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.
Our AG (stock company) series:
1. What is an Aktiengesellschaft (AG)? Everything you need to know about the stock company in Germany <<<
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 German Stock Corporation Act (Aktiengesetz, or AktG for short).
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.
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.
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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.
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 Aktiengesellschaft 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 does the Aktiengesellschaft have to disclose to the Handelsregister?
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.
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 Stock Exchange Act (Börsengesetz) and the Stock Exchange Admission Ordinance (Börsenzulassungsverordnung). Being listed on the stock exchange also creates additional disclosure requirements.
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