Aktiengesellschaft (AG)

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A German word for a "corporation limited by share ownership" whose shares may be traded on a stock market.
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An Aktiengesellschaft (AG) is a German word for a "corporation limited by share ownership" whose shares may be traded on a stock market. 

The phrase is used to describe enterprises that were incorporated in Germany, Austria, Switzerland, and South Tyrol. Although the French word société anonyme is more popular, it is also used in Luxembourg. The legal form of the corporation is denoted by the abbreviation AG, which is pronounced [aːˈgeː]. For instance, popular German AGs that trade on the DAX stock exchange include Volkswagen AG and Daimler AG.

Advantages and disadvantages of an AG

One of the key benefits of an AG is that it enables the business to raise money from the general public by issuing shares. This could aid the business's expansion and growth. Another benefit is that the shareholders' personal assets are protected in the event of insolvency and they are not held liable for the company's debts.

An AG does, however, come with some drawbacks, such as higher regulatory supervision and compliance costs. A public limited company's status must be upheld by an AG by following a number of initial and ongoing criteria, including as publishing annual reports, conducting general meetings, and paying taxes and fees. If a major shareholder or group of shareholders buys the majority of the company's stock, an AG runs the danger of losing control over its management and strategy.

How to establish an AG

A minimum of five members who contribute to the company's share capital are required to form an AG. In Germany, Austria, and Switzerland, an AG must have a minimum share capital of 100,000 Swiss francs and 50,000 euros, respectively. At registration, the share capital must be paid in full or at least in part.

An AG's articles of organization, which include the company's name, registered office, share capital, shareholders' contributions, and share information, must be written by the AG's founders. Along with the signed application and other documents, the articles of organization must also be authenticated by a notary public or a judge and submitted to the Commercial Registration Office. The Office shall publish the establishment of the AG in the official gazette and issue a certificate of registration.

How an AG operates

An AG has a "two-tiered board" structure made up of a management board (Vorstand) and a supervisory board (Aufsichtsrat). While employees may have seats depending on the size of the company, shareholders typically control the supervisory board. The management board's members are appointed by the supervisory board, which also sets their remuneration and monitors their performance. The management board makes all operational decisions and personally manages the business.

At the annual general meeting (Hauptversammlung), which must be conducted at least once a year, the shareholders exercise their rights and control over the business. The general meeting elects and dismisses the supervisory board members, approves the annual accounts and dividends, and makes decisions on other significant issues like changes to the articles of association or mergers and acquisitions.