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Civil Law Partnership – GbR

Limited Liability Company - GmbH

Limited Partnership – GmbH & Co. KG.

Stock Corporation – AG


What is the main source of law authorising this entity form?

German Stock Corporations Act ( “Aktiengesetz”, AktG)

English translation available under: https://www.gesetze-im-internet.de/englisch_aktg/index.html.


Give a brief summary of this entity form, including

Does the entity possess separate legal personality?

The AG has legal personality meaning that it can have rights and obligations, may acquire ownership of and other rights in real estate property and may sue and be sued in court independent of its shareholders.

(Maximum) period of existence

No maximum period of existence. Commonly an AG is founded for an indefinite period. A limited period may be stipulated in the articles of association.

Governing document(s)

The AG is governed by its articles of association.

Liability of incorporators / shareholders

There is no personal liability of shareholders apart from special cases of piercing the corporate veil. The minimum share capital may be spent for business purposes but must not be repaid to shareholders (to be considered in case of cash-pool agreements!).

(Governing) bodies

The bodies of the AG are:

    1. independent acting Board of Directors (“Vorstand” );
    2. compulsory supervisory board ( “Aufsichtsrat” );
    3. shareholders meeting ( “Hauptversammlung”) with reduced power.

The AG is strongly regulated within the AktG with most regulations being mandatory that may not be validly waived or deviated from within the AG’s articles.

Other particularities

There are some reliefs for small corporations.

The AG itself is taxable. Taxation of shareholders occurs only on profit distributions.


Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

Acquisition of assets, equity, etc. abroad is possible without limitation.

Cross-border restructurings are possible inside the EU, by way of mergers or based on ECJ rulings (e.g. cross-border relocations with change of legal form).


Can this type of entity be publicly listed or held?

The entity can be listed on stock exchange, if prerequisites are met. It can be publicly held (e.g. Deutsche Bahn AG).


Can this type of entity be used for a non-profit or charitable organization?

Principally, yes ( “gAG” “gemeinnützige AG” ). Sometimes used e.g. for trust like structures to act as separate legal personalities.





Give a brief summary of the process of incorporation, formation, or organization, including

Main documents required

Notarization of the deed of incorporation and of the articles of association of the AG at a German notary is required. Documents have to include business name and place; description of the purpose of the business, share capital, form and amount of shares. Additional documents required in case of a formation with contributions in kind.

Formation has to be reported and audited.

Involvement of notary, company register, governmental authorities

Share capital has to be at least 50,000 Euro (to be paid in at incorporation in the amount of at least 25% of contributions).

Timing (estimate)

Registration may take several weeks, depending on the kind of incorporation (share capital to be contributed in kind takes longer as the review of an accountant is required) and the workload of the Commercial Register. Time can be reduced by the acquisition of a shelf company.

Main costs, including registration and similar fees (excluding legal fees)

The costs for foundation and incorporation depend on the amount of share capital to be registered with the Commercial Register as well as the kind of contribution to be made to the AG by the shareholders. Excluding legal, tax and other advisor fees, the costs for the foundation and incorporation of an AG start at around 4,000 Euro.

Notarial certified filing with the Commercial Register at the local court of the entity’s registered seat by the Board of Directors of the AG.


Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

It is recommended to have the purpose of the business and the business name reviewed by the Chamber of Industry and Commerce ( “Industrie- und Handelskammer – IHK”) located at the seat of the company to avoid any delays in the registration process for potential inadequacies.


Minimum number of incorporators / shareholders and residency requirements

One (natural person or a legal entity). No residency requirements.


Minimum number of directors (or other applicable officers) and residency requirements

Directors: one director (no legal entity permitted). No residency requirements.

Supervisory Board: at least three members (in case the AG is subject to any employee co-determination regulations, the number of members has to be divisible by three; no legal entities permitted). Statutory regulations provide for a maximum number of members depending on the amount of the share capital. No residency requirements.


Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

Payment required of 50,000 Euro in cash or in kind.

Opening of a bank account is necessary.


Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

Incorporation is possible by virtue of a PoA of shareholder(s) (PoA needs to be notarized and, in case, legalized).

Board of Directors need to apply for registration, signature(s) to be notarized, no representation possible. Legally it is possible that the Board of Directors signs abroad (foreign notary to certify signature, in case legalization required), however, particularly the banks tend to require physical presence for opening of bank account (for anti-money-laundering verification).


Is a tax identification number, or equivalent, required? If so, how is it obtained?

Tax identification number will be provided by tax authorities on registration. VAT-ID will be provided by tax authorities on request.





What is the title of the applicable company registry?

The Commercial Register (“Handelsregister” ) at the local court located at the registered seat of the AG

In addition, companies and their shareholders need to be registered with the Transparency Register ( “Transparenzregister” ) for anti-money-laundering purposes).


What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles, Ownership identification (direct and/or indirect ownership, 'beneficial owners'), Group structure, Share capital, Directors, Accounts, Insolvency, good-standing, liquidation, Liens and encumbrances on the shares, Liens and encumbrances on assets of the entity, Other (e.g. litigation, tax matters)

All registered information is publicly available (and can be legally relied on).

Information/documents to be filed include:

  • Articles of Association (incl. all statutorily required information and all changes over time), transformations, inter-company agreements (profit-transfer and/or domination agreements);
  • share capital;
  • all directors with power of representation (including date of birth and city of residence);
  • list of the members of the supervisory board (including their name, profession and city of residence);
  • further representatives (authorized signatories; “Prokuristen”), if any;
  • formation report and formation audit;
  • capital increases/decreases including a list of subscribers for newly issued shares and audits/reports in case of contributions in kind.

To be registered with the federal gazette ( Bundesanzeiger ) – in particular:

  • financial statements including annual accounts;
  • invitations to shareholder meetings including at least the statutorily required information;
  • (additional filings may be required in special circumstances).

The Transparency Register was additionally introduced in implementation of EU Directive 2015/849 and is intended to help prevent the abuse of associations and legal structures for the purpose of money laundering and terrorist financing. Companies or other legal persons must provide information on the ultimate beneficial owner via the Transparency Register, unless this information is already available from entries and documents from other public registers. As the ultimate beneficial owner is often not filed with the Commercial Register, this information needs to be published via the Transparency Register (online access available). The question whether the beneficial owner is resident abroad or not is irrelevant for the notification obligation. Therefore, foreign beneficial owners must also be reported.





What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

Board of directors ( “Vorstand” ) representing the company.


How are the members of the executive body appointed, dismissed and replaced?

Appointment/dismissal by supervisory board ( “Aufsichtsrat” ); appointment and dismissal has to be filed with the Commercial Register (dismissal only for cause).


Is it possible to appoint corporate directors or must all directors be natural persons?

Yes.


Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

It is required to have a supervisory board ( “Aufsichtsrat” ) with at least three members vis à vis the Board of Directors as far as daily business is concerned; in some cases obligatory members are elected by the employees; main task is to supervise and advise the Board of Directors; represents the company (only) in legal transactions with the Board of Directors.

The shareholders' meeting appoints and dismisses members of the supervisory board.

It is a separate body (two-tier structure).


What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

Shareholders Meeting ( “Hauptversammlung” ).

Election of supervisory board; decision about profit distribution and changes of articles (incl. capital measures); extraordinary decision rights in special cases (core business matters).


What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

Majority for ordinary decisions:

  • simple majority of the casted votes, if a larger majority is not required in accordance with the article of association (articles may not lower majority requirement).

Majority for changes of articles of association and other major/core decisions (specifically mentioned within the AktG or listed in articles):

  • simple majority of the votes casted and 75% of the share capital represented at the shareholders’ meeting; articles may provide for higher majority, not however provide for lower majority;
  • in case of an amendment of shareholders’ rights and/or obligations, all affected shareholders need to consent.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

Requirements regarding the composition of the Supervisory Board depending on number of employees (to be observed as of 500 employees and more or if the company falls within the scope of certain law codes for specific companies e.g. Co-Determination Act ( Mitbestimmungsgesetz )).


What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

Annual financial statements, in case of stock listing quarterly, to be filed with electronic Federal Gazette ( “elektronischer Bundesanzeiger” ). Extent depending on balance sheet, turnover and number of employees.


Is the entity permitted to determine its own financial year?

Yes. To be filed with the Commercial Register and approval of tax authorities required.


Is the entity subject to any statutory (external) auditor obligations?

Depends on financial figures of the company. Not compulsory for entities which don’t match two of the following criteria’s:

  • 6,000,000 Euro balance sheet total;
  • 12,000,000 Euro sales revenue in the twelve months preceding the closing date;
  • the annual average of fifty employees.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

None.





What is the title designated for ‘ownership interests' (e.g. shares, quota, interests, membership)?

Share ( “Aktie” ).


Are different classes of ownership interests possible? If so, what are some examples of different classes?

Shares can be issued as unregistered share ( “Inhaberaktien” ) and registered shares ( “Namensaktien” ). The difference is that with registered shares the shareholders are known to the company in person.

Different classes of ownership interest are possible. The AG may issue “Vorzugsaktie” (preferred shares) with increased share profit rights but without voting rights or “Vinkulierte Namensaktie” (registered share with restricted transferability).


What documentation is required for the transfer of ownership interests?

In general no formal documentation is required for the transfer of shares.


Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

Depending on the kind of share (registered or unregistered share) the transfer needs to be indicated towards the AG.

Additionally in case of “vinkulierte Namensaktien” (registered shares with restricted transferability) the consent of the corporation to the transfer is required (by resolution of the managing board).


Are there any applicable stamp duties imposed when transferring ownership interests?

No.


How are shares issued? (including information on payment obligations, registration requirements)

Issuance during incorporation or by means of a capital increase following a required shareholders’ resolution in which the number of shares to be issued and – in case of shares with nominal value – the nominal value is determined (two types of shares (i) shares with nominal value and (ii) no-par value shares). No physical issuance required.

No keeping of unissued shares by the company (unless the issuance of shares by the directors is specifically authorized by the shareholders in one of the statutorily recognized cases (so called authorised capital (Genehmigtes Kapital)). The authorised capital has to be mentioned within the articles including information on the amount, the period in which it can be used and the circumstances in which it may be used.


Further information on equity contributions, e.g. , Non-cash payments on shares; (Share premium) contributions without issuance of shares , Can partially paid shares/ownership interests permitted and what are the restrictions on them?

Contributions in kind are possible.

Shareholders’ contributions into the capital reserves are possible without issuing shares.


Any requirements with respect to share cancellation, share repurchase and other capital reductions

Share cancellation and repurchase is possible if requirements under statutory law are met.

Share capital can be reduced by formal proceedings (in general by a notarized shareholders’ resolution, registration with the Commercial Register and six month cooling off period).


Any requirements with respect to distributions to shareholders?

Only the net profit is distributed to shareholders. The share capital may not be distributed to the shareholders.


Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes.





Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

Main costs are for annual financial statements and shareholders meetings. Additional fees and requirements if the company is stock listed.


What are the general corporate tax rates? (Specify if there is a national versus local distinction).

National: corporate tax ( “Körperschaftssteuer“ ) 15% + solidarity surcharge = 15,825%.

Local: if trade tax ( “Gewerbesteuer” ) applies (in most cases), the total tax burden of a AG is about 30%.





Summary of any specific matters, e.g. recent or prospective major legal developments

Due to the Covid 19 pandemic, the holding of general meetings has been made easier:

Until the end of 2021, general meetings can in principle be held virtually and votes for resolutions can be passed by postal vote or electronic participation on the day of the general meeting. Shareholders can submit their questions for the debate up to one day before the general meeting.

In the future, the Transparency Register will evolve from an interception register ( “Auffangregister” ) to a full register ( “Vollregister” ). Then, no cross-references to other registers are allowed and all beneficial owners have to be registered, even if they are listed in another register, such as the Commercial Register.




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Need more information?
Contact a member firm:
Sven Hoffmann
HEUSSEN Rechtsanwaltsgesellschaft mbH
Germany


Gregor Wedell
Schalast Rechtsanwälte mbB
Germany