Contents
- What is the AG?
- Formation
- Registered capital
- Corporate bodies
- Accounting & disclosures
- What has to be disclosed?
- AG shares transfers
- Is an IPO mandatory?
- Want to know more?
Got questions about setting up an AG?
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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 Gesellschafter (shareholders). 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 into the commercial register, it officially exists as an AG.
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. Based on this amount, the first shares will be issued. These can be nominal shares or individual shares.
Nennbetragsaktien (nominal shares) are denominated at a certain value, whereby the minimum amount must be one euro, and only whole amounts are permitted. Stückaktien (individual shares) 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 set out in the articles of association of the AG.
Not sure whether an AG is right for you?
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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.
Organe: What are the corporate bodies of the AG?
An AG has three Organe (corporate bodies): the Hauptversammlung (annual general meeting), the Aufsichtsrat (board of directors) and the Vorstand (management board).
Hauptversammlung: Annual general meeting (general assembly)
The Hauptversammlung (annual general meeting), which represents the shareholders and exercises their rights, is convened once a year. An 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 company’s day-to-day operations but rather with organisational issues, such as the appointment of members of the board of directors, capital reductions and increases, and the allocation of profits. However, the management board may ask the shareholders to decide on an operational issue to safeguard themselves.
Aufsichtsrat: Board of directors (supervisory board)
The Aufsichtsrat (board of directors) is the AG’s controlling body. It appoints and dismisses the management board and the Abschlussprüfer (auditor). The Aufsichtsrat reviews the Jahresabschluss (annual accounts/annual financial statements) and submits them to the board of directors.
In addition, the board of directors have access to the company’s books at all times to perform their supervisory functions.
Vorstand: Executive board (management board)
The Vorstand (executive board) is responsible for the operational business of the AG.
It’s self-sufficient and independent of the Aufsichtsrat (board of directors) and the Hauptversammlung (annual general meeting).
The executive board 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 regarding the composition and publication of the Jahresabschluss (annual accounts, a German and extended version of an annual financial statement).
An AG’s annual accounts 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.
Handelsregister: What has to be disclosed to the 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.
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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, approval must be given at the Hauptversammlung (annual general meeting).
When does an AG have to go through an IPO?
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, have 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.
