Corporation whose shares can be traded on the stock exchange
The AG (‘Aktiengesellschaft’ = public or non-public corporation) is a company with its own legal personality. This legal form is most suitable for larger companies requiring a strong equity base. The advantage is that shares are easy to trade even at a stock; the disadvantage being the existence of more legal requirements especially formal restrictions. The Companies Act determines a minimum capital sum of EUR 50,000. Typical for an AG is a particular share capital broke down into shares. The AG is, as a legal person, subject to corporation tax, solidarity surcharge and trade tax on income.
In order to form an AG, only one shareholder is required to take the stake in the AG for either cash or property. The shareholder can be either an individual, a partnership or another corporation. Shares are either issued in a nominal amount or split up into individual portions. Besides, issuance of preferred shares is permitted. Each share grants one voting right in principle. However, the voting right of preference shares can be lifted. Please note that the legal rights and obligations surrounding shares go beyond the above brief description.
Structure of an AG
The AG needs for its representation at least one director who needs to be an individual person. The necessary articles of incorporation can determine more than one director to be responsible. According to the Companies Act two directors are required if equity exceeds EUR 3 Mio. The company law prescribes three organs: board, supervisory board and general meeting. The directors are supervised by the supervisory board which consists usually of internal and external members. The supervisory board is – among other rights and obligations – responsible for appointing the directors. The tenure of the directors is five years with the option of repeated appointment.
The legally required minimum number of board members is set at three whereas the articles of incorporation can determine a higher number. The maximum legal number of board members is set at 21 for large corporations. The board of directors and the supervisory board are appointed by the shareholder’s meeting. The various rights and obligations of the shareholder’s meeting are listed in §§ 119 et seqq. German Companies Act.
Establishing an AG
Formation of an AG must take place before a notary. The content includes e.g. the founder(s), paid in capital, name and location of company. A further legal requirement is to have the corporation registered by the director(s) in the companies’ register.