German company law

German company law (Gesellschaftsrecht) is an influential legal regime for companies in Germany. The primary form of company is the public company or Aktiengesellschaft (AG). A private company with limited liability is known as a Gesellschaft mit beschränkter Haftung (GmbH). A partnership is called a Kommanditgesellschaft (KG).

History

In Germany, through most of the 19th century the Kommanditgesellschaft (société en commandite in France) was the typical form of business organisation. A "KG" had at least one member with unlimited liability, but other investors' liability was limited to their contribution. A special concession was not required for setting up this company. The first German public company statute was the Prussian Act of 1794. In 1861 the Allgemeines Deutsches Handelsgesetzbuch or the General Commercial Code for all of Germany, as well as Austria, was enacted, which devoted a section to joint stock companies. This allowed incorporation with limited liability. Companies would be constituted with a single board of directors, though they had the option of a two-tiered board system, involving shareholders appointing a supervisory board, which could in turn elect the management board.[1]

There were updates to the Allgemeines Deutsches Handelsgesetzbuch in the Aktiennovelle von 1870 (New Company Act 1870)[2] and again in 1884.[3] The 1884 reform mandated that companies have a two-tier board, with the justification that free registration rather than a system of state concession meant a supervisory board was needed to take over the state's monitoring role.[4] The members of the supervisory board were not allowed to serve on the management board. However, shareholders could still directly elect management board members if they so wished.[5] Further reforms led to the Handelsgesetzbuch of 1897, but without changing the basic structure.[6]

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