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.