What are corporate investments?

What types of investments are there?

Are you considering selling company shares? Then you should be aware of the different types of shareholdings.

Stocks

Shares are probably the best-known form of corporate investment. Larger companies and some medium-sized companies are traded on the stock exchange. By selling part of their equity capital in an initial public offering or a capital increase, publicly traded companies raise capital. Investors can participate in these companies by purchasing their shares. Traditionally, such share purchases are made through a bank.

Shares in a limited liability company

In a limited liability company (GmbH), shares can be acquired in the form of equity interests. As with stocks, this makes investors and shareholders partners in the company and gives them a right to profits, a say in the company’s affairs, and an exit participation: if the GmbH shares are sold, the exit participation can mean a share of the profits from the sale proceeds. Shares in a GmbH are often acquired by professional investors such as private equity firms, business angels, or venture capital firms in order to participate in the profits of growing companies.

Funds

Funds enable investors to indirectly participate in a company by purchasing fund shares without being co-owners. They therefore do not receive any say in the company’s decisions or share in its profits. Instead, they benefit from distributions made by the fund company. A distinction is made between:

• Open-ended funds: Investors can invest or withdraw their capital at any time.
• Closed-end funds: Shares can only be purchased within a subscription period and for a fixed term.

Mezzanine capital

Mezzanine capital describes a hybrid form of equity and debt capital. The investor provides the company with capital in the form of a participating loan. In return, the investor receives a share of the profits and an exit participation. Here, too, investors do not become co-owners.

Silent partnership

Silent partnerships also count as mixed capital. Here, investments are made in the company’s equity capital, but no entry is made in the commercial register. There is no right to a say in the company’s affairs, and liability is limited to the amount of the investment.

Employee share ownership (employee participation)

In addition to external investors, employee share ownership is also possible for the company’s employees. This form is conceivable, for example, if the employees are to be tied to the company but cannot be paid higher remuneration. Shareholders can receive a share of the company’s capital.

Advantages and disadvantages of a company investment

The advantages of company participation include the opportunity for attractive returns and a share in the company’s success. Another noteworthy benefit is the potential boost to employee motivation that comes with employee participation. On the other hand, there is a risk of losses and limited liquidity in the case of non-listed investments.

Do you need assistance with corporate participation?

If you would like further information on how to sell your company shares, you can rely on Conpair for sound advice. We are happy to assist you.