Silent Partnerships

In this form of the financing of a company, an investor (so-called silent partner) participates with a capital contribution in the commercial enterprise of another person. In return, he receives a share of the company’s profits.

The great advantage of this type of financing is that the silent partnership is usually not visible to outsiders. In principle, it does not need to be recorded in the commercial register and is also not evident from the company name. The only exception is the silent partnership in a stock corporation, where the silent partnership has to be listed in the commercial register.

Another advantage is that the parties are very flexible in the contractual arrangement of the participation in the company. Corporate financing can therefore be well adapted to the individual needs of the company seeking capital and the investor. For example, the silent partner can participate in the loss of the enterprise, but the loss participation can also be contractually excluded. Furthermore, in addition to the control rights, which must be granted mandatorily, the silent partner can also be granted more extensive information rights and decision-making powers in the company’s business.

If the silent participations are to be offered to the public, a sales prospectus must be published which has previously been approved by BaFin. The distribution requires a licence according to Section 34f of the German Trade Regulation Act (GewO).