What is an entity with variable interest?

Entity with variable interest (VIE) is a legal trade structure that allows the investor to hold a control share in the accounting unity without this interest that has enough voting privileges to lead to the majority. Somewhat like a special purpose subject, the entity of variable interest was defined by the United States Council. In principle, three elements must be present in a certain form if an investment company can be correctly identified as VIE.

First, an investor or a group of investors holding capital on the subject has no privilege or responsibility for the company's control. This means that the ownership effect of such a large block of own capital is not automatically performed in deciding on the company's activities or the ability to reorganize the company's powerful level. However, investors in the field of variable interest will gain the same advantages in terms of realizing their investment as anyone other investor.

Furthermore, the entity of variable interest may be somewhat thin capitalized. This means that risk capital is not enough to finance the overall operations of the company. Other sources of financing, such as product sales, carry the burden of fulfilling the expenditure associated with the ongoing operation of business. This is in fact one of the reasons why voting privileges are limited, because their interest is not the primary benefit that the company maintains.

The last, current economic conditions do not necessarily complicate voting interests of your own capital. In order to observe this situation, which is sometimes seen as a rule of abuse, the voting authorization is somewhat limited. This condition allows the company to pass the period when the demand for the company's goods are low, but better times are expected. During this temporary depressive market it makes NAS more difficultmelting entity with variable interest to more difficult owners of their own capital so that the holders of the risks try to close the company and sell assets. The legal trade structures of this type help to maintain industry and investment markets somewhat more stable even during a temporary decline.