The Settlement Credit of a Silent Partner: Valuation, Maturity, Tax

The Auseinandersetzungsguthaben (settlement credit) is the amount a silent partner receives in cash on withdrawal. § 235 HGB and § 186 UGB (the German and Austrian commercial code provisions) require the settlement but govern neither valuation nor maturity nor interest. Without a contractual rule, the fallback applies: the nominal amount of the contribution, reduced by allocated losses, with no share in hidden reserves or goodwill, due immediately and bearing no interest.

For owners running an actual process, our approach to selling your company sets out how the mandate works.

That gap is the real point of dispute. The two sides go into the settlement with different expectations, and the statute does not decide the question.

The silent partner expects a share in the enterprise value that has been built up; the business owner expects to repay what was paid in. Who is right is written in the contract — or nowhere at all.

The fundamentals of the legal form are set out in silent partnership.

What § 235 HGB and § 186 UGB govern — and what they do not

Both provisions say that the departing partner settles with the owner in cash. They do not say on what basis, at what date, or at what rate of interest.

Without a valuation standard, the nominal amount remains. Without a maturity provision, the whole amount is payable at once. Without an interest provision, the silent partner bears the waiting time without compensation.

For the owner, immediate maturity is a liquidity risk; for the silent partner, the nominal amount is a value risk. Both risks can be cleared away with one clause each.

The widespread claim that a general nominal value principle applies to the settlement credit is unsupported. The nominal amount is the result of an absent agreement, not a free-standing rule of law.

Question	What the statute governs	Outcome without a contract	The clause that is called for
The claim in principle	§ 235 HGB, § 186 UGB: settlement in cash	the claim exists	none required
Valuation standard	nothing	nominal amount of the contribution, reduced by loss allocations	valuation under IDW S 1, valuation date, appointment of the valuer
Hidden reserves and goodwill	nothing	not included	express inclusion, with an effect on classification as atypical
Maturity	nothing	due immediately and in full	instalment plan, deferral, annual cap
Interest	nothing	no interest	interest on the outstanding amount from the valuation date
Dispute over the amount	nothing	open civil litigation	expert determination, procedure, allocation of costs
Right to information for verification	§ 233 HGB (one sentence), § 183 UGB with a court procedure in Abs 3	in Germany no codified court procedure	contractual right to information and inspection
Grounds for termination	§ 234 HGB, § 184 UGB via cross-references	termination rights under the respective chain	minimum term, notice periods, grounds for termination
Change of control	nothing	no legal consequence	express clause with a valuation mechanism

The full architecture of the clauses is dealt with in the silent partnership agreement.

Typical or atypical: the difference in the payout

This choice decides the order of magnitude of the payment, not the details. For a typical silent partner the calculation is arithmetic; for an atypical one it is a valuation.

Giving the silent partner a share in hidden reserves and goodwill departs from the statutory default. That very agreement is at the same time the core feature that typically makes the participation atypical. The consequences for co-entrepreneur status are shown in the atypical silent partnership.

Component of the credit	Typical silent	Atypical silent
Nominal amount of the contribution	yes	yes
Deduction of accumulated loss allocations	yes, to the extent agreed	as a rule yes
Profit shares not yet paid out	yes	yes
Share in hidden reserves	no	yes, if agreed
Share in goodwill	no	yes, if agreed
Need for a valuation	none, a calculation from the books	company valuation required
Typical point of dispute	the amount of loss allocation	method, valuation date, planning assumptions
Tax classification of the exit (AT)	investment income, § 27 Abs 2 Z 4 EStG	disposal gain, § 24 EStG
Tax classification of the exit (DE)	§ 20 Abs 1 Nr 4 EStG	§ 16 Abs 1 S 1 Nr 2 EStG
Risk of tax without a cash inflow	low	high where the capital account is negative

Nothing follows automatically for the balance sheet. In 6 Ob 204/16t the OGH (the Austrian Supreme Court) held that atypical silent participations are in principle debt; § 10 Abs 2 EKEG also has to be observed alongside. Co-entrepreneur status for tax purposes does not create equity on the balance sheet.

The valuation clause is the single most important point in the contract

With an atypical arrangement, the entire payout hangs on one question: how is enterprise value determined. A clause fixing IDW S 1 as the standard is in practice the most valuable sentence in the whole contract.

It has to settle four things: the standard, the valuation date, the procedure for appointing the valuer, and how binding the result is.

Without those four points the parties negotiate the method only once their interests are maximally opposed. The methodology itself is set out in company valuation and IDW S 1.

The second most important point is maturity. A large amount falling due immediately, with no instalment provision, endangers the very business it comes from.

What ten reviewed standard templates do not contain

The finding from a review of ten common contract templates is unambiguous. Not one of the ten agreed a valuation under IDW S 1.

Nor was a pure book value settlement found as the sole rule. The templates avoid both extremes and leave the question open.

Three further clauses were missing from all ten templates: monthly reporting, a non-compete binding the silent partner, and a genuine change-of-control clause. Anyone using a template adopts those gaps sight unseen.

In practice that means: a template pulled off the internet governs precisely the point that later triggers the dispute. How a participation is set up cleanly from the outset is described in taking on a silent partner.

Termination and obtaining information: the consequences of the MoPeG

In Germany the MoPeG (the reform of partnership law) changed two provisions that bear directly on the settlement. Both changes are regularly overlooked in practice.

First, the grounds for termination. Since the MoPeG (Art. 51 Nr. 20), § 234 HGB refers to §§ 132 and 133 HGB. Previously the reference was to §§ 132, 134 and 135. § 132 HGB has been recast entirely and now comprises six paragraphs; §§ 134 and 135 in their old form have disappeared from the chain.

Austria did not follow that step. § 184 UGB refers to §§ 132 and 134 UGB. The two chains are not congruent and must not be cited together.

Second, the right to information. Since the MoPeG (Art. 51 Nr. 19), § 233 HGB consists of a single sentence: "Auf das Informationsrecht des stillen Gesellschafters ist § 166 entsprechend anzuwenden." — the silent partner's right to information is governed by § 166 by analogy.

With that, the court procedure in § 233 Abs 3 HGB in its old form has disappeared from the text of the statute. Austria retained it in § 183 Abs 3 UGB.

For checking a settlement calculation this matters. A German silent partner no longer has an expressly codified route to court to have the figures on which his credit is based examined. Anyone entering a silent participation in Germany should therefore agree the right to information and inspection for the settlement case expressly, including a schedule of documents and a deadline.

Insolvency of the owner, subordination, and the Austrian clawback

If insolvency proceedings are opened over the owner's assets, the claim to the contribution is an insolvency claim. That follows from § 236 HGB and § 187 UGB.

Where subordination has been agreed, § 39 Abs 2 InsO applies in Germany to agreed subordination and § 39 Abs 5 InsO to the small-shareholder privilege for a participation of ten per cent or less without a management position. For the over-indebtedness test, § 19 Abs 2 InsO and, in Austria, § 67 Abs 3 IO are decisive. The distinction from other subordinated instruments is dealt with in subordinated loans.

Austria has a provision with no German counterpart. § 188 UGB contains a special one-year clawback period for the return of the silent contribution or the waiver of the loss share before insolvency proceedings are opened.

Anyone unwinding and paying out a silent participation in a crisis needs to know that period. The payment can be reversed.

For participations that came into existence defectively, the leading decision is BGH, judgment of 16.07.2019 – II ZR 175/18 = BGHZ 223, 13.

Taxation of the settlement credit

The payout is not a single taxable event. It breaks down into components treated differently depending on the country and the arrangement. The mechanics in overview are set out in tax on silent partnerships.

Feature	AT typical silent	AT atypical silent	DE typical silent	DE atypical silent
Relevant provision	§ 27 Abs 2 Z 4 EStG	§ 24 EStG	§ 20 Abs 1 Nr 4 EStG	§ 16 Abs 1 S 1 Nr 2 EStG
Allowance on exit	not applicable, no disposal gain	EUR 7,300	not applicable, no disposal gain	EUR 45,000 under § 16 Abs 4 EStG, from the completed age of 55, tapering from EUR 136,000, once in a lifetime
Rate relief	none; § 27a Abs 2 Z 3 EStG excludes the special rate, tariff up to 55 %	§ 37 Abs 5 EStG, half the average rate only on death, incapacity, or from the completed age of 60 on ceasing gainful activity, in each case with a seven-year period	flat-rate withholding tax, displaced by § 32d Abs 2 Nr 1 EStG for related parties and from a 10 % holding	§ 34 Abs 3 EStG, 56 % of the average tax rate, minimum 14 %, up to EUR 5 million
Particular feature	profit shares are taxable to the extent they are not to be used to top up a contribution reduced by losses	a negative capital account must in any event be recognised under § 24 Abs 2 S 2 EStG	§ 32d Abs 2 Nr 1 S 2: "Insoweit findet § 20 Absatz 6 und 9 keine Anwendung"	§ 15a Abs 5 Nr 1 EStG applies expressly to the silent partner

The harshest single consequence sits in the Austrian column for the atypical silent participation. Under § 24 Abs 2 S 2 EStG a negative capital account must in any event be recognised on withdrawal.

That means a tax charge with no cash inflow whatsoever. The silent partner has been allocated losses over years, receives nothing on exit — and still pays tax on the elimination of the negative account. The calculation therefore belongs before the notice of termination, not after it.

When the contribution is lost: total loss

For Germany the position has changed noticeably. § 20 Abs 6 Satz 5 and 6 EStG have been repealed without replacement, by the Jahressteuergesetz 2024 of 02.12.2024, BGBl. 2024 I Nr. 387, issued on 05.12.2024, Art. 3 Nr. 7 Buchst. c.

Art. 3 Nr. 22 makes clear, via § 52 Abs 28 S 25 and 26 EStG, that both sentences no longer apply to any open case. The repeal has been in force since 6 December 2024.

The much-quoted set-off ceiling of EUR 20,000 is therefore repealed law. Any account that still cites it is out of date.

On the question of when a loss is recognised for tax purposes, there is a relevant decision on a neighbouring provision. On 24.10.2017 the BFH held in VIII R 13/15, BFHE 259, 535, BStBl II 2020, 831 that the definitive loss of a private capital claim within the meaning of § 20 Abs 1 Nr 7 EStG gives rise to a deductible loss under § 20 Abs 2 S 1 Nr 7, S 2, Abs 4 EStG. The mere opening of insolvency proceedings is not, as a rule, sufficient.

That decision was handed down on number 7 and not on the silent contribution. Applying it to § 20 Abs 2 S 1 Nr 4 EStG is an argument by analogy and has to be flagged as such.

The central negative finding is this: there is no BFH decision specifically on the loss of a typical silent contribution under § 20 Abs 2 S 1 Nr 4 EStG. The question is unresolved at the highest instance.

For Austria the picture is thinner still. On the definitive total loss of a typical silent contribution, neither a provision nor a decision of the VwGH is available.

Common mistakes

No valuation standard in the contract. The most expensive mistake. It defers the most important commercial question to a moment when agreement can no longer be expected.

A share in hidden reserves agreed without awareness of the consequences. Anyone including that clause changes the tax classification of the entire participation.

No maturity provision. The owner owes the full amount immediately. That is a burden no set of annual accounts shows in advance.

Adopting a template without checking what it omits. A template is a starting point, not a contract.

Citing both chains of cross-references in one sentence. § 234 HGB and § 184 UGB refer to different provisions.

Relying on a court information procedure in Germany. It is no longer in the text of § 233 HGB.

Unwinding the participation in a crisis without looking at § 188 UGB. The one-year clawback period makes an agreed payout reversible.

Exiting with a negative capital account and no tax planning. § 24 Abs 2 S 2 EStG creates a payment obligation with no money coming in. Anyone wanting to test a sale instead of termination will find the alternatives in selling a shareholding.

This article is not a substitute for legal or tax advice in an individual case.

How IGCP supports owners

International German Capital Partners (IGCP) has been advising on participation and settlement processes for more than 20 years, with over 100 transactions supported and entirely independent of banks, funds and buyers.

In a settlement that means two things. First, commercial clarity: what amount follows from the contract, and what amount from the statutory fallback. Second, affordability: what the business can pay without endangering its operating substance.

Where a valuation is needed, it is prepared before the negotiation and not during it. The legal and tax implementation is done with your own advisers. The typical range is companies with revenues between EUR 300,000 and EUR 15 million in the DACH region, with a focus on niche businesses and scalable models.

If a silent participation is coming up, ending or has become contentious, send the participation agreement and the last two sets of annual accounts to office@igcp.at. You will receive an initial assessment of the basis of calculation, the likely range and the payout structure.

Anyone wanting to test a sale in the market rather than a settlement will find the process under selling a shareholding.

FAQ

How is a silent partner's settlement credit calculated?

Without a contractual rule it consists of the nominal amount of the contribution, reduced by allocated loss shares, plus profit shares not yet paid out. Hidden reserves and goodwill are left out. § 235 HGB and § 186 UGB only require a settlement in cash and contain no valuation standard.

When is the settlement credit due?

Without an agreement to the contrary, immediately and in full. Neither § 235 HGB nor § 186 UGB contains a maturity provision. For the owner that is a considerable liquidity risk, which can only be limited by a contractual instalment plan.

Does the settlement credit bear interest?

Not by operation of law. Both provisions are silent on interest, so without an agreement the outstanding amount carries none. An interest clause running from the valuation date is the usual quid pro quo for the silent partner accepting payment by instalments.

Does the silent partner receive a share in hidden reserves and goodwill?

Only if it has been agreed. The statutory default is a settlement in cash without any share in hidden reserves or goodwill. Agreeing that share typically turns the silent partnership into an atypical one with co-entrepreneur status.

How can the silent partner check the settlement calculation?

In Austria through § 183 UGB, whose paragraph 3 still contains the court procedure. In Germany, since the MoPeG, § 233 HGB consists only of a reference to § 166 HGB; the procedure in § 233 Abs 3 HGB in its old form has disappeared from the statutory text. German contracts should therefore regulate the right of examination expressly.

What happens for tax purposes with a negative capital account?

Under § 24 Abs 2 S 2 EStG a negative capital account must in any event be recognised on withdrawal. That produces a tax charge with no cash inflow at all. The departing partner receives no payment and still owes tax.

Is the total loss of a typical silent contribution deductible in Germany?

Unresolved at the highest instance. There is no BFH decision specifically on the loss of a typical silent contribution under § 20 Abs 2 S 1 Nr 4 EStG. The decision BFH of 24.10.2017 – VIII R 13/15 concerns § 20 Abs 1 Nr 7 EStG; applying it here is an argument by analogy. The set-off ceiling of EUR 20,000 previously cited fell away with the Jahressteuergesetz 2024.