization scheme that the parent company (SPV) can use to benefit from a partial exemption from corporate income tax on the proceeds of the sale of the shares it holds from "its daughter" i.e. the start-up/target company)
What for ?
By centralizing negotiations, the SPV simplifies the fundraising process for start-ups. Rather than negotiating with multiple individual investors, the target company deals directly with the SPV's investor representative (the manager or corporate officer/chairman).
Accordingly:
A reduced capitalization table.
Simplified interactions between partners (BA and managers).
Better visibility for future investors/stakeholders.
This increased transparency can facilitate future fundraising and allow the start-up to save time and reduce the costs associated with future operations. This allows the invested company to also simplify the management of its shareholders, the transmission of information and the interaction with the partners in the context of the signing of deeds such as amendments to the main pact (i.e. of the start-up) or Powers of Attorney.
On the investor side: they therefore have access to larger deals with a lower individual entry ticket. With a minimum average investment per investor generally between €10,000 and €30,000, investors can diversify their portfolio more easily, by investing in several start-ups with high growth potential. Indeed, the market is tending to evolve and it is more complex today for independent BAs to subscribe to investment tickets of less than €10,000, directly, with start-ups (the end of small holders?). In addition, by pooling their resources and investing together, they exert greater influence in the governance of the target. The less experienced can benefit from the expertise of SPV leaders (often industry professionals or recognized business experts).
The SPV also makes it possible to create a secondary market between partners/MLs, which leads to greater liquidity of the securities. Unlike direct investments, where the transfer of securities can be more complex and involves multiple stakeholder interactions, the SPV simplifies this process. Indeed, the securities are held by the SPV rather than directly by individual investors in the companies invested. Thus, when an investor wishes to sell his shares, he can do so at any time as long as he finds a buyer. This transfer facility increases the liquidity of investments, as investors have the opportunity to exit their position more easily by selling their shares to other SPV partners (governed by the SPV's articles of association and agreement).
As you can see, the SPV is an essential tool for start-ups and investors looking to participate effectively and strategically in the financing of start-ups. By understanding how it works, each party can make informed decisions to optimize their performance and contribute to the success of tomorrow's start-ups.
