Risk Warnings Contract
Risk warnings
- General Information
The following general risk information outlines the risks that may be present when investing in financial instruments, in particular investments or securities, offered on the https://www.credipto.com/ platform. These general risk warnings are supplemented by project-specific risk warnings for individual financing projects. These project-specific risk warnings may differ from and take precedence over the disclosures below. Project-specific risk information is provided to investors in the context of the relevant investment.
The financial instruments offered are associated with economic, legal and tax risks. Investors should therefore read the risk information below and the relevant project-specific risk information carefully and take it into account when making their decisions. In particular, the investor's investment should be appropriate to its own financial circumstances and its investment in the financial instruments offered should only represent a small portion of its total assets.
Some of the legal and actual risks associated with the financial instruments offered and important for the valuation of financial instruments are presented below. Also presented are risk factors that may impair the ability of issuers (“issuers”) to produce expected results.
Not all risks associated with investments can be described below. The risks listed below cannot be exhaustively described here for all investments offered on the platform. The chronological order of the risks listed does not allow any conclusion to be drawn about the probability of their possible realization or the extent of a potential impairment.
- general risks
- Maximum risk - risk of total loss
For many of the financial instruments offered, there is a risk of total loss of the investment amount and interest receivable. The occurrence of individual risks or the cumulative interaction of various risks may have a significant negative impact on the expected results of an issuer, which may lead to its bankruptcy. The individual investor may be exposed to additional financial disadvantages. This may be the case, for example, if the investor finances the acquisition of financial instruments with a loan, strictly schedules payments from the financial instrument to cover other obligations despite the existing risk of loss, or due to costs for back tax payments. In the worst case scenario, such additional financial disadvantages can even lead to the personal bankruptcy of the investor. Investors should therefore examine all risks taking into account their personal situation and circumstances and, if necessary, seek individual professional advice. External financing of investments (e.g. through a bank loan) is strongly discouraged.
Financial instruments are only suitable as an addition to an investment portfolio. Investment is only suitable for investors who can accept a loss up to the total loss of their capital investment. As a rule, there is no legal or other deposit protection. Furthermore, the financial instruments offered are usually not suitable for pension provision.
On the other hand, there is usually no obligation to make additional contributions or any other risk of liability exceeding the amount of invested capital. In particular, asset investments offered on the platform under the Asset Investment Act (e.g. qualified subordinated loans) never provide for an investor's obligation to make additional contributions.
- Subordination risk
Some of the financial instruments offered on the platform are equipped with loss participation (i.e. a reduction in investors' repayment claims in case the issuer incurs losses) and/or qualified subordination and pre-bankruptcy enforcement block. Such financial instruments are entrepreneurial financing with a corresponding entrepreneurial risk of loss (liability function similar to equity). However, the investor does not obtain any participation or control rights under company law and therefore does not have the opportunity to influence the realization of the entrepreneurial risk (in particular, the investor does not have the opportunity to terminate loss-making business activities before the invested capital is used). From the investor's point of view, this type of contractual arrangement combines the disadvantages of debt capital (in particular, the investor's participation in the asset, the investor's influence over the management of the issuer, and the investor has no other participation and information rights) with the disadvantages of equity capital (the investor's participation in entrepreneurial risk, no obligation to file for bankruptcy of the issuer if there is no possibility of repayment). For the investor, this means that the risk assumed by the investor may in certain respects be even higher than the entrepreneurial risk of a shareholder.
If a qualified subordination and pre-insolvency bar is recognized, all claims of the investor, in particular claims for repayment and claims for interest or profit participation (“subordination claims”), cannot be asserted against the relevant issuer if they would give rise to a binding reason for the issuer to file for insolvency proceedings or if such a reason for insolvency already exists (pre-insolvency bar). The corresponding grounds for insolvency under German law are insolvency and over-indebtedness (see below for further details). For issuers domiciled abroad, these are replaced by the applicable grounds for insolvency under the relevant national insolvency law.
A pre-insolvency bar to enforcement means that claims arising from financial instruments are no longer enforceable if the issuer is insolvent or over-indebted at the time of the payment request or if another ground for insolvency exists under the law applicable to the issuer or is threatened to materialize as a result of the payment. The investor's claims will be permanently barred from enforcement unless and to the extent that the issuer's crisis is resolved. This may result in the investor's claims being permanently unenforceable even outside of insolvency proceedings.
Insolvency occurs if the issuer is unable to fulfill its payment obligations as they fall due (Section 17 (2) of the German Insolvency Act).
Over-indebtedness exists if the issuer's assets can no longer cover its current liabilities, if it is predominantly unlikely under these circumstances that the issuer will be able to continue its activities (Section 19 (2) of the German Insolvency Act).
In the case of foreign issuers, the valid insolvency grounds of the issuer under the relevant national insolvency law are specified in the project documentation.
These legal provisions may change in the future. This will also change the requirements and conditions under which the pre-insolvency enforcement bar applies.
Qualified subordination, including the pre-insolvency enforcement bar, may have the following effects: The issuer would have to suspend interest and redemption payments or dividend payments for as long as it is obliged to do so, if the pre-bankruptcy enforcement bar is triggered. The investor will not be able to claim its claims when due.
The investor will be obliged to repay, upon demand, an interest or redemption payment or a dividend payment that it has wrongfully received despite qualified loyalty to the issuer.
There is also the possibility that the investor may not receive, or may not receive in a timely manner, interest payments or redemption payments or a profit participation payment as a result of the subordination. In addition, the investor may have to pay tax on interest or dividends already paid, even if the investor is obliged to repay the amounts received.
The investor's subordinated claims are also subject to the following claims in the event of liquidation proceedings and bankruptcy of the issuer: Qualified subordination applies to all present and future claims of all non-subordinated creditors of the issuer and - in the case of issuers domiciled in Germany - to all subordinated claims referred to in Section 39(1) of the German Insolvency Act.
Consequently, the investor's claims will only be taken into account after all other creditors of the issuer have been fully and finally satisfied. In the case of foreign issuers, the applicable ranking of subordinated claims in the event of the issuer's bankruptcy and/or liquidation is disclosed in the project-related documentation.
- Risks arising from lack of collateralization
If the financial instruments are unsecured, the investor will not be able to satisfy, in the event of the issuer's insolvency, any claim for repayment of the invested capital or any claim for payment of interest or distribution of profits arising from the collateral. Particularly in the case of insolvency, this may mean that the claims of individual investors cannot be satisfied or can only be satisfied to a lesser extent. This may result in payments not being made or not being made on time or in partial or total loss of the investment amount.
- Risks in case of final redemption
Depending on the financial instrument, it may be agreed that the issuer must repay all or part of the capital provided at maturity on a specific date (bullet repayment). If the issuer is unable to raise the capital required for redemption from its business activities and/or obtain the necessary follow-up financing by that date, there is a risk that the final redemption cannot be made or cannot be made on schedule. An investment in a bullet repayment financial instrument involves a higher risk than, other things being equal, for example, an annuity or installment repayment financial instrument.
- Marketability (fungibility), availability of invested capital, long-term commitment
Financial instruments brokered on the platform usually have a fixed contractual term. In these cases, early ordinary cancellation by the investor is not foreseen.
Investments are not securities and are not comparable to securities. There is no liquid secondary market for brokered investments. Even if the sale of financial instruments by the investor is in principle legally possible, there will usually be no opportunity to sell financial instruments due to small market sizes and trading volumes. As a result, if the investor wishes to sell, it may not be possible to find a buyer or the sale may only be possible at a lower price than desired. The investment amount may remain tied until the end of the contract term.
- relevant issuer-level risks
In many cases, the financial instruments intermediated here are corporate financings. In these cases, the investor bears the risk of an unfavorable business development of the issuer. There is a risk that the issuer may not have the necessary funds in the future to fulfill the demands of investors and/or to distribute profits. Neither the economic success of the issuer's future business activities nor the success of the projects pursued by the issuer can be predicted with certainty. Issuers can neither guarantee nor assure the amount and timing of inflows.
- Issuer default risk (issuer risk)
Issuers may become insolvent or over-indebted. This may be particularly the case if an issuer has lower revenues and/or higher expenses than expected or is unable to provide the necessary follow-up financing. The insolvency of an issuer can lead to the loss of investors' investments and interest, as issuers are not part of any deposit protection scheme.
- Special purpose vehicle
The Issuer may be a special purpose vehicle that has no other business other than the realization of the planned project (e.g. in the fields of wind turbines or real estate) to absorb potential losses and overcome payment difficulties. Whether and when investors' claims can be satisfied and/or profit distributions can be made depends in these cases to a large extent on the progress and economic success of the relevant project.
- Early company stage
The issuer may also be a company at an early corporate stage that has not yet generated a positive operating cash flow (i.e. the outflow of liquid funds due to business activities initially exceeds the inflow of liquid funds). Financing such young companies is associated with certain risks. If a business idea does not succeed on the market or the planned business expansion does not materialize as hoped, there is a risk of total losses for investors. The success of a company depends on various factors such as the team, specific key people, experts and advisors, market environment, supplier relations, technological developments, property rights, legal framework conditions, competitors and other components. Investors who invest in an early-stage company are much more likely to lose their invested capital than to realize a return on their invested capital.
- Risks arising from business activities and the realization of the project pursued by the relevant issuer
Various risk factors may adversely affect the ability of operating issuers to fulfill their obligations arising from financial instruments. On the one hand, these are risks arising from the realization of the project carried out by the relevant issuer. On the other hand, the general business activities of the relevant issuer may also be associated with risks. These and/or other risks may have a negative impact on the issuer's asset, financial and earnings position. As a result, issuers may not have the necessary funds to fulfill the demands of investors in the future and/or to distribute profits and repay the debt on the financial instrument issued.
- Key person risk
The loss of key personnel of an entrepreneurial issuer entails the risk that specialized knowledge is no longer available and therefore qualified business development and risk management can no longer be guaranteed as before. The loss of such key personnel can have a detrimental impact on the economic development of the issuer concerned.
- Forecast risk
Estimates of the course of the project, the costs of carrying out the project and the revenue that may be generated, among other things, may prove to be inaccurate.
Previous market or business developments are not a basis or indication of future developments.
- Legal change risk
The presentation of the legal consequences of an investment in a financial instrument is based on the state of the law in force at the time of the offer, court decisions and administrative practice applied to date. Changes or reforms in the application of existing legal norms by the competent authorities and courts, as well as future changes in legal norms may have negative consequences for the platform, the issuer and the investor. There is no guarantee that the laws and regulations, judicial and administrative practice in force at the time of the Offer will not change. On the contrary, the investor bears the risk of legal changes.
- Investor level risks
- Debt financing risk
Depending on the individual circumstances, the investor may suffer further financial disadvantages in individual cases, for example due to additional tax payments. If the investor finances the purchase of the financial instrument externally, for example by taking out a private loan from a bank, the investor's other assets may be jeopardized in addition to the loss of the invested capital. In this case, the investor's maximum risk is over-indebtedness, which in the worst case can lead to the investor's personal bankruptcy. This can happen if the investor is unable to cover the interest and amortization expenses arising from debt financing due to little or no return on the financial instrument. We therefore strongly advise against borrowing against the financial instruments offered.
- Note on risk diversification and avoidance of risk concentration
Due to its risk nature, an investment in one of the financial instruments brokered on the platform should be considered as only one component of a diversified (risk-mixed) investment portfolio. As a general rule, the higher the return or gain, the greater the risk of loss. Better risk diversification and avoidance of “cluster risks” can be achieved by spreading invested capital across various asset classes and financial instruments.
- Risk of changes in the legal and tax framework
It cannot be ruled out that brokered financial instruments may be affected by future tax, corporate or other legislative changes in a way that requires a corresponding deduction to be applied to payments owed, so that the expected results for the investor may not be achieved (or may no longer be achieved). There is also the risk that the acquisition, sale or redemption of financial instruments may be taxed, resulting in additional costs for the investor. These costs may also have to be borne by the investor in the event of a total loss of the investment amount. The assumption of these costs may lead to the personal bankruptcy of the investor.
- information from the platform operator
- Scope of the offer review by the Platform Operator
The Platform Operator, acting as a contractual agent on behalf of, for the account and under the responsibility of Effecta GmbH (liability umbrella), will only carry out a suitability check prior to the publication of a financial instrument or financing project on the Platform. Publishing on the Platform does not constitute a recommendation for an investment. The Platform Operator does not assess the creditworthiness of the relevant issuer and does not check the accuracy, completeness or timeliness of the information provided by the issuer.
- Activity profile of the platform operator
The platform operator does not have an advisory function, does not provide advisory services and does not provide any consulting services. In particular, it does not provide financial and/or investment advice or tax and/or legal advice. The platform operator does not provide investors with personal recommendations for the acquisition of financial instruments based on an examination of the personal circumstances of the respective investor. Personal circumstances are inquired into only to the extent required by law in the context of investment brokerage and only for the purpose of providing information required by law, but not for the purpose of making a personal recommendation to an investor to purchase a particular financial instrument.
- Information content of documents
In the case of offerings for which a formal prospectus has not been prepared (prospectus-exempt offerings), the project description and other documents of an offered financial instrument on the platform do not purport to contain all the information necessary to evaluate an offered financial instrument. Investors should take the opportunity to ask questions of issuers on the platform before making an investment decision. Investors should also seek information from independent sources or seek expert advice if they are unsure whether they should subscribe to the financial instruments offered. As each investor may be pursuing personal objectives with their investments, the information provided and assumptions made by the issuer should be carefully scrutinized in light of individual circumstances.