What is AG (Aktiengesellschaft)? Definition, Meaning, and Example

Different legal frameworks exist to specify how businesses operate and function in the world of business. The AG, or Aktiengesellschaft, is one such structure that enjoys considerable significance, notably in German-speaking nations. Since "Aktiengesellschaft" means "stock corporation" in English, it emphasizes the company's essential quality of being a publicly listed one. To provide readers with a comprehensive understanding of what AG is, this article will explore its meaning, define it, and use an example to demonstrate how it can be used in real-world situations.

What is the AG (Aktiengesellschaft)?

The German word for a public limited corporation, Aktiengesellschaft, is typically abbreviated as AG. Public stock exchanges trade these kinds of firm shares, which are accessible to the entire public. The maximum responsibility of shareholders of these firms is their investment. The assets of the shareholders are safeguarded if the firm goes bankrupt, and they are not held liable for the obligations of the company.

The terms "share" and "company" are combined to form the German word "Aktiengesellschaft". A company with shareholder ownership that trades on a stock exchange is known as an AG. At regularly planned general meetings, shareholders have the opportunity to oversee policy. All operational decisions are made by the supervisory board and carried out by the management board.

The initials 'AG' are added after the firm name to identify German companies that are listed on a stock exchange. The majority of AG firms are listed on the DAX and are publicly traded on stock markets.

How to set up an AG?

Five or more members are necessary to form an AG. The Stock Corporation Act's rules and regulations are applied to Aktiengesellschaft (AG). A share capital of about $56,000 is required for this act, of which at least half should be paid at registration. In order to prepare the paperwork for registration, the business owner will need a bank or an attorney's services.

The name of the Aktiengesellschaft will be derived from the objective of the business and will include the term Aktiengesellschaft in its title. The name, address, share capital, contribution made by each shareholder, and information about the shares are all listed in the Article of Association. The article of association will be certified by a notary public or court.

In addition to submitting the notarized paperwork and signed application to the Commercial Registry Office, the requisite capital must be put into a bank account. The AG will become a legitimate entity in seven days if all paperwork is in place. In addition to publishing information about the business in the Swiss Official Gazette of Commerce, the Office also provides a certificate of registration.

What are AG's Corporate Bodies?

An AG has three corporate bodies, such as the management board, the board of directors, and the general assembly.

1. General Assembly/ Meeting (Hauptversammlung)

If necessary for the company's benefit, a special general assembly may also be called. The annual general assembly/general meeting serves as a representative of the shareholders and a forum for the exercise of their rights.

The majority of the choices made at the general meeting are organizational in nature and have little to do with the day-to-day operations of the firm. Examples include the nomination of board members, capital increases and decreases, and the distribution of profits. To protect itself, the management board may, nevertheless, ask the shareholders to decide on a business matter.

2. Board of Directors/ Supervisory Board (Aufsichtsrat)

The AG's governing body is the Aufsichtsrat. Along with choosing and dismissing the management board, it also picks the auditor (Abschlussprüfer). The yearly financial statements are presented to the board of directors after being reviewed by Abschlussprüfer.

Furthermore, the Aufsichtsrat members always have access to the company's books in order to perform their supervision responsibilities.

3. Management/ Executive Board (Vorstand)

The Vorstand is in charge of the AG's day-to-day operations. It is self-sufficient and unrelated to the Hauptversammlung and Aufsichtsrat.

The power of representation of the Vorstand is infinite, but only in theory; it works as a shared power of representation when it comes to representing the firm to the outside world. Individual members may only represent the firm in a meaningful manner if the articles of association expressly provide them exclusive representation.

Monitoring of AG

The supervisory board of an AG, which consists of three or more members, appoints and oversees the managing board, which consists of one or more members. An Aktiengesellschaft (AG) with a share capital of $3 million or more typically has two or more members on the management board. An AG with more than 500 workers will have one-third of its supervisory board made up of employee representatives. Employee representatives will make up half of the board if there are more than 2,000 workers. Additionally, the article of association may set a cap on the number of members.

The financial records of the corporation are examined by auditors. An ordinary corporate audit is necessary if the following criteria are met for two or more consecutive years: the organization has more than 50 full-time workers, $2 million or more in annual revenue, or a balance sheet with more than $100,000.

What are the AG's Reporting and Accounting Obligations?

Regarding the structure of the Jahresabschluss-the German term for an extended annual financial statement-and its publishing, precise guidelines are applicable to AGs. The balance sheet, profit and loss account, and notes are generally included in an AG's annual reports rather than the management report. An AG must publish its yearly accounts, the extent of which is determined by the company's size.

What details need to be given to the Handelsregister?

A certain number of transactions and adjustments made to an AG must be recorded in the Handelsregister (commercial register) as well. For instance, the creation of the stock corporation, the first management team and board of directors, staff changes in the committees, the corresponding yearly financial statements of the firm, and more.

How are shares of AG transferred?

It is not necessary to fill out a specific form to decide when shares are transferred between shareholders. However, the kind of shares must be taken into account. One type of transferable asset is an assignment of a non-securitized share. However, the general assembly of the AG must approve "restricted" registered shares before they may be issued.

What does an AG need to list its IPO?

The AG must first complete the initial public offering procedure before the shares may be traded on one of the global stock markets. In order to achieve this, it is necessary to adhere to specific legal standards outlined in the Börsengesetz (Stock Exchange Act) and Börsenzulassungsverordnung (Stock exchange admission regulation). Additional disclosure obligations are likewise brought about by stock market listing.

Examples of AG

Automotive manufacturers are some of the biggest German AG corporations. Some notable AGs include the following:

Volkswagen AG

Located in Wolfsburg, Lower Saxony, Germany, Volkswagen AG, also known as the Volkswagen Group, is a global German car manufacturer. Volkswagenwerk Aktiengesellschaft (sometimes shortened as Volkswagenwerk AG) became the name of the corporation in 1960 after a portion of the German federal government's ownership in it was floated on the German stock market. In addition to offering associated services including financing, leasing, and fleet management, the company typically designs, manufactures, and sells motorcycles, motorcycle engines, and turbomachinery. Additionally, it creates, produces, and distributes both commercial and passenger automobiles.

Volkswagen Aktiengesellschaft is a publicly listed company having secondary listings on the SIX Swiss Exchange and the Luxembourg Stock Exchange in addition to its primary listing on the Frankfurt Stock Exchange. It belongs to the Euro Stoxx 50 stock market index.

BMW AG

Bayerische Motoren Werke AG, usually known as BMW, is a multinational corporation headquartered in Munich, Bavaria, and produces luxury cars and motorcycles. In order to primarily manufacture airplane engines, the company was founded in 1916. From 1917 to 1918, as well as again from 1933 until 1945, this work was done.

The Quandt family has had a long-standing interest in the company ever since the Quandt brothers' donations in 1959 saved BMW from bankruptcy, with the public holding the remaining shares.

GMbH vs. AG

Another frequent corporate abbreviation, GMbH, is predominantly utilized in Germany. Germany classifies businesses as either publicly traded or privately held, like the majority of other nations. The acronym "AG" stands for "public companies", whereas "GmbH" is often used to indicate private businesses and is written after a company's name. The term "GMbH" stands for Gesellschaft mit beschränkter Haftung, meaning limited liability firm.

Conclusion

Ultimately, AGs are widely present in the market and support both innovation and economic growth. AGs promote progress in a variety of industries by empowering shareholders and encouraging responsibility. The problem of striking a balance between profitability and sustainability must be addressed, as well as strict governance. AGs are essential in forming the world of business.