Hidden equity
In tax law, hidden equity is the proportion of debt that has the economic significance of equity. This can be, for example, capital that is made available to the company in large amounts by related parties, usually without security . In this case, as with other outside capital, equity serves as a risk buffer. If necessary, from a commercial law point of view, these can be equity-replacing loans .
The most common form of providing hidden equity is provided by third parties in the form of a silent partnership . In this form of participation, a distinction is again made between typical and atypical participation. Other, relatively rare forms of participation are venture capital , whereby participation via venture capital can be both active and hidden equity.
A company usually makes use of hidden equity capital when it cannot borrow from other institutions due to a low equity ratio .