The Legal Structure of a Public Limited Company (AG)

The Aktiengesellschaft (AG) is one of the most well-known and significant legal forms for companies in Germany. It is particularly suitable for larger businesses that require a broad capital base and efficient organizational structure. In this article, we will explain the key features, advantages, and legal requirements of an AG.

Basics of a Public Limited Company

An AG is a corporation whose equity is divided into shares. Shareholders are the owners of the company and, depending on their shareholding, have voting rights at the general meeting and a right to a portion of the profits.

Formation

The formation of an AG requires at least one person (natural or legal) and a minimum share capital of 50,000 euros. The formation process involves several steps:

1. Articles of Association: The founders draft the articles of association, which contain the fundamental regulations of the company, such as the purpose, share capital, and organization.
2. Formation Report and Audit: The founders prepare a formation report and have the formation audited by an external auditor.
3. Registration in the Commercial Register: The AG is registered in the commercial register, thereby obtaining its legal capacity.

Corporate Bodies

The AG has three main bodies:

1. General Meeting: The general meeting is the supreme body of the AG, where shareholders exercise their rights. It elects the supervisory board, decides on profit distribution, capital measures, and amendments to the articles of association.
2. Supervisory Board: The supervisory board oversees the management board and advises it on important decisions. It consists of at least three members and is elected by the general meeting.
3. Management Board: The management board independently manages the company and represents it externally. It is appointed by the supervisory board and consists of one or more persons.

Advantages of a Public Limited Company

Capital Raising

The AG offers excellent opportunities for capital raising. By issuing shares, the AG can raise capital from a large number of investors without the original owners losing control over the company.

Limited Liability

The liability of shareholders is limited to their investment. This means that personal assets of the shareholders are not at risk in the event of the AG's insolvency.

Professional Management

The separation of ownership and management in an AG allows for professional and specialized management by the management board, which is overseen by an independent supervisory board.

Stock Exchange Listing

An AG can list its shares on the stock exchange, increasing the liquidity of the shares and facilitating access to additional capital. However, publicly listed AGs must meet additional transparency and reporting requirements.

Obligations and Requirements

Accounting and Annual Financial Statements

The AG is required to maintain double-entry bookkeeping and prepare annual financial statements. The annual financial statements must comply with the statutory provisions of the German Commercial Code (HGB) and be audited by an independent auditor.

Disclosure Requirements

AGs are subject to extensive disclosure requirements. The annual financial statements, management report, and supervisory board report must be published in the electronic Federal Gazette. Publicly listed AGs must also publish quarterly reports and ad-hoc disclosures.

Co-Determination

In larger AGs, employees have the right to co-determination in the supervisory board. According to the Co-Determination Act (MitbestG), employee representatives must be elected to the supervisory board if the company exceeds a certain size.

Dissolution and Liquidation

Reasons for Dissolution

An AG can be dissolved for various reasons, such as a resolution by the general meeting, expiry of the period specified in the articles of association, opening of insolvency proceedings, or a court decision.

Liquidation

The liquidation of an AG is carried out by the liquidators, who are usually the previous members of the management board. The liquidators are responsible for winding up the company’s assets, settling liabilities, and distributing any remaining surplus to the shareholders.

Conclusion

The Aktiengesellschaft is an attractive legal form for larger businesses that want to benefit from the advantages of capital raising, limited liability, and professional management. Despite the extensive legal requirements and obligations, the AG offers significant benefits through its structure and the potential for stock exchange listing, making it ideal for companies looking to grow and develop further.

Our law firm in Frankfurt am Main provides comprehensive advice and support in the formation, administration, and optimization of your AG. Contact us for individual advice and tailored solutions to fully exploit the advantages of this legal form.