Annual General Meeting of the AG in Germany - Term, Rights and Duties
Powers, Competences of Shareholder and General Meeting
The annual general meeting is the meeting of the owners of the german stock corporation, the shareholders. Therefore, their rights and duties play an important role for the shareholders involved. However, the competences and powers of the annual general meeting also have significant effects for the other players in the AG - the management board and the supervisory board. The rights and powers of the shareholders in Germany (majority shareholders, minority shareholders, individual shareholders) are also inextricably linked to the annual general meeting in Germany. The performance of duties and the exercise of rights by shareholders can be both a curse and a blessing for the management board and the supervisory board. In german practice, for example, shareholder activism often leads to disputes between shareholders on the one hand and the management board / supervisory board on the other.
Therefore, knowledge and practical handling of the tasks and rights of the shareholders' meeting and the procedure of a shareholders' meeting are relevant for all parties involved. It does not matter whether the AG is small (not listed on the stock exchange) or large (listed on the stock exchange).
Our Legal Expertise for the Annual General Meeting in german AGs
Our highly qualified and specialized team of lawyers and specialists in german corporate law at our offices in Hamburg, Berlin, Munich, Frankfurt and Cologne will advise you on all matters relating to the annual general meeting.
Members of our team are also academically involved in german stock corporation law, so we have special know-how in this area. Your first contact persons are:
- Dr. Ronny Jänig, LL.M. (Durham), Attorney at law, Certified specialist for corporate law
- Dr. Boris Schiemzik, Attorney at law, Certified specialist for corporate law
- Dr. Jens Nyenhuis, LL.M. (Cape Town) Attorney at law, Certified specialist in corporate law
For non-binding inquiries, please call or e-mail one of our experts directly or simply use the contact form at the bottom of this page.
Our Consulting Services for Shareholders, Management Boards and Supervisory Boards in Germany
Our consultants support management boards, supervisory boards and shareholders primarily on the following topics of the annual general meeting:
- Scope of rights and powers of the shareholders' meeting, minority shareholders and individual shareholders
- Exercise and enforcement of shareholder rights BEFORE the annual general meeting (invitation, additions to the agenda, etc.)
- Exercise and enforcement of shareholder rights IN the annual general meeting (right to ask questions, agenda, speaking time, conduct, etc.)
- Exercise and enforcement of shareholder rights AFTER the annual shareholders' meeting (action for contestation, etc.)
- Enforcement of rights of the general meeting and shareholders in court (action against supervisory board, management board, etc.)
- Advice and representation in disputes between general meeting/shareholders on the one hand and management board/supervisory board on the other hand
- Advice and representation in actions against resolutions of the general meeting and defense against such actions
- Support in the preparation and execution of general meetings (invitation, back office)
Annual General Meeting in Germany - Term and Definition
The term annual general meeting in Germany is to be understood in two contexts. On the one hand, the annual general meeting is the actual meeting of shareholders to discuss and pass resolutions. On the other hand, it is the body of the stock corporation that makes the main decisions of the AG.
Ordinary and Extraordinary General Meeting - Differences
The distinction between ordinary and extraordinary general meetings has become established in german practice; the AktG does not recognize it. An ordinary shareholders' meeting is defined as a shareholders' meeting held once a year, the agenda of which usually includes the following items:
- Presentation of the approved annual financial statements / consolidated financial statements
- Appropriation of profits / appropriation of earnings
- Discharge of the Management Board
- Discharge of the Supervisory Board
- Election of the Auditor
An extraordinary general meeting is a general meeting convened for special, unscheduled occasions. In german practice, these are usually one of the following occasions:
- Dismissal of supervisory board
- Appointment of special auditors Section 142 AktG
- Appointment of special representatives Section 147 AktG
- Conversion of the AG (e.g. into a GmbH)
- Listing (initial public offering) and delisting
- Capital measures, in particular capital increases
Convening of the Annual General Meeting by the Management Board and Shareholders in Germany
The annual general meeting in Germany is typically convened by the management board, including the agenda. The convocation is generally published in the "Company Gazette" (which is usually the (electronic) Federal Gazette). If the shareholders of the AG are known, the invitation can also be sent to the shareholders by letter. For listed stock corporations, Art. 121 para. 4a of the AktG must be observed.
Shareholders whose shares together reach 5% of the share capital may request, i.e. force, the management board to convene a meeting. The corresponding request must be made in writing together with the reasons for the request. In german practice, an inadequate statement of reasons is usually a reason for the management board to refuse to convene a shareholders' meeting.
The annual general meeting in Germany is usually chaired by the chairman of the supervisory board; however, the meeting may also be chaired by another person. For more information, see our page on the chairman of the meeting.
Task #1 - Supervisory Board - Appointment, Election and Removal by Annual General Meeting.
The annual general meeting in german AGs first decides who is and who is not a member of the supervisory board. This means that the annual general meeting elects ("appoints") the members of the supervisory board for a fixed period of time. It may also dismiss them prematurely. In co-determined stock corporations, some of the members of the supervisory board are appointed by the employees / employee representatives.
The annual general meeting in Germany also decides on the compensation of the supervisory board. The decision of the general meeting is made either in the articles of association or by simple resolution of the shareholders at the general meeting.
More information on the appointment of the Supervisory Board on our special page.
More information on the composition of the Supervisory Board on our special page.
Task #2 - Appropriation of Profits - Accumulation, Distribution
As owners and shareholders, the shareholders have the right to decide on the appropriation of the profit of the AG in Germany. The decision may be to distribute the profit (retained earnings) in full or to leave it wholly or partly for investment in the JSC.
The resolution of the annual general meeting is usually based on the recommendation of the management board and supervisory board. The shareholders do not have to follow the recommended resolution.
Task #3 - Auditor - Election, Appointment by Annual General Meeting
The auditor is a neutral control authority in the structure of the german stock corporation. In the interests of the shareholders (and creditors of the AG), they examine the figures prepared by the management board and their basis for the fiscal year in question.
It is therefore in the nature of things that the annual general meeting alone elects (appoints) the auditor. However, it is not the annual general meeting that concludes the contract with the annual auditor in Germany. This task and competence lies solely with the supervisory board.
Task #4 - Structural Measures - Decision by Annual General Meeting
One of the core tasks of the shareholders and consequently of the annual general meeting is to make the key decisions for the structure of the german AG. These decisions include the following in particular:
- Amendment of the articles of association
- Subsequent formation, post-formation transactions
- Capital measures, for example, increasing the capital stock
- Transformation of the AG in accordance with the Transformation Act, for example, change of legal form to a GmbH, merger, demerger and spin-off
- Conclusion and amendment of an intercompany agreement (Sections 293 para. 1, 295 para. 1 German Stock Corporation Act)
- Integration of a subsidiary (Sections 319 para. 2, 320 para. 1 sentence 3 AktG).
- Listing (initial public offering) and delisting
- Dissolution of the company
Task #5 - Management Board, Supervisory Board - Control by the Annual General Meeting
Finally, the annual shareholders' meeting in Germany has the task and the right to monitor and control the managers of its assets - i.e. the management board, but also the supervisory board.
#5.1 - Discharge of the Management Board and Supervisory Board
The control takes place once in the context of the annual resolution of the shareholders' meeting on the discharge or non-discharge of members of the management board or supervisory board in Germany. It should be noted, however, that the consequences of the discharge or non-discharge in the AG are completely different from those of the managing director of a GmbH.
#5.2 - Compensation System for Management Board and Supervisory Board, Compensation Report
The supervisory board of listed german stock corporations is required to draft a remuneration system for the management board. This compensation system must contain certain minimum information, which is specified in Section 87a of the AktG.
The annual general meeting of listed german stock corporations has the right to decide or (better) pass a resolution on the compensation system designed by the supervisory board. Specifically, the AktG stipulates that the annual general meeting in Germany must "approve" the compensation system and any significant changes. It is significant that the resolution has no consequences - regardless of whether an approval ("confirmation resolution") is passed or the compensation system is rejected by the annual general meeting.
More information on management board compensation can be found on our special page.
#5.3 - Appointment of Special Auditor, Special Audit
A powerful instrument for controlling and monitoring the management board and supervisory board in Germany is the appointment of an external special auditor. The auditor's task is to independently investigate suspected breaches of duty by the management board or supervisory board on behalf of the shareholders' meeting. If necessary, his appointment serves to prepare actions for damages against members of the management board and supervisory board - against the will of the incumbent members of the management board and supervisory board.
More information on the appointment of the special auditor and the special audit can be found on our special page.
#5.4 - Appointment of special Representatives, Actions against the Management Board and Supervisory Board in Germany
Another way in which the annual shareholders' meeting monitors and supervises the management of the german corporation is the appointment of a special representative. His or her task is to examine any claims against the management board or supervisory board and the prospects of success of a claim for damages and, if necessary, to enforce claims in court on behalf of the german stock corporation.