How To Make Your First SPV Distribution as a Fund Manager

by Chris Tabb in

Distributions serve as a measure of success for a Special Purpose Vehicle (SPV) as they are tasked with sharing the wealth created from a successful investment.

This process involves collecting and distributing the earned funds in the correct amounts and to the corresponding investors. In most cases, distributions from a startup company will come in the form of either cash or shares. When these distributions occur and the SPV has to allocate the funds, it is essential to be accurate as mistakes in such allocations can cause investors to receive less or more than they are entitled to. Additionally, the distributions will also require SPV Administration expertise and will trigger various Tax and Accounting tasks.

This step is crucial in confirming that the cap table was accurate on the launch date and that all interest transfers and pro-rata allocations were adjusted correctly. The cap table plays an integral role in ensuring that the investors never receive a different amount than they were supposed to. Moreover, the distributions will have an effect on the tax returns and, when necessary, the entity’s financials. Therefore, it is critical for the SPV to be meticulous when distributing the funds created from a successful investment.

Complete your final distribution to shareholders and then shut down your capital-raising SPV—often called a wind-down—to complete the process.


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