A family office sets up a Cayman SPV for a co-investment

The situation

The client was a Hong Kong family office that was ready to take part in a co-investment venture involving a number of investors.

However, instead of placing its investment through one of the portfolio companies it owned, the client was looking for a specific structure that would help the investment to be kept separate from other investments made by the company.

The main prerequisites were that:

• a separate entity should be set up for the co-investment;
• the deal must be kept separate from any other portfolio investments;
• there must be clear ownership and corporate documentation;
• there should be a framework in place for the management of investment activities and subsequent distributions; and
• the entity should be set up prior to the closing of the deal.

What we set up

Having analyzed the transaction itself as well as the ownership structure, OCC recommended that the client create a company in the Cayman Islands as an SPV.

Cayman SPV

The Cayman company was set up solely for the purpose of keeping the interest of the client on the target investment. An SPV was created for it rather than folding the investment into a company which already had other interests.

Corporate documentation & ownership

OCC helped in the company formation and setting up the first corporate documents. These documents helped to prove the ownership, directors and shareholding structure of the SPV, thus helping the family office to keep a proper corporate document about the investment.

Preparation for the transaction

After its formation, the SPV got ready to participate in the co-investment transaction. OCC assisted in setting up the necessary corporate documents for the client to be able to execute the deal.

This was accomplished within 14 days before the expected deal closure.

The result

Having the Cayman SPV set up, the family office managed to make the co-investment using a special vehicle rather than a portfolio company already owned by the client.

This helped the client build a clearer system for keeping track of ownership and documentation of the transaction separately from other investments in the portfolio.

After setting up, the client:

• committed $1.5 million in co-investment through the Cayman SPV;
• set up the special vehicle before the expected closing of the transaction;
• had clear ownership documentation for the SPV;
• kept separate investment documentation and transaction management from the rest of the portfolio; and
• built a special vehicle for the whole process of holding the investment.