German Stock Corporation Act (AktG)

Historical development and legal basis

The German Stock Corporation Act (AktG) has undergone a significant legal history dating back to the time of the German Reich. The law was originally passed on January 30, 1937 and came into force on October 1 of the same year. The first revision took place on 6 September 1965, with entry into force on 1 January 1966, which represented a fundamental modernization of stock corporation law. Since then, the law has been continuously adapted to the changing economic and legal environment. The last significant amendment was made by Article 3 of the Act of January 4, 2023, which came into force on January 31, 2023. This development reflects the dynamic nature of stock corporation law and demonstrates the need to adapt the legal framework to modern corporate structures. The German Stock Corporation Act is based on the principles of German company law and is oriented towards international standards for stock corporations. It forms the central set of rules for the formation, organization and management of stock corporations in Germany. The creation of the Act was characterized by the aim of creating a transparent and legally secure framework for corporations. Both economic interests and the protection of shareholders played a decisive role in this. The development of the German Stock Corporation Act is closely linked to the development of German commercial law and reflects the increasing complexity of corporate structures.

Structure and system of the law

The German Stock Corporation Act is divided into four main books that comprehensively regulate various aspects of stock corporations and related legal forms. The first book deals with the stock corporation and comprises sections 1 to 277, setting out basic regulations on the formation, organization and management of stock corporations. It defines key terms such as minimum capital requirements, founders’ liability and the structure of corporate bodies. The second book is dedicated to the partnership limited by shares and comprises sections 278 to 290, regulating the special features of this type of company in detail. The third book deals with affiliated companies and contains important regulations on company agreements, management power and responsibility in the case of company dependencies. The fourth book contains provisions on penalties and fines for controlling companies and other persons. This systematic structure enables comprehensive and precise regulation of various aspects of stock corporation law. The sections of the law cover a wide range of topics, from the formation and accounting to the dissolution of stock corporations. Particularly important aspects are the regulations on the Annual General Meeting, the Management Board and Supervisory Board as well as the provisions on capital increases and decreases. The system of the law provides a clear structure and transparency for all parties involved. At the same time, it offers sufficient flexibility to take account of different company constellations.

Formation and capital structure of stock corporations

The formation of a stock corporation is subject to very detailed regulations in the Stock Corporation Act, which are intended to protect both founders and potential investors. The law defines precise minimum requirements for the formation, including the determination of a minimum share capital and the drafting of a company statute. The foundation requires at least one founder, although the number of founders is not limited. The share capital must amount to at least EUR 50,000 and be divided into shares. The shares can be issued as registered or bearer shares, whereby the law regulates various modalities for issuing shares. Particularly important are the provisions on raising capital, which are intended to ensure that the share capital is actually available. The Stock Corporation Act defines various forms of capital increase, such as the ordinary capital increase against cash contributions, the conditional capital increase and the authorized capital. These regulations offer stock corporations flexibility in raising capital and enable them to react quickly to growth and investment opportunities. The regulations on the capital structure are designed in such a way that they take into account both the interests of the company and those of the shareholders. At the same time, they create transparency and legal certainty for all parties involved.

Executive bodies and corporate governance

The German Stock Corporation Act defines a clear organizational structure with three main bodies: the Management Board, the Supervisory Board and the Annual General Meeting. The Management Board is responsible for operational management and is responsible for the strategic direction of the company. It must consist of at least one member and is appointed and monitored by the Supervisory Board. The Supervisory Board, for its part, has the task of monitoring the Management Board and reviewing important company decisions. Depending on the size of the company, it consists of three to 21 members who are elected by the Annual General Meeting. The Annual General Meeting is the shareholders’ body and has far-reaching powers, such as approving the actions of the Management Board and Supervisory Board, passing resolutions on the appropriation of profits and amendments to the articles of association. The law sets out detailed regulations for convening, holding and passing resolutions at the Annual General Meeting. Particular attention is paid to the rights of shareholders, including the right to information, the right to submit motions and the right to vote. The board structure is designed in such a way that it enables effective control and management of the stock corporation. At the same time, it creates mechanisms that prevent abuse of power and take into account the interests of all stakeholders. The provisions on corporate governance in the German Stock Corporation Act aim to ensure transparency, efficiency and accountability in stock corporations.

Shareholder rights and protective provisions

The German Stock Corporation Act defines comprehensive rights for shareholders that guarantee their protection and co-determination in the stock corporation. Central rights include the right to vote at the Annual General Meeting, the right to information and the right to profit distribution. Minority shareholders receive special protection through specific regulations, which are intended to prevent abuses by majority shareholders. The law guarantees every shareholder the right to participate in the Annual General Meeting and to submit motions. The Annual General Meeting must be convened at least 30 days before the date of the meeting and must contain all essential information. Shareholders have the right to challenge resolutions and apply for judicial review. The right to information enables shareholders to obtain detailed information about the company. In the case of capital measures, shareholders must always be granted a subscription right that secures their participation quota. The law protects shareholders from disadvantages and creates transparent mechanisms for corporate control. The regulations on the equal treatment of shareholders prevent discrimination and create trust in company management. Complex protective provisions also regulate the admissibility of inter-company agreements and control agreements.

Financial aspects and accounting

The financial provisions of the German Stock Corporation Act define comprehensive regulations on accounting and the preparation of annual financial statements. Public limited companies must prepare annual financial statements that comply with generally accepted accounting principles. The annual financial statements consist of a balance sheet, income statement and notes, which provide detailed information on the net assets, financial position and results of operations. The law stipulates a comprehensive documentation obligation that ensures transparency and traceability of the company’s finances. The annual financial statements are audited by an independent auditor, who must issue an audit certificate. Regulations on the appropriation of profits define how company profits are to be treated and which reserves must be formed. The Annual General Meeting decides annually on the distribution of profits and the creation of reserves. The law distinguishes between statutory reserves, which are mandatory, and free reserves, which the company has the discretion to form. Complex regulations govern the valuation of assets and the recognition of hidden reserves. Accounting must comply with the principle of balance sheet accuracy and clarity. International accounting standards such as IFRS can be applied optionally. The regulations aim to ensure a reliable and transparent presentation of the company’s situation.

Legal consequences and compliance

The German Stock Corporation Act defines comprehensive compliance requirements and possible legal consequences in the event of breaches of duty. Members of the Management Board and Supervisory Board can be held personally liable if they breach their duty of care. The law provides for differentiated sanction mechanisms, ranging from claims for damages to criminal prosecution. Board members must exercise the diligence of a prudent businessman in their management of the company. In the event of breaches of duty, there is a risk of claims for damages, which can relate to the company’s entire assets. The law clearly defines liability for board members who act with intent or gross negligence. The burden of proof generally lies with the company or the shareholders. Compliance systems must be implemented in order to minimize risks and ensure that the company is managed in accordance with the law. The documentation obligations are comprehensive and require complete records of all significant company decisions. Violations of compliance regulations can lead to the dismissal of Management Board members. The law thus creates a comprehensive framework for preventing abuse and ensuring proper corporate governance. The provisions on penalties and fines can provide for severe sanctions in the event of non-compliance with the statutory provisions.