Under German law, a subsidiary that sells profits to the parent company is not a normal business activity. It is generally covered by a profit-and-loss agreement that establishes the formula for the amount of profit to be transferred each year. The formula also applies to the transfer of funds when the parent company reimburses the losses of subsidiaries. Die Deutsche Bahn Gruppe sagt, die Gewinnabf-hrungsvertr-ge seien notwendig, um die Aktion-rsrechte zu schotzen. Shareholders of the parent company have the right to benefit from the company`s profits, including the profits of the subsidiaries. However, the parent company is also required to cover the losses of subsidiaries. The agreement sets the rules in writing instead of letting management decide each year. The minimum duration of an agreement is five calendar years. Defined simply, a profit-loss partner is a person or agreement that establishes a partnership with another person or unit with the intention of sharing all gains or losses in a defined percentage. It is this type of agreement that often governs the creation of basic enterprises and cooperation between companies in independent enterprises. In addition, this type of partnership is often used within financial systems that prohibit the collection of interest, including certain Islamic banking systems. Partnership agreements can be concluded in a variety of forms. In general, the more detailed the expectations during and at the end of the partnership, the clearer the expectations.
Written agreements allow for simpler judicial oversight. The agreement specifies the names of the parties involved and the dates of the partnership. The contributions of the invested parties are shown in advance, as well as how profits and losses are shared. Other issues discussed in the agreement include the responsibilities of the parties involved, accounting and operational methods, and the termination of the partnership provisions. In addition to the usual partnerships, these rules are useful in banking systems, as are many in Islamic countries that prohibit the use of interest. These systems allow customers and banks to engage in profit-loss partnerships, in which customers deposit money and take a small share of the bank`s profits. Similarly, bank borrowers contribute a predetermined portion of their profits to the bank instead of interest. Buyers and sellers acknowledge that Kendro GmbH made advance payments to SPX Europe prior to the closing date under Kendro GmbH`s profit transfer contract for fiscal years204 and 2005. One of the most controversial areas of a partnership is profit sharing when things happen unexpectedly or losses when they go wrong. In order to avoid unnecessary problems, it is necessary to set out in advance the expectations of these divisions.
These departments can be provided by separate bank accounts or by careful accounting. While an equitable distribution of a company`s revenues at the beginning of a partnership is often the most attractive, it makes sense, for legal reasons, to have a partner who assumes greater responsibility. A number of elements are needed for each partnership. A partnership requires a contract of any kind that can be written, orally or implicitly. The agreement must be between at least two individuals or entities who agree to run a joint venture. These parties must agree to share the company`s profits. Finally, the activity must be carried out on behalf of all partners, regardless of the amount of participation with which the various partners agree. A company without a profit transfer contract has tax consequences. The agreement shows that both companies have a „tax unit” allowing the parent company to declare the subsidiary`s profits as their own taxable income.
Under German law, the parent company can thus depreciate part of its interest on the subsidiary`s income.
