Profit Transfer Agreement

Definition

In a Profit Transfer Agreement one company agrees to transfer its profits to another company.

Context

This type of contract is used in Germany. The profit transfer agreement is used to consolidate profits between companies. The controlling company in this arrangement is the one that receives the profits of the controlled company. Under the rules of the agreement, the controlled company must act and operate in the best interests of the controlling company. The arrangement is essentially that of a parent company and subsidiary. However, if the controlled company suffers losses, the controlling company is obliged to provide it compensation for its losses.

---