The Gazette 1981

GAZETTE

APRIL 1981

German

Trading

Companies

A note on their structure

by Nicola K. Ban-

German law provides for two main types of company.

They are the "Aktiengesellschaft" (AG) and the "Gesell-

schaft mit beschraenkter Haftung" (GmbH). The AG is

comparable to the Public Company and the GmbH to the

Private Company as known in Irish law. Unlike the U.K.

and Ireland, these two types of company are governed by

two separate statutes. Both companies are separate legal

entities, apart from their shareholders, and their share-

holders are not personally liable for the acts of the

company.

In the AG, as opposed to the GmbH, there is little

opportunity for a shareholder to exercise much influence

on the company and it is therefore a suitable structure for

large concerns or undertakings, where shares will be

bought as an investment only.

A minimum of five shareholders is necessary to incor-

porate an AG. It has a minimum share capital of 100,000

DM, 25% of which must be paid up. The shareholders

are liable only to the uncalled amount of their shares. To

ensure that the capital will not evaporate, there are

stringent rules for the maintenance of capital.

The AG has three organs; the General Meeting (Haupt

versammlung), the Board of Supervisors (Aufsichtsrat),

and the Board of Management (Vorstand).

The General Meeting is the highest organ of the AG. It

is composed of all the current shareholders. What is parti-

cularly interesting about the AG General Meeting is that

its powers and rights are set out in the German Company

Law Statute (Aktiengesetz), or in the Articles of Associa

tion, which cannot remove any powers or rights conferred

by the Company Law Statute. The Irish General Meeting,

in contrast, may, if Article 80 of Table 1 of the

Companies Act, 1963, is adopted, pass any direction to

the Board of Directors on any matter relating to the

management of the company.

Perhaps the most important power of the AG General

Meeting is the power to appoint the Board of Super

visors. This body, in turn, appoints the Board of Manage

mcnt, which is responsible for the running of the

company. The main duty of the Board of Supervisors is to

watch over the Board of Management. It performs this

duty throughout the course of the year, and is enabled, by

statute, to examine all the documents of the company

relating to the assets of the company. A natural conse-

quence of this "watchdog" principle is that a member of

the Board of Management may not concurrently be a

member of the Board of Supervisors. The Board of Super-

visors is empowered to approve the proposed calculation

of the year's profits. Should it not approve the calcu-

lation, as proposed by the Board of Management, the

General Meeting is requested to approve the calculation

or, if necessary, to recalculate the profits. If the AG has

less than 2,000 employees, the Betriebsverfassungsgeset

(Statute on Works Organisation) provides that the Board

of Supervisors is composed of one-third of employees'

representatives and of two-thirds of shareholders'

representatives. If there are more than 2,000 employees,

the Mitbestimmungsgesetz (Statute on Co-Determ-

ination), which provides for the representation of the

employees on the Board of Supervisors, provides that the

ratio shall be 50:50. The actual number of members of

the Board of Supervisors is rather complicated and

regulated in the following way.

Where an AG has more than 2,000 employees there

is an equal number of shareholders' and employees'

representatives on the Board. The Mitbestimmungsgesetz

provides that from 2,000 employees to 10 000

employees, there is a minimum number of six members

from each side. The six members from the employees'

side are again divided into four and two - the four

members being actual members of the work force, the

other two members being full-time employees of the rele-

vant trade union operative in the industry in question

These members are fully employed by the union, and are

not members of the work force of the AG. From 10,000

to 20,000 employees, it is laid down that there shall be

eight members from each side. Here the employees'

representation is divided into six and two Where the

work force exceeds 20,000 there are ten from each side

the employees' ten being divided into seven and three on

the above lines.

When the work force of the AG is less than 2 000 the

number of members of the Board of Supervisors is related

to the capital of the company. There must be a minimum

of three members. The maximum number in an AG with

a share capital of up to 3,000,000 DM is nine From

3,000,000 to 20,000,000 DM the maximum is fifteen

Over 20,000,000 DM there shall be a maximum of

twenty-one members of the Board. The number of

members must be divisible by three, as the employee-

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a w o r k

force under

2,000, as mentioned above, is one-third to two-thirds.

The Board of Management, as a body, is capable of

acting on the company's behalf. However, the Articles of

Association may provide that certain members of the

management may represent the company when acting

alone or with another member of the Board of Manage

ment. This is common as it avoids the necessity of

obtaining the signature and consent of each member of

the Board of Management each time the company acts

Members of the Board of Management may hold

office for a maximum of ten years.

The GmbH

The more frequently used form of company for small

undertakings is the GmbH. In contrast to the AG, the