Investors who hold a profit participation right in a company are entitled to participate in the company's profits. The return on the profit participation right is linked to the success of the company and can vary over the term of the investment based on the annual profits generated.
The actual return on the profit participation right may be lower or higher than the expected average return for a particular financial year, depending on the company's performance. This means that if the company performs exceptionally well, investors may receive higher returns than expected. Conversely, if the company underperforms, the returns may be lower than anticipated.
In years when the company incurs losses, the profit participation right also participates in those losses. However, the maximum amount of loss that the profit participation right can absorb is limited to the capital granted for the profit participation right. This means that investors are not personally liable for any losses beyond their initial investment.
In subsequent profit years, any losses incurred in earlier years may be offset by the profits generated before the distribution of remuneration. This allows for potential compensation of losses in the future when the company returns to profitability.
It is important for investors to carefully evaluate the company's financial performance and prospects before investing in a profit participation right. The actual returns can be influenced by various factors, including the company's profitability, market conditions, and overall business performance.