AG vs GmbH in Germany: What are the differences?

Share capital

One of the main differences between a GmbH and an AG is the required share capital. A GmbH must have at least €25,000, while an AG requires a minimum of €50,000.

This higher capital requirement should not be seen purely as a disadvantage. For many business partners and investors, the larger capital base of an AG is a signal of financial stability and reliability, which can strengthen confidence in the company.

Corporate bodies

Corporate bodies are the structures within a company responsible for management, oversight and decision-making.

Corporate bodies of a GmbH

A GmbH has two main corporate bodies:

• Shareholders’ meeting 💬Gesellschafterversammlung
• Managing directors 💬Geschäftsführer

This legal form is characterised by a separation of ownership and management. The shareholders own the company and may take decisions on all matters affecting it. They may also intervene directly in operational matters by issuing binding instructions to the management.

However, major decisions require approval by shareholders holding the necessary majority of shares. The shareholders also carry out the oversight function, monitoring the conduct of the management.

Corporate bodies of an AG

In an AG, responsibilities are divided among three separate bodies:

• Management board 💬Vorstand
• Supervisory board 💬Aufsichtsrat
• General meeting 💬Hauptversammlung

The management board is responsible for the day-to-day running of the company. It is overseen by the supervisory board, which appoints, monitors and removes its members. The general meeting brings together all shareholders, who exercise ownership rights but do not manage the company.

A key distinction between an AG and a GmbH lies in the rights of shareholders. In a GmbH, shareholders may instruct the management at any time. In an AG, this is not allowed. There is a strict separation between those who manage the company and those who provide capital.

Shares

Both the AG and the GmbH are types of corporations 💬Kapitalgesellschaften. Their owners contribute to the share capital and hold corresponding ownership interests in the company.

A key difference between the two legal forms lies in the transferability of shares. In an AG, shares are generally easy to transfer and can usually be sold informally, without significant formalities. An exception applies to registered shares 💬Namensaktien, which are issued to a specific named shareholder and require certain formal steps when transferred.

By contrast, the shares of a GmbH are not freely transferable. Any transfer must be executed by a notarised shareholder resolution 💬Gesellschafterbeschluss, which makes the process more time-consuming and more expensive. This stricter requirement adds an additional layer of control over who becomes a shareholder, but it also reduces flexibility compared with an AG.

Starting costs

There are significant financial and structural differences between the two legal forms when it comes to setting up a limited liability company. Establishing an AG is generally more expensive and more complex than forming a GmbH. All aspects of the AG are governed by the stock corporation act 💬Aktiengesetz, while the fundamental rules for the GmbH are set out in the LLC act 💬GmbH-Gesetz.

The stricter requirements of the stock corporation act mean that the framework for forming an AG is more rigid: many steps in the incorporation process require notarisation, and the documentation obligations are more extensive than those for a GmbH.

Liability

The two legal forms also differ significantly in terms of management liability. In an AG, members of the management and the supervisory board may be held liable if they breach their duty of care or act unlawfully. Shareholders, on the other hand, are liable only up to the value of their shareholding.

In a GmbH, the managing director can be personally liable for damages caused by the company or for breaches of their statutory obligations. In severe cases, this liability can extend to fines or even criminal penalties, including imprisonment. Read more about the MD’s responsibilities.

Shared characteristics of AG and GmbH

Despite their structural differences, the AG and GmbH share several core features as corporations under German law. Both legal forms offer limited liability, require a defined share capital and articles of association, must comply with statutory accounting and reporting obligations, and are represented externally by appointed management bodies. Both legal forms are treated as separate legal entities 💬juristische Personen capable of entering into contracts, holding assets and assuming rights and duties in their own name.