German public limited company (Aktiengesellschaft, AG)
The German Public Limited Company (Aktiengesellschaft, AG) is most closely comparable with the Anglo-American Public Limited Company by Shares (PLC). The German Aktiengesellschaft is generally preferred by large companies. Foreign investors tend not to found an AG when entering the market in Germany, but rather prefer a GmbH.
Founding an AG
To found an AG, at least one founding shareholder is required, who can be either a natural or legal person, or another company with legal capacity (e.g. OHG, KG).
The necessary nominal capital for founding is at least 50,000 Euro and is divided into shares. An alternative to this is an asset-based founding, whereby the contributed economic goods (real estate, company shares, machines etc.) must also have a common value of at least 50,000 Euro.
The following steps are required for founding an AG, whereby the company’s location must be in Germany:
- Completion of Articles of Association, which must be certified by a notary
- Lodgement of one quarter of the nominal value of each share (at least 12,500 Euro)
- Naming of a German business address for the AG
- Application for registration in the Companies Register in the district where the company is located
- Tax registration at the jurisdictional German tax office
- Local business registration at the jurisdictional local business office
The total costs for founding an AG are generally between 2,000 and 3,000 Euro.
Bodies / Management
The AG has three bodies: Chair, Board of Directors (Supervisory Board) and General Assembly.
The AG must have one or more chairpersons, whereby only natural persons can be appointed to the chair. The chair is authorised to manage the AG and is appointed by the Board of Directors.
A Board of Directors (Supervisory Board) must also be appointed, to choose the members of the Chair, and to supervise the activities of the Chair. The Board of Directors consists of at least three natural persons with unlimited legal capacity, who are chosen by the General Assembly of the AG. A member of the Board of Directors cannot simultaneously be a member of the Chair or hold another management position in the company.
The General Assembly is the third body of the AG, and consists of all company shareholders. It has the following rights:
- Decisions on changes of the Articles of Association (core business), especially regarding capital measures (increases/decreases in nominal capital, contingent capital, etc.);
- Appointing and dismissing members of the Board of Directors (which for its part, appoints the Chair)
- Relieving the Chair and the Board of Directors;
- Only if the Chair and Board of Directors so decide: determining the annual report; otherwise the General Assembly only accepts the annual report as determined by the Chair and the Board of Directors (§ 172, § 173 AktG – German Law on Public Limited Companies);
- Use of the profit balance;
- Appointing year-end auditors, auditors for founding processes, and the Chair’s management;
- Appointing special auditors (§ 142 AktG)
- Transferring the entire company assets (§ 179a AktG);
- Other management measures which involve the core responsibility of the General Assembly to decide the course of the company, and whose effects can reach all the way to a change in the Articles of Association;
- Dissolving the company.
For obligations which arise before the Articles of Association were certified, the shareholders shall be personally liable as joint debtors.
After entry into the Companies Register, outside liability for obligations is basically limited to the company assets of the AG.
The income of an AG is subject to corporate tax, the solidarity surcharge, and local business tax.
Tax on turnover (VAT) is done in Germany essentially independently of the company’s form and is explained in more detail on the next page.