LAWFUEL – The Law Firm Newswire – The international law firm Clifford Chance advised KfW on the stucturing of its standardised Profit Participation Rights Programme (Genussrechtsprogramm). Under this programme, German small and medium-sized enterprises (SMEs) will, for the first time, also be offered profit participation rights capital in the form of small tranches with the aim of improving their equity ratio.
The new programme is intended to augment the bank’s existing promotional loan financing in the equity finance area by providing participatory capital in the form of participatory rights with equity capital character in the balance sheet. Within the framework of the programme, KfW provides equity investment companies with refinancing and liability coverage of up to 50% of the relevant profit participation right amount.
Profit participation volumes can range from EUR 0.5 to EUR 5 million. A standardised profit participation right agreement concluded between the respective equity investment company and the financing enterprise serves as the basis. Enterprises seeking capital revert directly to the equity investment company. The standardised profit participation right agreement addresses the special legal and accounting characteristics of corporations and SMEs in the legal form of limited partnership with a private limited company as general partner (GmbH & Co. KG).
The KfW-Mittelstandsbank promoted the German SME sector to the tune of approximately EUR 22 billion last year. It provides long-term, low-interest loan financing via the relevant firm’s bank, which is structured according to the specific requirements of founders, high-growth companies and established companies.
The Clifford Chance team was led by partner Hans Stamm (Banking & Capital Markets, Munich), and included partner Gerhard Dreyer (Tax, Frankfurt) as well as associates