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Stock Corporation (AG) – Founding, Liability, Legal Form, Management, Taxes

Laura — Tue, 09 Mar 2021 07:21:24 +0000

Stock Corporation (AG) – The Stock Corporation is a German legal form, founded by at least one person and managed by several legally prescribed organs. Instead of a classic managing director, a board of directors leads the Company, supervised by the supervisory board. The shareholders’ meeting functions as the highest decision-making body. With a minimum share capital of 50,000 Euro, strict formalities and the possibility of going public, the AG is the “top class” of stock corporations – and in the Real Estate sector even tax privileged as a REIT-AG. Here you will find everything about establishment, liability, costs, taxes and the special form Real Estate-AG. Additionally, you will find all German Company types and legal forms, as well as tips on setting up a business, also in the special case Real Estate Holding, Family Foundation & Co.

Stock Corporation: Establishment, Advantages and Disadvantages

The AG is not just a legal form — it is a structured vehicle for taxation, liability, and capital raising. In the following, you will learn everything essential about the establishment: Who can found an AG? What is the difference between internal and external relations? What are the actual costs — not only the share capital, but also notary, founding auditor, and ongoing management? And above all: When is an AG worthwhile from an investor’s perspective — and when is a Real Estate Holding in GmbH structure the better choice?

The 7 Founding Criteria of an AG at a Glance

Number of Partners — at least 1 shareholder, plus 3 supervisory board members = 4 people minimum
Management — Board of Management (not managing director!), controlled by the supervisory board
Founding — formal, notarized, multi-stage process
Company Name — freely selectable, suffix “AG” mandatory
Funding — at least 50,000 Euro share capital, share issuance possible
Liability — limited to share capital in external relations
Profit distribution — dividends, decided by the general meeting

Capital company AG: Management according to HGB

In the business world, there are many different types of business structures. They are broadly divided into two categories: sole proprietorships and companies, which in turn are divided into incomplete companies — including silent partnerships and BGB partnerships — and complete companies (personal companies, capital companies, and a few more).

The stock corporation — abbreviated as AG — is one of the complete companies and is not subject to the Civil Code (BGB), unlike incomplete companies, but rather to the Commercial Code (HGB) and the Stock Corporation Act (AktG). As a capital company, the AG is more complex in structure than other forms of business law. It cannot be established informally, but requires the notarized certification of the shareholder agreement and compliance with numerous legal requirements.

Other typical capital companies:

European stock corporation (Societas Europaea, abbreviated as SE)
Limited liability company with shares (KGaA)
Entrepreneurial company / UG (limited liability)
Company with limited liability (GmbH)

The stock corporation is, together with the GmbH, the best-known form of capital companies. In Germany, it is mainly chosen as a legal form for listed companies and is considered — not least because of the higher initial capital — as the “big sister” of the company with limited liability.

AG vs. GmbH vs. KGaA: Comparison table

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Before you decide on a legal form, a direct comparison of the three heavyweights of capital companies is worthwhile:

Criterion	GmbH	AG	KGaA
Minimum Capital	25.000 €	50.000 €	50.000 €
Minimum Shareholders	1	1 (+ 3 Supervisory Board Members)	1 General Partner + 1 Limited Partner
Management Body	Managing Director	Board of Directors	General Partner
Supervisory Board	Optional (Mandatory from 500 employees)	Mandatory (at least 3)	Mandatory
Annual Audit	Only from medium size class	Mandatory (always!)	Mandatory
Owner Anonymity	Low (shareholder list is public)	High (no public shareholder register for bearer shares)	Very high
Listing on Stock Exchange possible	No	Yes	Yes
Takeover Protection	Moderate	Low (hostile takeover possible)	Very high (controlled by general partner)
Ongoing Annual Management Costs	2.000–8.000 €	30.000–100.000 €+	40.000–120.000 €+

Insider Tip: For pure Real Estate Holding Structures, the GmbH is usually the more efficient choice — the AG only pays off starting from an asset base of 5–10 million euros or in case of a planned stock market listing/REIT status.

Legal Form Variant AG & Co KGaA — KGaA with Complementary AG

Sometimes the AG also appears in combination with a stock limited partnership (KGaA). For example, family businesses occasionally organize themselves as a stock corporation & Compagnie Limited Partnership on Shares — short: AG & Co KGaA. In this case, they form a stock corporation in a legal sense — however, the general partner as personally liable partner is not an individual, but also a stock corporation. If the general partner is instead represented by a GmbH, it is referred to as a GmbH & Co KGaA, and in the case of a Societas Europaea, as a SE & Co KGaA.

Why this structure? It combines the capital market capability of an AG with the takeover protection of a KG. Families like Henkel, Merck or Hornbach thus retain full control through the general partner, even if 90% of the shares are listed on the stock exchange.

More about the individual hybrid forms:

GmbH & Co KGaA — see Gesellschaft mit beschränkter Haftung (GmbH)
SE & Co KGaA — see Societas Europaea (SE)

Examples of AG & Co KGaA companies:

CTS EVENTIM AG & Co. KGaA
Drägerwerk AG & Co. KGaA
Fresenius Medical Care AG & Co. KGaA
Henkel AG & Co. KGaA
HORNBACH HOLDING AG & Co. KGaA
ProCredit Holding AG & Co. KGaA

A special case is CEWE Stiftung & Co. KGaA: Here, the general partner is represented by a foundation. In general, the stock limited partnership is possible in all conceivable combinations.

Read more about the topic “Establishing a family foundation”:

Establishing a family foundation

Establishment & Founding of an AG — From Articles of Association to Registration

You want to set up an AG? Then you need to know: A natural or legal person is sufficient as a founder, so you can appear as the sole shareholder and automatically be the sole managing board member. Such a one-person AG is often referred to as a “small stock corporation.” However, you can’t do it entirely alone: an AG must appoint at least three members of the supervisory board — the smallest possible AG thus consists of four people.

The process of establishing an AG can be divided into two phases: the internal establishment of the AG and the external establishment of the AG.

Phase 1 — Preparation & Foundation (Internal Relations)

You establish your stock corporation internally. The most important step is first and foremost the drafting of the articles of association, which must be notarially certified by a notary. For the formulation of the articles of association, all founding members must be present, as well as the future management board and supervisory board.

Content of the articles of association (mandatory under § 23 of the Stock Corporation Act):

Company name and registered office
Business purpose
Amount of share capital (minimum 50,000 €)
Face value and number of shares
Type of shares (bearer or registered shares)
Number of board members
Form of announcements

From bearer shares to nominal value shares — learn more about the different types of shares here:

Types of shares — Transferability, scope of rights & division of share capital

In the second step, the acquisition of shares and the appointment of the organs of a stock corporation follows, which must be notarially certified. Optionally, the auditor for the annual financial statements can already be appointed here. The supervisory board then appoints the management board as the first official act. No later than now, the contributions must be deposited into the business account, with at least a quarter of the share capital (i.e., at least 12,500 €) being recorded.

Phase 2 — Registration in the Commercial Register (External Relations)

Zum Abschluss des Gründungsprozesses muss dein Unternehmen ins Handelsregister eingetragen werden. Dieser Schritt rüstet die Aktiengesellschaft mit einer eigenen Rechtspersönlichkeit aus. Die Gründungsmitglieder, Aufsichtsrat und Vorstand führen die Anmeldung gemeinsam aus. Es bedarf einer Übersicht zu allen Aufsichtsräten und Vorständen, diverser Urkunden und notarieller Beglaubigungen, sowie eines Gründungsberichts und ggf. einer Gründungsprüfung durch einen externen Wirtschaftsprüfer (bei Sachgründung oder qualifizierter Bargründung).

Das Registergericht beurteilt nach Vorlage aller Dokumente, ob die Errichtung der Aktiengesellschaft ordnungsgemäß erfolgt ist. In einem letzten Schritt wird die Eintragung ins Handelsregister vorgenommen — deine Aktiengesellschaft gilt damit offiziell als gegründet.

The Founding Process at a Glance

Phase 1 — Construction in the internal relationship
- Determination of the bylaws (notarially certified)
- Share acquisition
- Order of the company organs (notarially certified)
- Possibly ordering the final examiner
- Einzahlung der Einlagen (mind. 1/4 Grundkapital = 12.500 €)

Annual General Meeting – decision-making body of a stock corporation (AG)

Laura — Mon, 08 Mar 2021 12:28:24 +0000

Annual General Meeting – A stock corporation consists of several bodies. The management board deals with the day-to-day business and other matters of the company and represents the stock corporation externally. The supervisory board is a legally prescribed self-controlling body that appoints and monitors the individual members of the management board and, in case of doubt, also removes them. Furthermore, it is responsible for the written reporting of the annual financial statements as well as for annual reports. The general meeting acts as the decision-making body of the stock corporation. Here you can find all legal forms and here you can go back to the overview AG.

Annual General Meeting – The decision-making body

The Annual General Meeting acts as the decision-making body of a stock corporation. It represents the legislative body of the company and is intended to relieve the members of the supervisory board and the management board of their duties. The general meeting consists of the shareholders of an AG and is usually convened once a year.

More on the other bodies of a public limited company:

Duties of the Annual General Meeting – Auditor, appropriation of profits & Co.

It decides which shareholders are appointed to the supervisory board and also elects the auditor(s) for the annual financial statements. The general meeting is the only body of an AG that may decide on the appropriation of the balance sheet profit and can be influenced by proposals from the members of the management board and the supervisory board. Another important task of the general meeting: It passes resolutions on essential issues – for example, with regard to capital increases or reductions, possible mergers or dissolutions, sales, takeovers or acquisitions…. insofar as these result in an amendment to the Articles of Association.

Overview of the tasks of the Annual General Meeting:

Discharge of the Management Board & the Supervisory Board
Election of the Supervisory Board members representing the shareholders
Election of the auditor
Decision on the appropriation of profits
Decisions on matters concerning amendments to the Articles of Association

The members of the general meeting are automatically provided with participation in the formation process of the stock corporation. In contrast to the management board and supervisory board, they are not bound to fixed terms of office, but are allowed to hold office until they leave the company. Each shareholder receives votes in proportion to his profit shares. The shareholder is granted one vote per share.

AG: foundation, legal form, special case real estate

Stock corporation (AG)
Real estate stock corporation (REIT-AG)
Real estate company

Stock corporation (AG): Formation, liability, legal form & Co.

Aktiengesellschaft (AG) – The stock corporation is a German legal form founded by at least one person and organized by different bodies. Instead of a managing director, the company is managed by a board of directors consisting of at least one person. As the name already indicates, this legal form of a company primarily stands for stock trading. You would like to start a company alone or together with other people and learn more about company law forms in advance? Then you’ve come to the right place!

Stock corporation (AG)

Real estate stock corporation (REIT-AG)

Real estate stock corporation / REIT-AG – You don’t find the idea of a stock corporation bad at all and are now wondering how you can combine your capital company with the real estate industry? A real estate company is a company that serves the financing, development, realization, leasing, or marketing of real estate – starting with a single property up to a real estate portfolio in the three or multi-digit range. The management of real estate property or third-party real estate on behalf of third parties can also be handled by a real estate company.

Real estate stock corporation (REIT-AG)

Real Estate GmbH & Asset Management GmbH

Alternative – In this article you will learn the basics about real estate companies. Briefly explained, a real estate company is a company that has the purpose of leasing, developing, financing, realizing and/or marketing. It doesn’t matter if it is one or more properties. The management of residential and commercial real estate – in its own interest or as a service offered to third parties – is also a popular focus for real estate companies and asset management GmbHs. Find out more about the main advantages and disadvantages of buying real estate and the expected costs.

Real estate company

Supervisory Board – controlling body of a stock corporation (AG)

Laura — Mon, 08 Mar 2021 12:27:31 +0000

Supervisory Board – The Supervisory Board is a legally prescribed self-monitoring body that appoints and monitors the individual members of the Management Board and, in case of doubt, also removes them. Furthermore, it is responsible for the written reporting of the annual financial statements as well as for annual reports. The Management Board deals with the day-to-day business and other matters of the company and represents the stock corporation externally. The general meeting acts as the decision-making body of the stock corporation. Here you can find all legal forms and here you can go back to the overview AG.

Supervisory Board – The controlling body

The supervisory board is the supervisory body of a stock corporation and consists of at least three members. The Supervisory Board is appointed by the Annual General Meeting for a term of four years and is obliged to report to the Annual General Meeting.

More on the other bodies of a public limited company:

Duties of the Supervisory Board – Appointment, Supervision, Dismissal & Co

As the name suggests, the supervisory board is primarily responsible for supervising the management board, in addition to appointing and dismissing the management board. Furthermore, it is responsible for reporting in writing on the annual financial statements after they have been prepared by the management board and audited by the auditors, and it prepares annual reports. Formally, the Supervisory Board issues the invitation to the Extraordinary General Meeting and can submit proposals to the General Meeting on the appropriation of the profits generated.

Tasks of the Supervisory Board at a glance:

Reporting to the Annual General Meeting
Appointment of the Management Board
Supervision of the Management Board
Dismissal of the Management Board
Written reporting
Preparation of annual reports
Invitation to the Extraordinary General Meeting
Proposal for the appropriation of profits

The members of the supervisory board are registered in person with the registration court and at least the chairman of the supervisory board must also be listed by name on the AG’s business letters. Upon taking up their office, supervisory board members may not simultaneously act as members of the management board of their company, and they are also prohibited by the prohibition of cross-linking from being appointed as a member of the management board of another company. Remuneration is paid to all members of the Supervisory Board in accordance with the Articles of Association or the amount is decided at the Annual General Meeting.

AG: foundation, legal form, special case real estate

Stock corporation (AG)
Real estate stock corporation (REIT-AG)
Real estate company

Management Board – governing body of a stock corporation (AG)

Laura — Mon, 08 Mar 2021 12:24:41 +0000

Management board – The management board of a stock corporation deals with the day-to-day business and other affairs of the company and represents the stock corporation externally. The supervisory board is a legally prescribed self-controlling body that appoints and monitors the individual members of the management board and, in case of doubt, also removes them. Furthermore, it is responsible for the written reporting of the annual financial statements as well as for annual reports. The general meeting acts as the decision-making body of the stock corporation. Here you can find all legal forms and here you can go back to the overview AG.

Board of Directors – The management body

Instead of managing directors, a stock corporation has an executive board consisting of at least one managing person. As a management body, the executive board forms the metaphorical head of the company and thus has management authority in the internal relationship and representation authority in the external relationship. The Management Board is appointed by the Supervisory Board for a term of five years and is obliged to report to the Supervisory Board.

More on the other bodies of a public limited company:

Tasks of the Management Board – management, annual balance sheet, management report & Co

The primary task of the management board of an AG is the independent management of the company. Contextually, it establishes the annual balance sheet, prepares the profit and loss account (P&L) and prepares a management report that depicts the company’s situation – current and future – in a realistic relationship to possible opportunities and risks. Formally, the Management Board issues the invitation to the Annual General Meeting and can submit proposals to the Annual General Meeting on the appropriation of profits. It is also the only body which, in a worst-case scenario, may file an application for the opening of insolvency proceedings.

Duties of the Management Board at a glance:

Independent management
Reporting to the Supervisory Board
Approval of the annual balance sheet
Statement of profit and loss
Preparation of a management report
Invitation to the Annual General Meeting
Proposal for the appropriation of profits
Application for the opening of insolvency proceedings

The individual members of the management board are entered in the commercial register and must also be listed by name on the AG’s business letters. Upon taking office, they may not simultaneously act as a member of the supervisory board of their company and are also prohibited by the prohibition of cross-linking from being appointed as a member of the supervisory board of another company. As compensation, each member of the Management Board receives a fixed salary and also receives a so-called bonus, i.e. a share in the annual profit.

AG: foundation, legal form, special case real estate

Stock corporation (AG)
Real estate stock corporation (REIT-AG)
Real estate company

Stock corporation (AG): Formation, liability, legal form & Co.

Stock corporation (AG)

Real estate stock corporation (REIT-AG)

Real estate stock corporation (REIT-AG)

Real Estate GmbH & Asset Management GmbH

Real estate company