FAQs: Equity Investments

Beginners

Frequently asked questions about equity investments

By André Jasch
6 minute read

Here we have summarized the most frequently asked questions about equity investments on Companisto.

 

What is equity?

  • Equity is the capital raised by a company from its own resources. It is the capital provided by the owners or partners of a company. Conversely, any investor holding equity in a company is also a shareholder of that company.

 

What are equity investments?

  • Equity investments are a form of investment in startups and growth companies. An investor invests in the equity of a company and thus becomes a co-owner of the company, with all rights and obligations associated with it.

 

What rights are associated with equity investments?

  • Equity investments involve profit participation and exit participation. This means that the investor generates a return if the company generates profits or if the company is sold, also known as an exit. In addition, the investor receives all ownership rights, including extensive information rights on current business developments and voting rights in shareholder resolutions.

 

What is the process of identification before an investment?

  • Investors must identify themselves once before making an equity investment. They have two different methods for doing this: PostIdent and VideoIdent. Investors should have a valid ID ready for identification. In order to complete the entire process, they also need a computer with a webcam (not older than 3 years) or a mobile device (smartphone or tablet).

 

Why do I have to identify myself before an equity investment can be made?

  • The law stipulates that every investor must identify himself once prior to an equity investment. The legal basis for this is the Money Laundering Act (§ 11 GwG), which obliges platform operators such as Companisto to verify the identity of their investors before making an equity investment. Without a successful identification, investors are not allowed to make any equity investments. Identification is a one-time process and does not have to be repeated for subsequent investments.

 

What forms of equity participation are there on Companisto?

  • The new Companisto participation model consists of two pillars: a participation model for stock corporations (AGs) and one for limited liability companies (GmbHs). When investing in shares in limited liability companies, investors become shareholders with all ownership rights. Investors who participate in a stock corporation on Companisto become shareholders with full voting rights. The companies' share registers will be linked to Clearstream. Through the Clearstream connection, the shares receive an ISIN (International Security Identification Number) and can be deposited, i.e. they can be held in any share deposit with a bank or an online broker. In both investment models, investors may be able to claim an INVEST subsidy of 20 percent.

 

What is the difference between A-Shares and B-Shares?

  • Companisto offers two ways of participating in limited liability companies: A-Shares and B-Shares. With both investments, the investor becomes a co-owner of the company and receives all associated ownership rights. The minimum investment for A-Shares is EUR 10,000. Investments in equity interests of EUR 10,000 or more in companies that comply with the guidelines of the INVEST promotion program are subsidized by the state with 20 percent. An A-Share investor is entered in the commercial register as a shareholder of the company. In shareholder voting, the A-Share investors pool their voting rights. The minimum investment amount for B-Shares is the price for one share in the limited liability company. The B-Share investors' votes are bundled in a trustee pool during shareholder votes. A B-Share investor is not entered as a shareholder of the company in the commercial register. Instead, a trustee acts as shareholder for all B-Share investors. The trustee exercises the voting rights of the B-Share investors. B-Shares are not subsidized by the INVEST subsidy program and cannot be converted into A-Shares.

 

What is the role of the trustee?

  • The trustee manages the holdings of the B-Share investors. He is entered as a shareholder in the commercial register and represents the B-Share investors in shareholder votes. The trustee is bound by instructions and always acts in the interest of the investors, who make a majority decision beforehand.

 

What is a shareholder vote?

  • In a shareholder vote, all shareholders come together to make important decisions about the company in which they hold an interest. Pursuant to section 47 of the German Companies Act (GmbHG), the shareholders' meeting adopts its resolutions by a majority of its votes cast. At the meeting, the shareholders vote YES or NO. According to the law, this takes place at least once a year.

 

How does a shareholder vote take place?

  • The company must prepare a resolution proposal prior to a shareholder vote and make it available to Companisto. Based on this resolution proposal, Companisto organizes the shareholder voting, which takes place online in the closed investor area.

 

What is the difference between equity investments and participatory loans?

  • Participatory loans are a form of investment that is similar to equity - to the extent permitted by law; however, the investor does not acquire ownership rights. As with equity investments, the investor participates in profits and exit proceeds and has information rights, but receives no voting rights in shareholder votes and is not listed as a shareholder in the commercial register.

 

What is the difference in investor protection between equity investments and participatory loans?

  • Equity investments are subject to the Asset Investment Act (VermAnlG) in the same way as participatory loans. However, the investor not only receives an asset investment information sheet (VIB), but also an even more detailed asset investment prospectus with all the important details and risks of the investment. In addition, shareholders have a stronger legal position, which results directly from the Limited Liability Company Act (GmbHG) and the Stock Corporation Act (AktG).

 

How are equity investments taxed?

  • All income on Companisto, regardless of the type of investment, is investment income. This also includes income from an equity investment. This is subject to capital gains tax (25 percent), solidarity surcharge (5.5 percent on capital gains tax) and church tax (8 percent or 9 percent on capital gains tax, depending on the federal state).

 

Can I claim losses from an equity investment for tax purposes?

Any losses from an equity investment can be offset against investment income just like losses from a classic equity crowdfunding investment. The relevant factors for loss offsetting are investment income from interest, dividends and realized price gains from equity transactions. If no investment income is available, the loss can be carried forward. Companisto provides the investors with all packet of all the necessary documents in case of insolvency. It is advisable to report losses from a startup investment as soon as possible. Investors should file their losses with the tax office when the opening of insolvency proceedings is announced. They should submit the following information to the tax office through their tax advisor:

  • Copy of the participation agreement and the participation certificate
  • Proof of payment as confirmation of the investment made
  • Preliminary loss statement of Companisto (to be found in the investor area of the startup under documents)
  • Confirmation of the opening of insolvency proceedings (to be found under Insolvency Announcements)

 

 

Do you have any other questions about equity investments on Companisto? Let us know in the comments below!


 


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André Jasch
Please note
The acquisition of this asset involves considerable risks and can lead to the complete loss of the assets used. The expected yield is not guaranteed and may turn out to be lower.
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