Why do I need an "Independent Director" for my SPE?

The use of Special Purpose Entities (SPE) as a proven and reliable financing tool for securitized lending, structured finance and off balance sheet financing of high quality assets continues to grow not only in importance but in application and scope.

Maintaining the legal ownership of assets in a vehicle that can be isolated from the bankruptcy risks of the larger enterprise, thus creating a "bankruptcy remote" status, is one of the most crucial elements of many special purpose entity. And, clear guidelines exist on what an SPE must do to maintain this status. An Independent Director acts in a fiduciary capacity. He/she must approve any major company events, particularly bankruptcy and maintain true independence from the SPE parent and the lender. These requirements are the essential ingredients needed to maintain the SPE status with lenders, established by Standard & Poor's and accepted by other rating agencies.