1E9Ct5D

are applicable to the “regular” GmbH. Thus, the UG will make it possible to “start small”and then gradually expand the business to a “full-grown” GmbH without the need for reregistration.But as long as the registered capital stays below the threshold value of25.000 Euro for a GmbH, the UG must trade under the designation “Unternehmergesellschaft(haftungsbeschränkt)” and must pay up the entire amount of the registered share capitalbefore registration. In addition, a UG will be required to set up a reserve equal to a quarterof the annual surplus minus the accumulated deficit of the preceding year3. Stock Company (Aktiengesellschaft, AG)The AG is usually used by larger companies. This is also due to the fact that its legislation,the Stock Corporation Act (Aktiengesetz), provides less flexibility and most of its legislationsare mandatory which can only be modified by the Articles of Association if this isexplicitly permitted by the Stock Corporation Act. Therefore, an adaption to the shareholder’srequirements is not possible offhand. However, the advantage of an AG in comparisonwith a GmbH is the fact that shares can be transferred easily and the AG can belisted at a stock exchange and is therefore able to equity capital from the public.FormationIn order to form an AG one or more shareholders are needed. First of all a notarization ofthe Articles of Association is required. After that the founding shareholders must appointthe first Supervisory Board and the Statutory Auditor. These appointments must be notarised.The Supervisory Board then appoints the first management. Subsequently, thefounding shareholders must prepare a written formation report, including all relevant detailsof the establishment of the AG. The Management Board and the Supervisory Boardwill then scrutinise the formation report. (In some cases an auditing of the formation reportby an independent auditor might be required). Following this procedure the formationof the AG has to be registered with the Commercial Register. The application for registrationhas to be signed before a notary public and by all founding shareholders and the initialmembers of the Managing Board and the Supervisory Board.LiabilityUpon registration stockholders are not personally liable to the AG. Instead of that, theirduties are limited to paying the contributions owed. However, the AG only becomes a legalperson on registration. People acting for and on behalf of the AG prior to registrationwill be liable for any debts incurred.17