A participation loan (participation loan ) is a form of participation financing in the form of a loan within the meaning of BGB . A share of the profit or turnover of a company or business for the purpose of which (in particular for financing) the loan was granted is agreed as remuneration for the loan being granted (profit-sharing = profit-dependent). In addition to profit sharing, interest can be agreed, whereby the focus must be on profit sharing.
Differentiation from the quiet society
The distinction must therefore be made on the basis of circumstantial evidence. Speak for the existence of a profit participation loan
- the loan is secured according to standard banking practice
- the interest rate depends on profit or turnover
- the lender has no say in the company
- the lender bears no entrepreneurial risk
- participation in the loss is excluded
- there is no common purpose
Significance as an unregulated capital investment
Due to the amendment to the Sales Prospectus Act of July 1, 2005, investments that are not securitized in securities are predominantly subject to a prospectus requirement. In this way the legislature wanted to regulate the so-called "gray capital market" . The legislature wanted to keep part of the gray capital market alive. The Asset Investment Act , which mostly came into force on June 1, 2012, did not yet cover the profit-sharing loan either. Since the introduction of the Small Investor Protection Act, which came into force in 2015, the profit-sharing loan has been taken out as an investment within the meaning of the Asset Investment Act in Section 1 (1) No. 2 in order to circumvent the prospectus requirement, which was then required for a funding amount of 100,000 euros or more to continue to avoid and bring the investor under control rights. The obligation to publish a prospectus is generally required, but does not apply with the requirements of Section 2a (1) VermAnlG. Especially in the area of equity crowdfunding the introduction of KASG was necessary to protect the investor. With the participation loan the subordinated loan (§ 1 Abs. 2 Nr. 4 VermAnlG) and "other investments that grant a claim to interest and repayment or in exchange for the temporary transfer of money convey an asset-based claim directed towards cash compensation" were included and which were also privileged in accordance with Section 2a (1) VermAnlG. The legislature owes a reason why it has privileged exactly these three investments.
No applicability of the Capital Investment Code
The Investment Code (KAGB) is predominantly entered into force July 22, 2013. It ties in with the concept of investment assets . What is to be understood by investment funds is set out in Section 1 of the KAGB. Investment fund is any undertaking for collective investment which collects capital from a number of investors in order to invest it in accordance with a defined investment strategy for the benefit of these investors and which is not an operating company outside the financial sector. A joint investment only exists if the investors are to participate in the opportunities and risks, whereby both profit and loss sharing must be agreed, according to the interpretation letter from the Federal Financial Supervisory Authority (BaFin) on the scope of the KAGB and the concept of "Investment assets" dated June 14, 2013, last amended on August 27, 2014. Loans typically do not provide for any loss sharing and are therefore not subject to the concept of investment assets and thus not to the KAGB. The so-called qualified subordination, which is very often agreed in the context of participatory loans, does not change this assessment, as it does not represent a loss sharing, but only a temporary right to refuse performance.
Effects of the Small Investor Protection Act on the profit participation loan
With the introduction of the Small Investor Protection Act, which came into force on June 10, 2015, the prospectus requirement for participatory loans and subordinated loans in accordance with Section 1 (2) VermAnlG. However, there is an exception according to Section 2a (1) VermAnlG if the sales price of all investments issued by the issuer does not exceed EUR 2.5 million and the total amount does not exceed the total amount, the investment is publicly offered and the sale via an investment advisor or investment broker via an internet service platform takes place.
Loans as a deposit business?
Loans can qualify as deposit business within the meaning of Paragraph 1 Sentence 2 No. 1 of the German Banking Act (KWG) and thus constitute banking transactions that are subject to regulation. In order to avoid the deposit business, loans can either be secured in accordance with the usual bank security or qualified subordinate. What a standard bank collateral should look like depends on the general banking view. For example, mortgage liens, guarantees or bank sureties have been used as security customary in banking, provided they are designed accordingly, in particular in the event of realization, allow the investor direct access to the security. The agreement of a qualified subordinate means that the loan monies raised are no longer necessarily repayable - unlike in the case of deposit business.
The lender generates income from capital assets ( EStG ). Profit sharing and interest are subject to capital gains tax withholding. This covers income tax, unless the lender and borrower are related parties or shareholders, further exceptions are possible. The aim here is to prevent the borrower's profit sharing and interest from reducing operating profit at the full tax rate, while profit sharing and interest are only taxed by the lender at the final withholding tax rate. The loan is to be recognized as a liability in the borrower's balance sheet. The valuation is based on the repayment amount and usually corresponds to the nominal amount of the loan.Paragraph 1, Sentence 1, No. 5 in conjunction with Paragraph 1, No. 4, 1st HS
As part of the contractual design as an investment product, in addition to the distinction from the silent partnership, it is very important to construct the loan in such a way that it is not a deposit transaction within the meaning of (1) No. 1 of the German Banking Act (KWG). Otherwise the company accepting the loan would have to have a banking license within the meaning of KWG. Often the participatory loans are legally inadequately constructed, so that the Federal Financial Supervisory Authority (BaFin) repeatedly issues prohibition orders on the basis of the acquisition or processing orders with regard to accepted loans.
- Barbara Dörner: Expert report (PDF; 170 kB)