Requirements for
a Stock Corporation
in Germany

Requirements for a Stock Corporation in Germany (“AG”)

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Establishing a stock corporation (Aktiengesellschaft – AG) in Germany is a business model whereby shares can be traded on the stock exchange. Compared to other business models in Germany, the AG is more expensive to start and involves more regulation regarding financial records.

At Schlun & Elseven Rechtsanwälte, our corporate lawyers are here to advise our business clients on all issues concerning the stock corporation in Germany. Allow our experts to oversee the legal requirements relating to registering the AG and ensuring that it is established on a secure footing. Contact our team directly to start a productive partnership.

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As a full-service law firm, Schlun & Elseven will oversee all the legal requirements for registering a stock corporation in Germany.

Registering a Stock Corporation in Germany

At Schlun & Elseven Rechtsanwälte, our lawyers guide founders through the registration process.

Forming a stock corporation in Germany is open to both German residents and those not residing in Germany. It can consist of shareholders who are German citizens, residents and non-German citizens and residents.

Our team supports our corporate clients with the foundation protocols, including overseeing the completion of the company’s articles of association and subsequent notarial certification. The articles of association are essential for company formation and outline the name of the company, its objective, the amount of authorised capital, the quantity and nature of shares (common shares or preferential shares), the nature of their use (bearer or registered shares) and the number of members of the board.

When establishing a stock corporation in Germany, applications need at least 50,000 euros of share capital, of which one quarter (12,500 euros) must be provided upon registration. The company must then be registered with the Tax Office, Commercial Register and the Trade Office. Our team supports founders with submitting the required documents, such as the application for registration, documents showing the management board structure and the necessary certificate showing that the share capital was deposited to the German Commercial Register.

Drafting and Reviewing the Articles of Association

To register a company with the German Companies Registry, a stock corporation must prepare specific documents, including the memorandum and articles of association.

The memorandum of association provides the details of the agreement between shareholders to establish a company, and the articles of association outline the rules under which the company is formed. These documents must be notarized to be considered valid. At Schlun & Elseven Rechtsanwälte, our lawyers will examine your documents and ensure they follow the specified requirements.

For the articles of association of a German company to be valid, they need to contain specific information; however, they also include details regarding the company’s internal procedures. The internal rules of the company within the articles of association should incorporate elements regarding share capital alterations, the management of shareholding changes, the obligations of the shareholders, and the procedure for appointing and dismissing directors. Shareholder disputes often arise when there is a lack of clarity within the company’s bylaws and regulations. Carefully drafted articles of association by experienced lawyers can prevent costly legal conflicts.

Within the articles of association, the company outlines the business objective, the scope of the managing director’s power of attorney or the shareholders’ contribution obligations, and the company’s business name and legal address.

At Schlun & Elseven Rechtsanwälte, our German corporate law specialists advise stock corporations in Germany in matters of the following:

  1. Drafting the articles and memorandums of association,
  2. Reviewing the articles of association and individual contractual clauses,
  3. Enforcement of claims under the articles of association and defence of shareholders in shareholder disputes,
  4. Amending the articles of association in cases of restructuring, mergers and succession,

Contact us directly to benefit from our services.

The Administrative Elements of the Stock Corporation

Within the AG in Germany, three bodies are most important regarding the company. The three bodies are the management board, the supervisory board, and the general assembly. Each of these bodies has different roles within the company and different legal responsibilities and roles.

The Managing Board

The managing board is responsible for the company’s decision-making, policy decisions, and running of the company. It is independent of the other two bodies. However, the company’s Articles of Association can outline that certain decisions should only be made with the supervisory board’s approval or by a general assembly of shareholders. It is the managing board that represents the company externally with third parties. The managing board can consist of one person, and they do not need to be company shareholders. However, it is more common practice for there to be several members within the group. Managing board members are appointed on a five-year term by the supervisory board.

Within the managing board, different directors can be made responsible for various aspects of the company. However, the Articles of Association can also provide guidelines and mechanisms by which the directors can operate.

The Supervisory Board

The supervisory board (Aufsichtsrat) consists of members chosen by company shareholders to promote their interests. They achieve this goal by overseeing the governance of the company and through hiring and supervising the board of directors and CEO. This body can remove directors and CEOs. Although the general assembly of shareholders has a significant say in who is appointed, in large corporations, employees also have an influential voice on the supervisory board in large corporations. The supervisory board members have access to the company’s financial records to allow them to keep a supervisory role over the management board.

The General Assembly

Usually, the General Assembly of shareholders convenes once a year with the annual general meeting. This meeting generally concerns the appropriation of profits, the discharge of the management board and supervisory board, and the statutory auditor’s appointment. However, in some circumstances, emergency general meetings can also be called. Whereas the management board is concerned with the daily running of the business, the general assembly is more concerned with more significant issues for the company. Examples include the appointment and removal of their representatives on the supervisory board, capital reductions and increases, changes to the articles of incorporation and resolving on a company’s dissolution. The general assembly is how shareholders can exercise their rights.

Liability Issues Concerning the Stock Corporation

The AG is a limited liability company model. The company itself has a distinct legal identity from those involved in the running of the company. In the event of financial difficulties, creditors can generally only target the company’s assets. However, there are more strenuous legal obligations relating to AGs than other forms of businesses, including the GmbH, which can lead to situations where individual members of the AG can be held liable. If members of the managing board or supervisory board act in a manner that breaches their duty of care or is illegal, they can be held liable for business decisions. Where members of the management board breach their duties, they have an obligation as joint and several debtors to pay the AG compensation in the event of resulting damage.

Shareholders’ Rights in AGs in Germany

There is no minimum number of shareholders listed to be able to form an AG. An AG can exist with one shareholder, and small AGs have become more common in recent years. However, most medium-sized and large stock corporations in Germany have many more shareholders. Shareholders have several ownership rights, including the right to a dividend, the right of subscription in respect of capital increases, the right to repayment in respect of capital reductions and the right to participate in liquidation.

Shareholders also have rights relating to decisions made concerning the articles of association, the appointment of year-end auditors, special auditors (under § 142 AktG), appointing and dismissing members of the Supervisory Board, the transfer of entire company assets (§ 179a AktG) and the dissolution of the company.

Dividends can only consist of the company’s profits, as shown in the company’s annual financial statements. The other assets of the company are not considered in the dividend. However, in situations where the directors of the company have misappropriated funds, they can be held personally liable for their actions. Generally, the company’s shares are easily transferred; however, an exception exists in the case of registered shares, where the articles of association may consist of rules whereby the transfer is conditional upon company approval.

At Schlun & Elseven Rechtsanwälte, our legal team advises on all matters of shareholder disputes in Germany.

Transformation into a Stock Corporation in Germany

Transforming a company from a limited liability company (GmbH) into a stock corporation (AG) can bring significant benefits for businesses. For long-term growth, capital increases, an improved reputation and increased access to specialist expertise, the stock corporation brings many advantages. The Transformation Act (UmwG) in Germany outlines the provisions relating to such a transformation of legal form. However, working with our corporate law team is recommended to carry out a transformation in a legally secure manner and avoid costly delays.

The process involved with the transformation involves five steps:

  • Create a conversion report: A conversion report outlining the reasons for the transformation, the consequences of the decision and the shareholders’ shares in the AG must be created. Shareholders within the GmbH need to receive the conversion report in advance, and those who do not support the move can then withdraw from the company if they choose to do so.
  • Conversion resolution: The official resolution can occur during a shareholders’ meeting, during which those present can discuss the conversion report and aspects within it. The transformation from a GmbH to an AG needs the support of the majority of the shareholders. Unless the articles of association state otherwise, 75% of shareholders should support it. Once the shareholders’ approval has been confirmed, the resulting conversion resolution must be certified by a notary.
  • The formation report: The company founders must prepare a formation report that demonstrates:
    • the required documents have been notarised,
    • the articles of association are in order,
    • the required capital increase (if the current share capital of the GmbH does not yet amount to 50,000 €) – detailed financial reports are necessary,
    • the appointment of a supervisory board or executive board and their possible shares.
  • External auditor: Once the formation report is ready, it needs to be examined by the executive and supervisory boards. Additionally, the competent registration court will appoint an external formation auditor. Their role is to check whether the information provided within the report is correct, especially regarding share distribution.
  • The Commercial Register: Stock corporations in Germany need to be entered into the commercial register. Once this has happened, the stock corporation is legally ready to begin trading. Registering with the commercial register involves submitting essential documents, such as the articles of association and the formation report to a notary public, who certifies them and sends the documents to the competent register court.

The corporate law team at Schlun & Elseven Rechtsanwälte is ready to manage this process and ensure that it is carried out in a legally compliant manner. If you require our assistance, please do not hesitate to contact us directly.

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Practice Group: German Corporate Law

Practice Group:
German Corporate Law