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13.2.7. What Constitutes Equity Capital

As in the case of debt interest, special criteria govern the determination of when an interest will be treated as an equity interest. Broadly speaking, any of the following interests issued by an entity will be considered to be an equity interest:

  • a share issued to a member or shareholder of a company;
  • an interest which provides returns that depend on the issuer's economic performance or activities (e.g. a hybrid instrument whose returns depend on the profits realized by the issuing company);
  • an interest which provides a right to returns at the discretion of the issuer; and
  • an interest that may or will be converted into an equity interest or share by the issuer.