A profit participation right provides investors with the opportunity to receive profit-related payments and participate in the company's losses up to the amount they have invested. However, it is important to note that all profit participation rights facilitated through Invesdor include a qualified subordination clause in accordance with legal provisions.
Qualified subordination means that investors do not have a right to payment or repayment of their invested amount as long as the company has negative equity or making such a payment would lead to the company's insolvency. In the event that insolvency proceedings are initiated against the company during the term of the investment, investors will only receive their outstanding profit payments and the invested sum after all other non-subordinated creditors have been paid, but before the shareholders' claims are addressed.
It is important to understand that a profit participation right is a form of entrepreneurial participation and grants investors profit rights, but it does not provide them with shareholder rights such as participation in decision-making, voting rights in shareholders' meetings, or co-determination in the company's affairs.
Investors should carefully assess the risk of insolvency for the company before making an investment. It is crucial to consider the financial condition and prospects of the company, as there is a possibility of a total loss of the investment in the worst-case scenario. Evaluating the risk of insolvency and conducting thorough due diligence can help investors make informed investment decisions.