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Equity
Equity is the portion of an enterprise’s assets that has been contributed by the owners and has not been financed by liabilities.
Equity constitutes the residual interest in the assets of an entity after deduction of all liabilities. It typically comprises share capital, share premium reserve, revaluation reserve and retained earnings.
Under Dutch law, in particular the Dutch Civil Code and the Annual Accounts Act, equity is relevant for determining solvency and the scope for distributions to shareholders.
In practice, equity is used to assess a company’s financial stability, for instance in connection with the incurrence of loans or in the context of mergers and acquisitions.
“The accountant examined the equity of the BV to determine whether dividend distributions were possible.”
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