Profit participating certificate

Generally, a securitized security that grants the holder of the profit participation certificate rights against the issuer of the certificate in return for the capital provided. These rights are limited to the debtor’s assets. Claims under company law are not associated with a profit participation certificate. – In return for the provision of capital, the holder of the profit participation certificate receives a share in the profits; this can be agreed by contract as subordinated, equal ranking or primarily. In practice, profit participation certificates with a guaranteed profit participation or a minimum interest rate have also become established. Furthermore, the profit participation certificate may promise the right to subscribe to new shares or a share in the company’s assets in the event of dissolution. – Profit participation certificates are classified as mezzanine capital; their distinction from subordinated loans is often difficult in individual cases. – See profit participation right, participation certificate. – Cf. BaFin Annual Report 2007, p. 80 (difficult distinction between profit participation rights and subordinated debt), p. 144 f. (machinations in the distribution of profit participation certificates).

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