1042 (1042-S, 1042S)
Forms 1042, 1042-S and 1042-T are United States Internal Revenue Service tax forms dealing with payments to foreign persons, including non-resident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts. Forms 1042 and 1042-S are filed separately from an SPVs 1065 form. The main difference between forms 1042 and 1042-S is that form 1042-S […]
1065
An IRS tax return form that reports the profits, losses, deductions, and credits of a business partnership. SPVs are considered partnerships (LLC or LP) by the IRS so SPVs file a 1065 each year the SPV has a taxable event. The IRS form 1065 generates K1s as part of its form. Each SPV member (investor) […]
1099
Tax document issued by a business entity to another entity or individual which reports non W-2 wage income (non-employee compensation, interest, dividends, etc.). An SPV may need to generate and deliver 1099s to individuals or entities (companies) that provided the SPV with services and was paid for those services. Examples include a law firm, management […]
2x (or 3x, 4x, etc.)
A return/realization multiple. In private equity, a measurement showing how much has been paid out to investors. A realization multiple is found by dividing the cumulative distributions by the paid-in capital. Return/Realization Multiple = Cumulative Distributions / Paid-In Capital (e.g. 2x means an investor or SPV received back two times the amount that it invested […]
3(c)(1) Exemption
In order for an SPV to not be subject to the Investment Company Act of 1940, the SPV must comply with various exemptions. The 3(c)(1) exemption states that no more than 100 accredited investors can participate in the SPV (there is another exemption called the Qualifying Venture Capital Fund exemption that allows, in certain circumstances, […]
3(c)(7) Exemption
In order for an SPV to not be subject to the Investment Company Act of 1940, the SPV must comply with various exemptions. The 3(c)(7) exemption states that no more than 2000 qualified purchaser investors can participate in the SPV. An SPV that is using the 3(c)(7) exemption cannot have a single “accredited investor” but […]
409(a) Valuation
A 409(A) valuation is a formal report that sets the current value of an investment portfolio company’s common stock and the strike price to exercise an option to purchase the stock. Typically a company hires a professional appraiser to prepare the report since stock options set at a strike price below the current value of […]
506(b) Offering
Rule 506 of Regulation D provides two exemptions from registration of an offering of securities with the SEC. An issuer offering securities pursuant to rule 506(b) cannot use general solicitation or advertising to market the securities. All the investors should be accredited investors. Issuers are required to file Form D with the SEC, comply with […]
506(c) Accreditation
Rule 506 of Regulation D provides two exemptions from registration with the SEC for companies offering and selling securities. The company can broadly solicit and generally advertise the offering if: (1) the investors in the offering are all accredited investors; (2) the issuer takes reasonable steps to verify that the investors are accredited investors by […]
506(c) Offering
Rule 506 of Regulation D provides two exemptions from registration of an offering of securities with the SEC. An issuer offering securities pursuant to rule 506(c) may broadly solicit and generally advertise an offering provided that, all purchasers in the offering are accredited investors, the issuer takes reasonable steps to verify purchasers’ accredited investor status, […]
Accredited Investor
An accredited investor is an individual or entity that meets specific financial criteria, enabling them to bear the economic risks associated with investing in unregistered securities. These investors are permitted to participate in exempt offerings, such as those involving private companies or funds (e.g., hedge funds, venture capital funds, or special purpose vehicles (SPVs)), which […]
ACH
ACH refers to a network that facilitates electronic money transfers between financial institutions, such as banks and credit unions. In the context of Special Purpose Vehicles (SPVs), ACH is commonly used by investors to transfer investment funds to the SPV. While ACH transfers typically take around three business days to process, they are characterized by […]
Acquisition
A corporate action in which one company purchases a majority or all of the ownership interests in another company to gain control of that company. Acquisitions are typically pursued as part of a growth strategy, where acquiring an established company is considered more advantageous than expanding independently. Payment for acquisitions may be made in cash, […]
Administrative Manager
Administrative Manager is a person or entity designated to handle specific administrative tasks for a Special Purpose Vehicle (SPV), typically including duties such as setting up and managing a bank account. An SPV administrator can act as an administrative manager of SPVs where the Organizer elects or is required to retain managerial authority.
Administrator
A company or individual engaged by an SPV to perform designated back-office support functions for the entity.