Equivalent to a limited company in the United Kingdom, the German Aktiengesellschaft (AG) is a corporation where the share capital is divided into shares, which can be freely traded on the stock market. Although one-person AGs with single entrepreneurs do exist, generally AGs are large companies with high turnover, as German law dictates high organisational requirements both at the company’s foundation and all subsequent stages.
Key features of an AG
- Establishment: At least one shareholder, with at least three natural persons on the supervisory board; article of association; entry into the commercial register
- Capital: At least 50.000 euros, divided into shares; 12.500 euros of which needs to be in a bank account at the time of registration
- Governance: Management board, supervisory board and Annual General Meeting
- Liability: Up to the amount of the company’s assets
- Taxation: Liable for corporation tax, solidarity surcharge, trade tax, capital gains tax, VAT and income taxes.
How to establish a public limited company in Germany
An AG requires at least 50.000 euros of share capital, which is split up into shares valued at a minimum of one euro each. The number of shares issued and their value is stipulated by the article of association. At least one quarter (12.500 euros) of this share capital must be provided before the company can be entered in the commercial register by a notary. Once this is complete, the founders can finish setting up the business by registering with the tax office, Chamber of Commerce and trade office.
As with a GmbH, one of the major pros of the AG business form is that the shareholders’ liability is limited. Shareholders participate through the purchase of shares; if the corporation goes bust, shareholders only risk the loss of their shares.
German tax liability of an AG
All AGs are subject to business taxes such as corporation tax, solidarity surcharge, trade tax, VAT and capital gains tax. If the company has employees, they also are required to pay payroll tax.
Managing an AG in Germany
AGs have a two-tiered board structure, which consists of a management board (Vorstand), which controls the company’s everyday operation, and a supervisory board (Aufsichtsrat).
Usually, the supervisory board is controlled by shareholders, but in larger companies employees may also have seats. The supervisory board also has the power to remove members of the management board. Every AG must also hold an Annual General Meeting, with all shareholders, the management board and the supervisory board.
AGs & German accounting
Like a GmbH, the AG is subject to the accounting rules set out by the German Commercial Code (HGB). This means that AGs are required to carry out double-entry bookkeeping, prepare annual balance sheets and make public disclosures as to profits and losses.