Risk Information

Please note: the German version retains legal validity and this English translation is for information only.
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The following general risk information describes in general terms the risks that may exist when investing in REDAVIA Participation Rights (the German term Genussrecht in here is translated as “Participation Rights” and its debtor is referred to as “Issuer”) of Redavia GmbH.

This offer is an offer of variable-return (hereinafter called “interest”) Participation Rights with qualified subordination and pre-insolvency enforcement bar of Redavia GmbH. The Participation Rights are long-term contracts under German law of obligations, which are associated with economic, legal, and tax risks. The Participation Rights give the investor rights closely following the rights of the owners of ordinary shares in Redavia GmbH, and as such, are often referred to as “Virtual Shares”. The investors should therefore read the following risk information carefully and take it into account accordingly when making their decision. In particular, the investors’ investment should correspond to their economic circumstances and their investment in the asset should only represent a small part of their total assets.

In the following, certain legal and factual risks associated with the offered investment are presented that are of material importance for the valuation of the investment. Furthermore, risk factors are presented that could impair the ability of the Issuer to generate the expected results.

Not all risks associated with the investment can be detailed below. The risks mentioned below cannot be fully illustrated here either. The order in which the risks are listed does not allow any conclusions to be drawn about possible probabilities of occurrence or the extent of a potential impairment.

2.1      Maximum risk – total risk of loss

There is a risk of total loss of the investment amount and the interest as well as any accrued bonus interest claims (collectively the “interest claims” or the “interest”). The occurrence of individual risks or the interaction of various risks can have significant adverse effects on the expected results of the Issuer, which could lead to its insolvency.

Individually, the investor may suffer additional pecuniary disadvantages. This may be the case, for example, if the investors finance the acquisition of the investment with a loan, if they firmly plan interest claims from the investment to cover other obligations despite the existing risk of loss, or due to costs for tax back payments. In the worst case, such additional financial disadvantages can even lead to the investor’s personal insolvency. Therefore, the investors should examine all risks in consideration of their personal circumstances and, if necessary, seek individual professional advice. External financing of the investment (e.g. through a bank loan) is expressly discouraged.

The investment is only suitable as an addition to an investment portfolio. The granting of the investment amount is only suitable for investors who could accept a resulting loss up to the total loss of their capital investment. There is no statutory or other deposit protection. The Participation Right is not suitable for retirement provision. On the other hand, there is no risk of an obligation to make additional contributions or any other liability that exceeds the amount invested.

2.2      Subordination risk and entrepreneurial character of the financing; existing balance sheet over-indebtedness of the Issuer

This qualified subordinated Participation Right is an entrepreneurial financing with a corresponding entrepreneurial risk of loss (liability function similar to equity). However, the investors do not receive any participation and control rights under company law and thus do not have the ability to influence the realisation of the entrepreneurial risk (in particular, they do not have the ability to terminate loss-making business activities before the contributed capital is used up). From the investor’s point of view, this contractual arrangement combines the disadvantages of debt capital (in particular, no influence of the investor on the corporate management of the Issuer and no other participation and information rights of the investor) with the disadvantages of equity capital (participation of the investor in the entrepreneurial risk, no obligation of the Issuer to file for insolvency in the absence of the possibility of repayment). For the investors, this means that the risk assumed may in some respects even exceed the entrepreneurial risk of a shareholder.

The investment is a Participation Right with a so-called qualified subordination and pre-insolvency enforcement bar (see item 7 of the General Terms and Conditions of Participation Rights for more details regarding this). This means: All claims of the investor arising from the subordinated Participation Rights – in particular the claims for repayment of the investment amount and for payment of interest – (“subordinated claims”) may not be asserted against the Issuer if this would give rise to a binding reason for the Issuer to open insolvency proceedings, i.e. insolvency or over-indebtedness, or if such a reason for insolvency already exists at that time (pre-insolvency enforcement bar). This means that the claims arising from the Participation Rights are already no longer enforceable if the Issuer of the Participation Rights is insolvent or over-indebted at the time of the request for payment or is in danger of doing so as a result of the payment. The investor’s claims would then be permanently barred in their enforcement as long as and to the extent that the crisis of the Issuer is not remedied. This may result in the investor’s claims being permanently unenforceable even outside insolvency proceedings.

Insolvency exists if the Issuer is unable to meet its due payment obligations (section 17 (2) of the Insolvency Code). Over-indebtedness exists if the assets of the Issuer no longer cover its existing liabilities, unless the continuation of the participation right debtor’s business is predominantly probable under the circumstances (section 19 (2) of the Insolvency Code). These statutory provisions may change with effect for the future. This would also change the conditions under which the pre-insolvency enforcement bar would take effect.

The Issuer is currently over-indebted on the balance sheet. At the time the profit participation capital is raised, it shows a deficit in its balance sheet that is not covered by equity (balance sheet over-indebtedness). In contrast, over-indebtedness in the sense of insolvency law described above (and thus a reason for insolvency) does not exist at the time of the raising of the Participation Right capital according to the assessment of the management of the  Issuer, since, on the one hand, liabilities of the Issuer are subject to a qualified subordination (including pre-insolvency enforcement bar) in an amount that exceeds the deficit not covered by equity. These liabilities are not to be taken into account as liabilities in the Issuer’s statement of over-indebtedness under insolvency law. On the other hand, the management of the Issuer considers the continuation of the company as a going concern to be predominantly probable (positive going concern prognosis).

Such a positive going concern assumption requires that the financial planning of a company shows that the company has sufficient liquid funds for the period of the next two years to be able to meet the respective payment obligations due. Various reasons for which this positive going concern assumption may not apply with regard to the Issuer can be found in the following (non-exhaustive) risk notes.

If in the future, the deficit not covered by equity exceeds the amount of the liabilities of the Issuer that are subject to a qualified subordination and if, in addition, the positive going concern assumption ceases to apply, or if the Issuer becomes insolvent, the Issuer would no longer be allowed to make any payments to the investor from that point on. The capital invested by the investor would then have to be used to satisfy senior creditors of the participation right debtor. This could lead to the total loss of the capital invested by the investor and the return.

The qualified subordination, including a pre-insolvency enforcement bar, could have the following effects: The Issuer would have to suspend the interest claims as long as they are obliged to do so if the pre-insolvency enforcement bar takes effect. The investors would not be allowed to claim their receivables when due. The investors would have to repay an interest or redemption payment that they wrongly received despite the qualified subordination to the profit Issuer on request. There is also the possibility that the investors will not receive the interest payments as well as the redemption payments in the result or not in time due to the subordination. In addition, the investors might have to pay tax on interest already paid, although they are obliged to repay the amounts received.

Furthermore, the investors’ subordinated claims shall rank beneath the following claims in the event that liquidation proceedings are conducted and in the event of the Issuer’s insolvency: The qualified subordination exists vis-à-vis all current and future claims of all non-subordinated creditors of the Issuer as well as vis-à-vis all subordinated claims specified in section 39 (1) of the Insolvency Code. The investor’s claims will therefore only be taken into account after complete and final satisfaction of all other creditors of the Issuer.

2.3      Loss sharing

Since the Participation Right capital is equity within the meaning of the German Commercial Code, the Participation Right capital and thus the respective investment amount participates in the losses of the Issuer up to the full amount. If the Issuer therefore reports a balance sheet loss or if the share capital is reduced to cover losses, the repayment claim of each investor shall be reduced directly on a pro rata basis. This can lead to the full consumption of the Participation Right capital and thus to a total loss of the investment.

2.4      Dilution

The Participation Rights offer interest in the form of a so-called “Virtual Shares”, i.e. a claim under the law of obligations to participate in the balance sheet profit of the Issuer and a participation under the law of obligations in a possible increase in value of the company operated by the Issuer. The Virtual Shares can be diluted, i.e. their relative amount can decrease, especially due to subsequent capital increases and follow-on financing. This may result in a possible return being lower than would have corresponded to the amount of the investment in the Participation Rights at the time of the investment.

2.5      Lack of security for the Participation Rights

Because the Participation Right is unsecured, the investors would not be able to satisfy either their claim for repayment of the capital invested or their interest payment claims from collateral if they did not receive any payments from the Issuer. Especially in the event of insolvency, this could result in the investor’s claims not being satisfied or only being satisfied to a lesser extent. This could result in the partial or total loss of the invested capital.

2.6      Final maturity of the redemption

The investors’ Profit Participation capital is to be redeemed in full at the end of the term (the first opportunity for ordinary termination exists on December 31, 2036, with a notice period of six months to the end of the year). If the Issuer has not generated the capital required for the redemption from its current business activities by then, there is a risk that the bullet redemption will not be made or not be made in full due to the loss participation and that, in addition, the investor will not receive any participation in the increase in enterprise value that may be owed.

2.7      Alienability (fungibility), availability of invested capital, long-term commitment

The Participation Rights may be terminated by either contracting party for the first time on 31 December 2036, with six months’ notice to the end of the year. Early ordinary termination by the investor is not provided for.

Participation Rights are not securities and are not comparable to them. Currently, there is no liquid secondary market for the Participation Rights. In principle, a sale of the Participation Rights by the investor is legally possible. However, the possibility of selling is not ensured due to the small market size and trading activity. It is also possible that an assignment cannot be made for the amount of the investment. It could therefore be that, in the event of a wish to sell, no buyer can be found or the sale can only take place at a lower price than desired. The invested capital may therefore be tied up until the end of the contract term.

2.8      Possible extension of the capital commitment

As this is a subordinated profit participation right, the profit participation capital may only be repaid if this would not lead to insolvency and/or over-indebtedness on the part of the Issuer. If this were the case, the term of the Participation Right would automatically be extended until the point in time at which this situation would no longer exist or until the insolvency or liquidation of the Issuer. The investment is therefore not recommended for investors who are dependent on getting their money back exactly at the planned end of the term. If the economic difficulties of the Issuer were not remedied, this could result in the partial or total loss of the invested assets and the interest claims.

3.1      Business risk of the Issuer

It is an entrepreneurial financing. The investor bears the risk of an adverse business development of the Issuer. There is a risk that the Issuer will not have the necessary funds available in the future to meet the interest claims and repay the investment amount. Neither the economic success of the Issuer’s future business activities nor the success of the project pursued by the Issuer can be predicted with certainty. The project consists of the implementation of an entrepreneurial strategy for the development and financing of renewable energy and energy efficiency projects, in particular in individual countries in Africa, which are implemented by group companies of the Issuer. The Issuer can neither assure nor guarantee the amount and timing of inflows.

The relevant market for the Issuer is the market for renewable energy projects and energy efficiency projects in individual countries in Ghana, Kenya, and Tanzania (collectively and individually the “Target Countries“). Economic success depends on several influencing factors, in particular the development of the market for renewable energy and energy efficiency projects in the target countries, constant or increasing demand for renewable energy and energy efficiency solutions in the target countries, a constant stable market environment and stable economic and political conditions, constant raw material and production costs, the development of a decentralized energy supply in the target countries and the maintenance of supplier relationships, the interest rate environment in Germany and in the target countries, the competitive environment and any margins that can be achieved as a result, planning and purchasing risks and risks of malinvestments in the areas of personnel, marketing and sales expenses, as well as malinvestments in existing and new subsidiaries in Germany and abroad.

The Issuer sources most of its solar modules and accessories from China. Due to the currently limited availability of shipping capacities for solar products from China, there may be delays in the transport of the solar modules and accessories to the target countries, which in turn may lead to delayed project implementation in the target country, as a result of which the Issuer will generate revenues later than originally planned. The import of solar modules and their corresponding accessories, in particular to Ghana and Kenya, is subject to the local laws and regulations applicable there. In particular, the import of solar modules and accessories into these countries can be subject to considerable delays, as import processing (e.g. required import licences, port regulations, etc.) is in part heavily dependent on the willingness of the local authorities and ministries to make decisions, and the implementation regulations are not clearly defined in some cases. The business license in the target countries sometimes requires certain qualifications and/or certificates, so that the business model there sometimes has to be readjusted, for example by renewing or rewriting contracts with local end customers.

Various factors such as, in particular, the payment and performance capacity of customers and suppliers, climate change, changes in the currency and foreign exchange area such as, in particular, a restriction of the ability to transfer money or payment transaction controls from the target countries, interest rate and inflation developments, negative developments in the swarm financing industry relevant to the Issuer, e.g. due to negative reporting, increasing terrorism in the target countries, the market entry of competitors, changes in the legal and tax framework, political and regulatory uncertainties or deteriorations in the target markets, rising prices of solar components, regional and global crises or pandemics that impact the solvency of customers and/or business partners, global production and delivery bottlenecks in the renewable energy industry in general and the solar industry in particular, and other aspects may also have an adverse effect on the project and the Issuer.

The occurrence of one or more of the aforementioned risks could have a material adverse effect on the net assets, financial position, and results of operations of the Issuer and thus also on the ability of the Issuer to meet the interest claims of the investors.

The Participation Rights grant a variable interest rate as specified in greater detail in the Issue Specific Information and the Terms and Conditions of the Participation Rights. Whether and in what amount the variable interest is paid depends in particular on the future economic development of the Issuer. The Issuer does not intend to distribute profits in the foreseeable future, but intends to reinvest any surplus generated in order to increase its enterprise value.

3.2      Default risk of the Issuer (issuer risk)

The Issuer may become insolvent or over-indebted. This may be the case in particular if the Issuer has lower income and/or higher expenses than expected or if it is unable to raise any follow-up financing that may be required. The insolvency of the Issuer may lead to the loss of the investor’s investment amount and interest, as the Issuer does not belong to any deposit guarantee scheme.

3.3      Early company phase

The Issuer is a company in an early corporate phase that is currently not generating a positive operating cash flow (payment stream) (i.e. the outflow of liquid funds from business activities currently exceeds the inflow of liquid funds). The Issuer will also be dependent on further external financing beyond the amount of the Participation Right in order to cover its financial needs. The financing of such a young company is associated with specific risks. If a business idea does not succeed on the market, if the planned business development cannot be implemented as hoped, or if the Issuer cannot raise the external capital required for further business development for other reasons, there is a risk of total loss for investors. The success of a company depends on a wide range of factors such as the team, certain key people, specialists and consultants, the market environment, supplier relationships, technological developments, property rights, legal framework conditions, competitors, and other factors. Investors who invest in an early-stage company are much more likely to lose their invested capital than to earn a return on their invested capital.

3.4      General risks from the business activity and the implementation of the project pursued by the Issuer

Various general risk factors may impair the ability of the Issuer to meet its obligations under the Participation Rights. On the one hand, these are risks from the implementation of the project pursued by the Issuer. The implementation of the project could be more complex than expected. Unexpected and/or higher implementation risks could occur and/or business processes could involve more effort and costs than expected. Planning errors could come to light or contractual partners of the Issuer could provide defective services. Necessary permits might not be granted. There could be delays in the planned process and/or problems in generating revenue in the planned amount or at the planned time. Legal requirements could change, necessitating changes or additional measures in connection with the implementation of the project, which could lead to additional costs and/or time delays.

On the other hand, the general business activity of the Issuer is associated with additional risks than those mentioned under letter a.), such as market-related risks (e.g. decline in demand and sales; payment difficulties or insolvencies of customers; cost increases and capacity bottlenecks on the procurement side; interest rate and inflation developments; changes in the legal and tax framework conditions of the Issuer’s activities; country and exchange rate risks) and company-related risks (e.g. quality risks; financing and interest rate change risks; risks from brands and property rights; dependence on partner companies and qualified personnel; risks from legal disputes, insufficient insurance protection, from the shareholder and/or group structure, from the internal organization, from asset valuations and back taxes).

These and/or other risks could have a negative impact on the net assets, financial position, and results of operations of the Issuer. As a result, the Issuer might not have the necessary funds available in the future to meet the investors’ interest claims and to repay the invested Participation Right capital.

3.5      COVID-19 pandemic and potential similar outbreaks in the future

Outbreaks of various viruses and other pathogens have occurred from time to time in different regions of the world. There is currently a widespread global pandemic of the SARS-CoV-2 virus (commonly known as the coronavirus) and the infectious disease COVID-19 caused by the virus.

Although COVID-19 is still spreading and the final impact of the pandemic is difficult to assess at this stage, it is already becoming clear that it is affecting the lives of a large proportion of the world’s population and has and will continue to have a significant global impact. The pandemic has already led to a state of emergency or disaster situation being declared in various countries, travel restrictions being imposed, quarantines being set up, and various institutions and companies being closed.

The ongoing COVID-19 pandemic and possible future outbreaks of viruses or other pathogens may have a material adverse effect on the Issuer:

First, any spread of such diseases among the employees of the Issuer itself and/or its direct and indirect subsidiaries, as well as any quarantines affecting the Issuer’s employees or facilities, may limit the ability of the Issuer’s personnel to perform their jobs and thereby impair the Issuer’s ability to operate to generate the proceeds.

Furthermore, the current pandemic and possible future outbreaks of viruses or other pathogens may have an adverse effect on contractual partners of the Issuer, which may result in the Issuer being unable to generate any or lower proceeds than forecast and/or in claims and receivables of the Issuer itself and/or its direct and indirect subsidiaries against third parties being cancelled or fulfilled only at a lower value than expected.

Furthermore, in connection with the COVID 19 pandemic and possible future outbreaks, there could be governmental restrictions on action or trade, up to and including assessments and seizures, which could impair the economic and trading activities of the Issuer, its direct and indirect subsidiaries and its contractual partners, or make such activities completely impossible.

Further, the Issuer could be adversely affected by the broader economic impact of the ongoing COVID 19 pandemic and potential future outbreaks. These effects may also occur in the event of possible future outbreaks of viruses or other pathogens. Any negative impact on the economy may significantly worsen the financial position of the Issuer, its contractual partners, and their customers. Such effects may also lead to the default or insolvency of the business partners of the Issuer and/or the business partners of its direct and indirect subsidiaries, which may affect the business activities of the Issuer as well as its financial situation.

Similarly, changes in the (global) economy and/or government support measures to prevent insolvency could lead to a loss of confidence, liquidity difficulties, a recession or inflation, which may have a significant adverse effect on the economic situation of the Issuer, its direct and indirect subsidiaries, and its contractual partners, as well as their ability to meet their contractual obligations.

Finally, a renewed economic downturn due to the COVID 19 pandemic or possible future outbreaks could make it difficult or impossible for the Issuer to obtain any necessary liquidity from investors, banks, or financial markets.

All of the aforementioned reasons may have an adverse effect on the net assets, financial position, and results of operations of the Issuer, both individually and cumulatively, and may lead to a partial or total loss of the investors’ investment.

3.6      Capital structure risk

The Issuer may take up additional debt financing and thereby incur obligations which (regardless of its income situation) must be serviced with priority over the claims of the investors (subordinated Participation Right holders). In this respect, it would be more susceptible to interest rate changes, revenue fluctuations, or rising operating expenses than companies that are not or only to a small extent financed with debt capital.

3.7      Key person risk

Due to the loss of key persons of the Issuer, there is a risk that expertise is no longer available and thus a qualified business set-up and risk management can no longer be fully guaranteed. The loss of such key persons could have an adverse effect on the economic development of the Issuer. This could reduce the amount of interest and/or redemption payments to investors or they could be cancelled.

3.8      Forecast risk

The forecasts regarding the costs for the implementation of the project, the achievable revenues, and other aspects could prove to be inaccurate. Past market or business developments are not a basis or indicator for future developments.

4.1      Debt financing risk

Depending on the individual circumstances, the investor may suffer further financial disadvantages in individual cases, e.g. due to additional tax payments. If the investor finances the acquisition of the Participation Rights with external funds, for example by taking out a private loan with a bank, the investor’s other assets may be at risk in addition to the loss of the invested capital. The investor’s maximum risk in this case is over-indebtedness, which in the worst case can lead to the investor’s personal insolvency. This can be the case if the investors are financially unable to service the interest and redemption burden from their external financing in the event of low or no returns from the investment. The Issuer therefore advises against external financing of the investment amount.

4.2      Risk of changes in the legal and tax framework

It cannot be ruled out that the subordinated Participation Rights will be affected by future tax, corporate or other legal changes in such a way that a corresponding discount must be applied to the interest payments and thus the expected results for the investor cannot (or can no longer) be achieved. Furthermore, there is a risk that the acquisition, sale, or redemption of the Participation Rights will be taxed, which would result in additional costs for the investor. These costs would 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 investor’s personal insolvency.

4.3      Note on risk diversification and avoidance of risk concentration

Due to the risk structure, the investment in subordinated Participation Rights should only be considered as one component of a diversified (risk-mixed) investment portfolio. The following generally applies: The higher the yield or return, the greater the risk of loss. By spreading the invested capital across several asset classes and investment projects, better risk diversification can be achieved and “cluster risks” can be avoided.

5.1      Scope of the project appraisal by the platform operator

The platform operator will only check the plausibility of a project prior to posting it on the platform. Posting on the platform does not constitute an investment recommendation. The platform operator does not assess the creditworthiness of the Issuer and does not check the information provided by the latter for its truthfulness, completeness, or up-to-dateness.

5.2      Activity profile of the platform operator

The platform operator does not practice any consultancy work and does not provide any consultancy services. In particular, neither financing and/or investment advice nor tax and/or legal advice shall be provided. 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 only requested to the extent that this is required by law in the context of investment brokerage, and only with the aim of providing the information required by law, but not with the aim of making a personal recommendation to the investor to purchase a specific financial instrument.

5.3      Information content of the project description

The project description on the platform and this risk information do not claim to contain all the information required to assess the investment offered. Investors should use the opportunity to ask questions of the Issuer, to obtain information from independent sources, and to seek expert advice if they are unsure whether they should invest in the Participation Rights. Since each investor may pursue personal objectives in granting Participation Right capital, the information and assumptions made by the Issuer should be carefully examined in the context of the individual situation.