The Aktiengesellschaft or AG (stock company in English) is an interesting but complicated legal form. This article explains the basic aspects of this company form. From the definition to the establishment and the bodies and up to the entry in the commercial register and the IPO, here you will learn the basics of stock companies in Germany.
Contents
- How is the AG legally defined?
- How is an AG formed?
- What is the registered capital?
- What are its corporate bodies?
- What are the accounting & disclosure requirements?
- What has to be disclosed to the commercial register?
- How are AG shares transferred?
- When does a AG have to go through an IPO?
- Want to know more about the AG?
Got questions about setting up an AG?
- Startup expert
- 10+ years experience
Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.
How is the AG legally defined?
What is an AG and how exactly is it defined? Just like a GmbH, an AG as a legal form is a capital company. As a corporation, it’s a legal entity and therefore has rights and obligations that exist independently of the owners. The shares of the company are held by shareholders (Gesellschafter). They’re the (co-)owners of the company. Shareholders’ co-determination rights are based on their share in the registered capital.
How is an AG formed?
The process of forming an AG is subject to strict regulations laid down in the AktG (stock corporation act).
The formation process of the AG in detail:
- Preparation and notarisation of the articles of association
- Acquisition of the shares by the founders
- Appointment of the board of directors, the management board and the auditor
- Preparation of the formation report and subsequent formation audit
- Deposit of contributions (cash or transfer of contributions in kind)
- Application for entry in the commercial register
As soon as the company has been entered in the commercial register, it officially exists as an AG.
You can find more information about how to form an AG here.
What is the registered capital of the AG?
The registered capital of an AG must amount to at least €50,000 . The first shares will be issued based on this amount. These can be either nominal shares or individual shares.
Nominal shares (Nennbetragsaktien) are denominated at a certain value, whereby the minimum amount must be one euro and only whole amounts are permitted. Individual shares (Stückaktien) are not denominated in a specific amount but represent a fixed portion of the share capital.
If 100 shares are issued, one share corresponds to one per cent of the value of the company. Whether these shares are actually issued as paper certificates or whether no individual securitisation takes place is stipulated in the articles of association of the AG.
Not sure whether an AG is the right for you?
We can help you in a free initial consultation
What are the corporate bodies of the AG?
An AG has three corporate bodies (Organe): the general assembly (Hauptversammlung), the board of directors (Aufsichtsrat) and the management board (Vorstand).
Hauptversammlung (general assembly/meeting)
The general assembly/general meeting, which represents the shareholders and exercises their rights, is convened once a year – extraordinary general meeting can also be held if necessary for the good of the company.
The decisions taken at the general meeting generally have nothing to do with the day-to-day operations of the company, but rather with organisational issues, such as the appointment of members of the board of directors, capital reductions and increases, as well as the allocation of profits. However, the management board may ask the shareholders to decide on an operational issue in order to safeguard themselves.
Aufsichtsrat (board of directors/supervisory board)
The Aufsichtsrat is the controlling body of the AG. In addition to appointing and dismissing the management board, it also appoints the auditor (Abschlussprüfer). The Aufsichtsrat reviews the Jahresabschluss (annual accounts/annual financial statements) and submits them to the board of directors.
In addition, the members of the Aufsichtsrat have access to the company’s books at all times in order to perform their supervisory function.
Vorstand (executive board/management board)
The Vorstand is responsible for the operational business of the AG.
It’s self-sufficient and independent of the Aufsichtsrat and the Hauptversammlung.
The Vorstand represents the company externally, whereby the power of representation is unlimited, but in principle only effective as a joint power of representation. Individual members can only effectively represent the company if the articles of association state that they have sole power of representation.
Sources: Deutsche Bundesbank, Deutsche Börse, Federal statistical office, as of September 2012
Graph title: Number of stock companies and limited commercial partnerships limited by shares in Germany from 2003 to 2012
Graph key: Number of companies
What are the accounting and disclosure requirements for the AG?
For AGs, clear rules apply with regard to the composition of the Jahresabschluss (annual accounts, a German and extended version of an annual financial statement) and their publication. The annual accounts of an AG include the balance sheet, profit and loss account and notes (§§ 242, 264 HGB), but not the management report. An AG is obliged to publish its annual accounts, the scope of which depends on the size of the company.
What has to be disclosed to the Handelsregister (commercial register)?
Certain transactions and changes in an AG must be registered in the Handelsregister (commercial register). These include, for example, the formation of the stock corporation, the first management board and the first board of directors, personnel changes in the committees and the respective annual financial statements of the company.
We can help you set up your own business in just a few steps.
Book one of our AG packages now and get started today!
How are AG shares transferred?
If shares are transferred from one holder to another, no special form is required. However, the type of shares must be taken into account. A non-securitised share, for example, can be transferred by assignment. In the case of “restricted” registered shares, however, the general assembly of the AG must give its approval.
When does a AG have to go through an IPO?
In order to trade the shares on one of the international stock exchanges, the AG must first go through the initial public offering process. This requires compliance with certain legal requirements laid down in the Börsengesetz (stock exchange act) and the Börsenzulassungsverordnung (stock exchange admission ordinance). Being listed on the stock exchange also creates additional disclosure requirements.
Still got questions about setting up a business in Germany?
- Startup expert
- 10+ years experience
Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.
Want to know more about the AG?
Our AG (stock company) series:
What is an Aktiengesellschaft (AG)? <<<
How to set up an Aktiengesellschaft (AG)
The pros and cons of the AG
What is the difference between the AG & the GmbH?
What is a “kleine AG”?
