Genussrecht

Genussrecht, in German corporate finance, refers to a form of participation right issued by a company to raise capital without granting voting power to the holder. It represents a contractual claim on profits and, in some cases, on liquidation proceeds, but it does not confer ownership in the company.

The rights and characteristics of Genussrechte vary by issue. Typical features include a right to a fixed or profit-related dividend and, in some structures, a preference in profit distribution or liquidation. They are usually non-voting, but some arrangements may provide limited governance rights or covenants. Depending on the terms, Genussrechte can be subordinated to creditors in insolvency and may be convertible into equity or carry an option to convert under specified conditions.

Genussrechte are commonly described as hybrid instruments because they combine elements of debt and equity. Their accounting and regulatory treatment depends on the substance of the terms under applicable standards (for example, German GAAP/IFRS) and may influence whether they are presented as equity or as liabilities on the balance sheet.

Practical use of Genussrechte includes capital formation without diluting control for existing shareholders, making them attractive for family-owned businesses, startups, or firms seeking alternative financing. Investors seeking higher yields than traditional debt may accept the absence of voting rights in exchange for participation in profits and potential upside, albeit with higher risk and less liquidity than standard debt instruments.

See also: Genussscheine, Vorzugsaktien, stille Gesellschaft.