Understanding Aktiengesellschaft (AG): Definition & Key Insights

What Is Aktiengesellschaft (AG)?

AG, short for Aktiengesellschaft, is the German term for a public limited company whose shares are traded on public stock exchanges. Shareholders' liability is limited to their investment, protecting their personal assets from company debts.

The structure of an AG follows strict regulatory and reporting requirements, with a defined shareholder framework. The article further explores how AGs are established, provides examples, and compares them to other company types, such as the GmbH. 

The Structure and Functioning of an Aktiengesellschaft

Aktiengesellschaft is a German term made up of words meaning share and corporation. An AG is a business owned by shareholders which may be traded on a stock marketplace. Shareholders exercise power over controlling policies at regularly scheduled general meetings. The managing board decides on all operational matters, and the supervisory board carries them out.

German companies that are publicly traded are designated as such by the letters 'AG' after the company name. 'AG' is an abbreviation for the German word Aktiengesellschaft, which literally translates to 'stock corporation' or 'shares corporation' in English. AG companies trade publicly on stock exchanges with the majority of companies trading on the DAX.

Some of the largest German AG corporations include its automotive manufacturers:

• Volkswagen AG
• Mercedes-Benz Group AG
• BMW AG

How to Establish an Aktiengesellschaft

Setting up an AG requires five or more members. An Aktiengesellschaft (AG) is subject to the Stock Corporation Act. This act involves share capital of approximately 50,000 euros, with at least one-quarter paid at registration. The business owner will enlist the services of an attorney or bank in preparing documentation for registration.

The Aktiengesellschaft's name will come from the enterprise’s purpose and contains the word Aktiengesellschaft in its title. The articles of association include the corporation’s name, registered office, share capital, each shareholder’s contribution, and details regarding the shares. A court or notary will authenticate the articles of association. 

The required capital is deposited into a banking account, and the notarized documents and signed application are submitted to the Commercial Registry Office. The AG will become a legal entity within seven days if all materials are in order. The Office will issue a certificate of registration, and publish news of the establishment in the Official Gazette.

Governance and Oversight in an Aktiengesellschaft

An AG has a managing board of one or more members appointed by and reporting to the supervisory board of three or more members. An Aktiengesellschaft (AG) with a share capital of 3 million euros or more has two or more managing board members. An AG employing over 500 workers will have employee representatives occupying one-third of the supervisory board. If the employee number exceeds 2,000, employee representatives will fill half of the board. Also, the articles of association may limit the number of members.

Auditors check the corporation’s financial documents. Meeting three or more of the following conditions for two or more years in a row requires an ordinary company audit: the company has more than 50 full-time employees; revenues exceed $2 million, or the balance sheet exceeds $100,000.

Comparing GmbH and AG: Key Differences

GmbH is another common business extension primarily known for its use in Germany. Like most countries, Germany has two distinct classifications for companies: publicly traded and privately held. While AG refers to public companies, the acronym 'GmbH' is used to designate certain private entities and is written after a company’s name. The letters stand for Gesellschaft mit beschränkter Haftung which translated literally, means a 'company with limited liability.'

The Bottom Line

An Aktiengesellschaft (AG) is a German public company whose shares are traded on stock exchanges, giving shareholders limited liability.

Governed by the Stock Corporation Act, AGs follow strict capital and governance rules with a managing and supervisory board, often including employee representatives. Unlike a private GmbH, an AG operates publicly. Examples include Volkswagen AG and BMW AG.