Participation certificate (Partizipationsschein)

The participation certificate (Partizipationsschein) is a Swiss-law equity instrument that confers economic rights without voting rights. It differs in this respect from a Preferred share, which generally carries voting rights even when paired with financial preferences.

‍

This instrument is sometimes used as an employee incentive mechanism, when founders wish to keep voting rights for themselves and for the round's investors, while still letting key employees share in the company's economic value creation, without diluting control of governance.

‍

This structural choice makes the participation certificate similar in purpose to an ESOP (employee stock ownership plan), but different in nature: it is an actual capital instrument, booked as such on the company's balance sheet, rather than a simple future purchase option. Its valuation, at the time of grant as well as at exit, therefore follows a logic of its own, to be documented separately from a classic option plan.

‍

For a Swiss startup structuring its Management package or incentive plan, the participation certificate is an alternative worth weighing against a classic ESOP (employee stock ownership plan), a trade-off covered in our analysis of the management package, particularly when preserving founder control is a stated priority of the financial structuring chosen.