Profit participation certificate

What is a Profit Participation Certificate?

A profit participation certificate (Genussschein) allows investors to share in a company’s profits. Depending on the specific terms, participation in the company’s value growth may also be included. However, investors do not become co-owners. Holding a profit participation certificate does not grant voting rights or direct ownership in the company.

Direct Profit Participation Certificate (classic form)
A profit participation certificate can be structured very flexibly. For investors, the following key aspects determine the potential returns and associated risks:

• Term: Profit participation certificates usually have a fixed term of several years. This can be structured as a fixed maturity or include termination rights, which may be waived for a certain period.
• Repayment: At the end of the term, investors are entitled to receive their original investment back — but only if the company remains solvent.
• Profit sharing: During the term, investors receive regular distributions based on the company’s performance. These can take the form of a fixed interest rate, a percentage of the profits, or a combination of both. If the company does not generate profits, distributions may be reduced or omitted entirely.
• Participation in company value: Some profit participation certificates also include the right to benefit from the company’s value appreciation. This can be structured as a share in the sale proceeds or as a bonus payment tied to the achievement of specific company valuation milestones.