Formation of the company

Last Updated on May 29, 2021 by LawEuro

Stock Corporation Act (Laws / Regulations of Germany)

Part 2
Formation of the company

Section 23
Establishment of the by-laws

(1) The by-laws must be established by way of being recorded by a notary. Authorised representatives may act only if they have a power of attorney certified by a notary.

(2) The deed is to set out the following particulars:

1. The founders;

2. For par-value shares: the nominal amount; for no-par-value shares: their number, the issue price, and, if several classes of stock exist, the classes of the stock that each founder will acquire;

3. The amount of the share capital that has been paid in.

(3) The by-laws must determine:

1. The company’s business name and its seat;

2. The purpose of the enterprise; specifically, industrial and trade enterprises are to provide details regarding the nature of the products and goods that are to be manufactured and traded;

3. The amount of the share capital;

4. The division of the share capital either into par-value shares or into no-par-value shares; for par-value shares, their nominal amounts and the number of the shares per nominal amount are to be cited; for no-par-value shares, their number; furthermore, if several classes of stock exist, the class of the stock and the number of shares of stock making up each class.

5. Whether the shares of stock are issued as bearer shares or registered in the names of their holders;

6. The number of members the management board is to have, or the rules according to which this number will be established.

(4) Furthermore, the by-laws must include determinations as to the formal requirements applying to the company’s publications by notice.

(5) The by-laws may deviate from the regulations of the present Act only where this has been expressly permitted. Supplementing the by-laws by additional determinations is permissible unless the present Act provides conclusively for the matter.

Section 24
(repealed)

Section 25
Publications of the company by notice

Where the law or the by-laws determine that a notice by the company is to be published in the company’s publications of record, such notice is to be given in the Federal Gazette (Bundesanzeiger).

Section 26
Special benefits. Formation expenses

(1) Any special benefit granted to an individual stockholder or to a third party must be specified in the by-laws, with the beneficiary being designated.

(2) The total cost charged to the company by way of providing indemnification or granting a reward to stockholders or other persons for the formation of the company, or for the preparations for same, is to be specified separately in the by-laws.

(3) Without this specification, the contracts as well as the legal transactions serving their implementation shall have no validity vis-à-vis the company. Following the entry of the company in the Commercial Register, it will not be possible to remedy such invalidity by amending the by-laws.

(4) It is possible to amend the specifications only once the company has been entered in the Commercial Register for five (5) years.

(5) Only once the company has been entered in the Commercial Register for thirty (30) years and at least five (5) years have lapsed since the legal relationships on which the specifications are based have been wound up will it be possible to cancel, by way of amending the by-laws, the determinations made in the by-laws regarding the specifications.

Section 27
Contributions in kind, acquisitions of assets; repayment of contributions

(1) Where stockholders are to make contributions that do not consist of paying in the issue price of the shares (contributions in kind), or where the company is to acquire facilities or other assets that already exist or that are yet to be created (acquisitions of assets), the by-laws must specify the following: the object of the contribution in kind or of the acquisition of assets, the person from whom the company is acquiring such object, and the nominal amount – in the case of no-par-value shares: the number – of the shares of stock to be granted for the contribution in kind, or the remuneration to be granted for the acquisition of assets. Where the company is to acquire an asset for which remuneration is granted that is to be set off from the contribution made by a stockholder, this shall be deemed a contribution in kind.

(2) Contributions in kind or acquisitions of assets may consist only of such assets the economic value of which it is possible to establish; obligations to provide services cannot serve as contributions in kind or acquisitions of assets.

(3) Where the cash contribution made by a stockholder, when seen in economic terms and by reason of an arrangement made in the context of the acquisition of the cash contribution, is to be assessed as a contribution in kind, either as a whole or in part (hidden contribution in kind), this shall not release the stockholder from the obligation to make a contribution. However, the contracts concluded for the contribution in kind and the legal transactions serving their implementation shall not be invalid. The value of the asset as given at the time an application is filed with the Commercial Register for entry of the company in same, or at the time at which the asset is made available to the company should this be later, shall be set off from the continuing obligation of the stockholder to make a cash contribution. Such set-off shall not be performed prior to the company’s having been entered in the Commercial Register. It is incumbent on the stockholder to prove that the asset is of sound value.

(4) Where an agreement has been made with the stockholder prior to the contribution having been made, according to which he is to receive performance that is tantamount, in economic terms, to repayment of the contribution, and this performance is not to be adjudged a hidden contribution in kind in the sense of subsection (3), then this shall release the stockholder from his obligation to make a contribution only in those cases in which the performance is covered by a fully recoverable claim to restitution that is due at any point in time, or that may become due by the company issuing a termination with immediate effect. Such performance, or the agreement of such performance, is to be set out in the application for entry in the register pursuant to section 37.

(5) Section 26 (4) shall apply to the amendment of specifications that have been made in a legally effective manner, while section 26 (5) shall apply to the cancellation of the determinations made in the by-laws.

Section 28
Founders

The stockholders who have established the by-laws are the founders of the company.

Section 29
Constitution of the company

The company is constituted upon all shares of stock having been acquired by the founders.

Section 30
Appointment of the supervisory board, of the management board, and of the auditor of the annual accounts

(1) The founders are to appoint the first supervisory board of the company and the auditor of the accounts for the first complete or incomplete financial year. The appointment must be recorded by a notary.

(2) The regulations governing the appointment of members of the supervisory board representing the company’s employees shall not apply to the composition and appointment of the first supervisory board.

(3) The members of the first supervisory board may not be appointed for a term of office extending beyond the time at which that general meeting is closed that has adopted a resolution regarding the approval of the management’s actions during the first complete or incomplete financial year and regarding the discharge to be granted to the management. The management board is to publish by notice, in due time prior to expiry of the first supervisory board’s term of office, the statutory regulations that, in its view, are to govern the composition of the next supervisory board; sections 96 to 99 shall apply.

(4) The supervisory board shall appoint the first management board.

Section 31
Appointment of the supervisory board where the company is formed on the basis of contributions in kind

(1) Where the by-laws specify, as the object of a contribution in kind or of an acquisition of assets, the contribution or acquisition of an enterprise or a part of an enterprise, the founders are to appoint only such number of members to the supervisory board that the general meeting is to elect following the contribution or acquisition, without being bound by nominations, and are to do so according to the statutory regulations that, in the founders’ view, govern the composition of the supervisory board. However, if that number is no more than two (2) members of the supervisory board, the founders are to appoint three (3) members of the supervisory board.

(2) Unless the by-laws stipulate otherwise, the supervisory board appointed pursuant to subsection (1), first sentence, shall have a quorum if half of its members, at a minimum, however, three (3) of its members, participate in the adoption of resolutions.

(3) Without undue delay following the contribution or acquisition of the enterprise or of the part of an enterprise, the management board is to publish by notice the statutory regulations governing, in its view, the composition of the supervisory board. Sections 97 to 99 shall apply mutatis mutandis. The members of the supervisory board then in office shall cease to so hold office only if the supervisory board is to be constituted according to other regulations than those the founders believed to govern, or if the founders appointed three (3) members of the supervisory board, while the supervisory board in fact is to also comprise members of the supervisory board representing the employees.

(4) Subsection (3) shall not apply if the enterprise or the part of an enterprise is contributed or acquired only after the management board has published the notice pursuant to section 30 (3), second sentence.

(5) Section 30 (3), first sentence, shall not apply to members of the supervisory board representing the employees who are appointed pursuant to subsection (3).

Section 32
Formation report

(1) The founders are to submit a written report regarding the process by which the company was formed (formation report).

(2) The formation report shall set out the significant circumstances governing the assessment of the performance for contributions in kind or acquisitions of assets as being a fair equivalent. In this context, the formation report is to include the following information.

1. The preceding legal transactions that were targeted at the acquisition by the company;

2. The acquisition costs and production costs incurred in the past two (2) years;

3. In the case of an enterprise being transferred to the company: the operating profits generated in the past two (2) financial years.

(3) Furthermore, the formation report is to set out whether and in which scope shares of stock have been acquired, in the context of the formation, for the account of a member of the management board or of the supervisory board and whether a member of the management board or of the supervisory board has claimed a special benefit for himself, or an indemnification or reward for the formation or the preparations for same, and if so, which manner of benefit, indemnification, or reward was so claimed.

Section 33
Audit of the formation. General provisions

(1) The members of the management board and of the supervisory board are to audit the process by which the company was formed.

(2) Moreover, an audit is to be performed by one or several auditors (formation auditors) where

1. A member of the management board or of the supervisory board is among the founders, or

2. Shares of stock have been acquired at formation for the account of a member of the management board or of the supervisory board, or

3. A member of the management board or of the supervisory board has claimed a special benefit for himself, or an indemnification or reward for the formation or the preparations for same, or

4. The formation involves contributions in kind or acquisitions of assets.

(3) In the cases governed by subsection (2) nos. 1 and 2, the officiating notary (section 23 (1), first sentence) may, on the instructions of the founders, perform the audit in the stead of a formation auditor; the provisions governing the formation audit shall apply mutatis mutandis. Where it is not the notary performing the audit, the court shall appoint the formation auditors. A complaint may permissibly be lodged against the decision taken.

(4) Solely the following should be appointed as formation auditors where the audit does not require any other knowledge:

1. Persons having sufficient prior training and experience in accounting;

2. Auditing firms, provided that at least one of their legal representatives has sufficient prior training and experience in accounting.

(5) No-one may be appointed as formation auditor who is not eligible pursuant to section 143 (2) to serve as a special auditor. The same shall apply where the founders or persons for the account of whom the founders have acquired shares of stock are able to substantially influence on how the persons or auditing firms manage their business affairs.

Section 33a
Formation of the company on the basis of contributions in kind without the formation being subjected to an external audit

(1) Where the formation involves contributions in kind or acquisitions of assets (section 33 (2) no. 4), its audit by formation auditors may be refrained from insofar as the following are to be contributed:

1. Transferable securities or money market instruments in the sense of section 2 subsections (1) and (2) of the Securities Trading Act (WpHG), provided such securities or instruments are valued at the weighted average price at which they were traded, in the course of the last three (3) months prior to the day of their in fact being contributed, on one or several organised markets in the sense of section 2 (11) of the Securities Trading Act (WpHG),

2. Other assets than those set out in no. 1, if a valuation is used as basis that an independent expert having sufficient prior training and experience has identified in accordance with generally accepted valuation principles, using the fair value, and if the valuation cut-off date does not precede by more than six (6) months the date on which the contribution was in fact made.

(2) Subsection (1) shall have no application where the weighted average price of the securities or money market instruments (subsection (1) no. 1) has been significantly influenced by exceptional circumstances, or if it is to be assumed that due to new circumstances, or circumstances that have become newly known, the fair value of the other assets (subsection (1) no. 2) will be significantly lower, on the date on which they are in fact contributed, than the value assumed by the expert.

Section 34
Scope of the formation audit

(1) The audit by the members of the management board and of the supervisory board, as well as the audit by the formation auditors, is to cover in particular the following questions:

1. Whether or not the information provided by the founders regarding the acquisition of the shares of stock, regarding the contributions to the share capital, and regarding the specifications pursuant to sections 26 and 27, is accurate and complete;

2. Whether or not the value of the contributions in kind or acquisitions of assets is at least equivalent to the minimum issue price of the shares of stock to be allotted in return for said contributions or acquisitions, or to the value of the performance to be provided therefor.

(2) A written report is to be submitted regarding each audit, with the above circumstances being presented therein. The report is to describe the object of each contribution in kind or acquisition of assets and is to state which valuation methods were used in assessing the value. Inasmuch as an external formation audit is refrained from pursuant to section 33a, providing this information may be forgone in the audit report prepared by the members of the management board and of the supervisory board, as may the observations set out in subsection (1) no. 2.

(3) One copy of the report by the formation auditors is to be submitted to each of the court and the management board. Any entity or individual may inspect the report at the court.

Section 35
Differences of opinion between founders and formation auditors. Remuneration and expenditures of the formation auditors

(1) The formation auditors may demand that the founders provide them with all clarification statements and proof necessary to perform the audit with the requisite skill and care.

(2) In the case of differences of opinion between the founders and the formation auditors as regards the scope in which the founders are to provide clarification statements and proof, the court shall take the final decision. There shall be no right of appeal against the court’s decision. For as long as the founders refuse to comply with the decision, no audit report shall be submitted.

(3) The formation auditors shall be entitled to reimbursement for their reasonable cash expenditures and to remuneration for their activities. The court shall establish the expenditures and the remuneration. A complaint may permissibly be lodged against the decision taken; a complaint on points of law is precluded. Based on the decision taken, compulsory enforcement may be pursued in accordance with the Code of Civil Procedure (ZPO).

Section 36
Application for entry of the company in the register

(1) All founders and members of the management board and of the supervisory board are to file the application with the court for having the company entered in the Commercial Register.

(2) The application for entry in the register may be filed only when the amount called has been duly and properly paid in for each share of stock, unless contributions in kind have been agreed (section 54 (3)), and when it is definitively available to be disposed over by the management board at its discretion, unless said amount has already been used to pay the taxes and fees accruing at formation.

Section 36a
Payment or rendering of contributions

(1) In the case of contributions in cash, the amount called (section 36 (2)) must comprise at least one quarter of the minimum issue price and, where the shares of stock are issued at a price higher than the minimum issue price, also the additional amount.

(2) Contributions in kind are to be rendered in full. Where the contribution in kind consists of the obligation to transfer an asset to the company, it must be possible to render this contribution within five (5) years of the company having been entered in the Commercial Register. The value must correspond to the minimum issue price and, where the shares of stock are issued at a price higher than the minimum issue price, also the additional amount.

Section 37
Content of the application for entry in the register

(1) The application for entry in the register is to include the declaration as to the pre-requisites set out in section 36 (2) and section 36a having been met; in this context, the amount in which the shares of stock are issued and the amount paid in therefor are to be stated. Proof is to be submitted as to the amount paid in definitively being available to be disposed over by the management board at its discretion. Where the amount has been paid in, pursuant to section 54 (3), by being credited to an account, such proof is to consist of a corresponding confirmation from the institution maintaining the account. Said institution shall be liable to the company for the confirmation being accurate. Where the amount paid in has been used to pay taxes and fees, proof is to be submitted as regards the nature and amount of such payments made.

(2) In the application for entry in the register, the members of the management board are to give an assurance that no circumstances are given that would disqualify them from being appointed pursuant to section 76 (3), second sentence, nos. 2 and 3, or pursuant to the third sentence of said provision, and that they have been instructed concerning their unrestricted obligation to provide information to the court. Their instruction pursuant to section 53 (2) of the Act on the Federal Central Criminal Register (BZRG) may be performed in writing; they may also be instructed by a notary or a notary appointed in a foreign country, by a representative of a comparable profession in the field of legal advisory services, or by a consular officer.

(3) Furthermore, the application for entry in the register is to state the following:

1. A business address within Germany,

2. The nature and scope of the power of representation conferred upon the members of the management board.

(4) The following are to be attached to the application for entry in the register:

1. The by-laws as well as the records and documents by which the by-laws have been established and by which the shares of stock have been acquired by the founders;

2. In the case governed by sections 26 and 27, the contracts on which the determinations are based, or that were concluded by way of implementing them, and a calculation of the formation expenses the company is to bear; the calculation is to set out the remuneration in each case by its nature and amount, and is to individually list the recipients;

3. The records and documents as to the appointment of the management board and of the supervisory board;

3a. A list of the members of the supervisory board, providing their family name, first name, profession exercised, and place of residence;

4. The formation report and the audit reports prepared by the members of the management board and of the supervisory board as well as the audit reports prepared by the formation auditors, along with the supporting records and documents.

5. (repealed)

(5) Section 12 (2) of the Commercial Code (HGB) shall apply mutatis mutandis to the submission of documents pursuant to the present Act.

(6) (repealed)

Section 37a
Application for entry in the register in the case of the company being formed on the basis of contributions in kind without the formation being subjected to an external audit

(1) Where an external audit of the formation is refrained from pursuant to section 33a, this is to be declared in the application for entry in the register. The object of each contribution in kind or acquisition of assets is to be described. The application for entry in the register must include the declaration that the value of the contributions in kind or acquisitions of assets is at least equivalent to the minimum issue price of the shares of stock to be allotted in return for said contributions or acquisitions, or to the value of the performance to be provided therefor. The value, the source of the valuation, and the valuation method applied are to be stated.

(2) Furthermore, the parties filing the application for entry in the register are to also give an assurance that they have not become aware of any exceptional circumstances that, in the course of the last three (3) months prior to the day on which the securities or money market instruments were in fact contributed, might have significantly influenced the weighted average price of said securities or money market instruments in the sense of section 33a (1) no. 1, nor of any circumstances indicating that as a result of new circumstances, or circumstances that have become newly known, the fair value for the assets in the sense of section 33a subsection (1) no. 2 is significantly lower, on the date on which they are in fact contributed, than the value assumed by the expert.

(3) The following are to be attached to the application for entry in the register:

1. Documents regarding the assessment of the weighted average price at which the securities or money market instruments to be contributed were traded on an organised market in the course of the last three (3) months prior to the day on which they were in fact contributed,

2. Any expert opinion on which the valuation is based in the cases governed by section 33a (1) no. 2.

Section 38
Court review

(1) The court is to review whether or not the company has been duly and properly established and an application for its entry in the register has been duly filed. Where this is not the case, the court is to refuse to enter the company in the register.

(2) The court may also refuse to enter the company in the register if the formation auditors declare, or if it is obvious, that the formation report or the audit report prepared by the members of the management board and of the supervisory board is inaccurate or incomplete or does not comply with statutory regulations. The same shall apply if the formation auditors declare, or if the court is of the opinion, that the value of the contributions in kind or acquisitions of assets is less, to a greater than negligible degree, than the minimum issue price of the shares to be allotted therefor or than the value of the performance to be provided therefor.

(3) Where the application for entry in the register includes the declaration pursuant to section 37a (1), first sentence, the court is to exclusively review whether or not the pre-requisites set out in section 37a have been met in determining whether the contributions in kind or acquisitions of assets are of sound value. Solely in cases of an obvious and significant over-valuation does the court have the option of refusing to enter the company in the register.

(4) The court may refuse to enter the company in the register pursuant to subsection (1) by reason of an inadequate provision having been made in the by-laws, of a provision having been omitted therein, or a provision being null and void, only inasmuch as this provision, its omission or the fact that it is null and void

1. Concerns facts or legal relationships that must be provided for in the by-laws pursuant to section 23 (3) or as a result of other, mandatory statutory regulations, or that are to be entered in the Commercial Register or to be published by notice by the court,

2. Violates regulations that exclusively serve, or mainly serve, to protect the creditors of the company or that otherwise serve the public interest, or

3. Will cause the by-laws to be null and void.

Section 39
Content of the entry in the register

(1) In entering the company in the register, the following particulars are to be included: the business name and the seat of the company, a business address within Germany, the purpose of the enterprise, the amount of the share capital, the day on which the by-laws were established, and the members of the management board. Where an application is filed to enter in the Commercial Register a person authorised to receive declarations of intent and to accept documents served to the company and such person has an address within Germany, this information is to be entered as well; vis-à-vis third parties, the authorisation to receive declarations of intent and to accept service of documents shall be deemed to continue in force until it is cancelled in the Commercial Register and such cancellation has been published by notice unless the third party was aware of the fact that no authorisation to receive service of documents existed. Furthermore, the type of power of representation conferred upon the members of the management board is to be entered in the Commercial Register as well.

(2) Where the by-laws include provisions governing the duration of the company or its authorised capital, these provisions as well are to be entered in the register.

Section 40
(repealed)

Section 41
Actions taken in the name of the company prior to its entry in the register. Prohibited issuance of shares of stock

(1) Prior to entry in the Commercial Register, a stock corporation shall not exist as such. Anyone acting in the name of the company prior to its having been entered in the register shall be personally liable; where several individuals take any action, they shall be jointly and severally liable.

(2) Where the company assumes an obligation that was entered into on its behalf prior to the company having been registered, and does so by way of a contract with the debtor such that the company takes the stead of the current debtor, this assumption of the obligation shall not require the consent of the creditor in order to be valid if the assumption of the obligation is agreed within three (3) months of the company having been entered in the register and the creditor is notified of this assumption of the obligation by the company or the debtor.

(3) The company may not assume any obligations arising from contracts that have not been specified in the by-laws and that concern special benefits, formation expenses, contributions in kind, or acquisitions of assets.

(4) Prior to entry of the company in the register, share interests may not be transferred, while shares of stock or temporary share certificates may not be issued. Any shares of stock or temporary share certificates issued previously shall be null and void. The issuers shall be jointly and severally liable to the holders for any damages resulting from the issuance.

Section 42
Single-member company

Where all shares of stock belong to a single stockholder, or to one stockholder other than the company, a corresponding notice is to be submitted to the Commercial Register without undue delay, providing the family name, first name, date of birth, and place of residence of the sole stockholder.

Sections 43 and 44
(repealed)

Section 45
Relocation of the seat

(1) Where the company’s seat is moved to another location within Germany, an application for entry of this relocation is to be filed with the court at the company’s current seat.

(2) Where the seat is moved to a location outside of the judicial district of the court at the company’s current seat, this court is to give notice of the relocation, ex officio, to the court at the new seat, and shall do so without undue delay. The entries made for the current seat as well as the records and documents kept safe by the court thus far having jurisdiction are to be attached to the notification; where the register is maintained in electronic form, the entries and the documents are to be transmitted by means of electronic communication. The court at the new seat is to review whether the relocation was resolved upon in due and proper manner and whether section 30 of the Commercial Code (HGB) has been observed. Where this is the case, the court is to enter the relocation of the seat in the register and is to include the entries of which it has been notified without performing any further reviews. The relocation of the seat shall enter into force upon its being entered in the register. The court at the company’s current seat is to be notified of the entry. This court is to perform, ex officio, the requisite cancellations.

(3) Where the seat is moved to a different location within the judicial district of the court at the company’s current seat, the court is to review whether the relocation of the seat was resolved upon in due and proper manner and whether section 30 of the Commercial Code (HGB) has been observed. Where this is the case, the court is to enter the relocation of the seat in the register. The relocation of the seat shall enter into force upon its being entered in the register.

Section 46
Liability and responsibilities of the founders

(1) The founders shall be liable as joint and several debtors to the company for the accuracy and completeness of the statements that were made for purposes of forming the company, such statements concerning the acquisition of the shares of stock, amounts paid in for the shares of stock, appropriation of the amounts paid in, special benefits, formation expenses, contributions in kind, and acquisitions of assets. Furthermore, they shall be responsible for ensuring that any entity determined as the entity that is to accept payments towards the share capital (section 54 (3)) is suited for this purpose and that the amounts paid in are available to be disposed over by the management board at its discretion. Notwithstanding their obligation to provide compensation for the damage that may otherwise accrue, they are to make payments that have been failed to be made and are to provide compensation for any remuneration that is not included as part of the formation expenses.

(2) Where the company’s founders intentionally or grossly negligently cause damage to same through contributions, acquisitions of assets, or formation expenses, all founders shall be liable as joint and several debtors to compensate the company for such damage.

(3) A founder shall be released from these obligations if he was neither aware of the facts giving rise to the obligation to provide compensation nor had reason to be aware of them in exercising the due care of a prudent businessperson.

(4) Where the company suffers a loss because a stockholder is unable to pay his debts as they become due or because he is unable to make a contribution in kind, those founders shall be liable as joint and several debtors to provide compensation to the company who accepted the stockholder’s taking an ownership interest in the company in spite of being aware of his inability to pay his debts as they become due or his inability to perform in accordance with his obligations.

(5) Besides the founders, those persons shall be liable and responsible in like manner for the account of whom the founders have acquired shares of stock. They cannot rely on their own lack of knowledge of any circumstances of which a founder acting for their account was aware or had reason to be aware.

Section 47
Liability and responsibilities of other persons besides the founders

Besides the founders and the persons for the account of whom the founders have acquired shares of stock, the following shall be liable as joint and several debtors to provide compensation to the company for its damages:

1. Anyone who knew or, in light of the circumstances given, had reason to assume at the time he received any remuneration that is not included, contrary to regulations, as part of the formation expenses, that the concealment was intentional or that it occurred, or anyone who knowingly cooperated in and assisted with the concealment;

2. Anyone who, in the case of damage caused intentionally or grossly negligently to the company through contributions or acquisitions of assets, knowingly cooperated in and assisted with causing such damage;

3. Anyone who publicly announces the shares of stock prior to the company having been entered in the Commercial Register, or in the first two (2) years following the company’s being entered in the register, in order to place such shares of stock on the market, if he was aware of the inaccuracy or incompleteness of the statements that were made for the purpose of the company’s formation (section 46 (1)), or if he was aware or had reason to be aware, in exercising the due care of a prudent businessperson, of the damage caused to the company by contributions or acquisitions of assets.

Section 48
Liability and responsibilities of the management board and of the supervisory board

Any members of the management board and of the supervisory board violating their obligations in the course of the company’s formation shall be liable as joint and several debtors to compensate the company for the damage resulting therefrom; in particular, they shall be responsible for ensuring that an entity determined as the entity that is to accept payments towards the share capital (section 54 (3)) is suited for this purpose and that the amounts paid in are available to be disposed over by the management board at its discretion. Sections 93 and 116, to the exception of section 93 subsection (4), third and fourth sentences, and subsection (6) of said section, shall apply in all other cases as regards the duty to exercise skill and care as well as the liability and responsibilities at formation of the members of the management board and of the supervisory board.

Section 49
Liability and responsibilities of the formation auditors

Section 323 subsections (1) to (4) of the Commercial Code (HGB) governing the liability and responsibilities of the auditor of the annual accounts shall apply mutatis mutandis.

Section 50
Waiver and compromise

The company may waive its claims to compensation, or conclude a compromise regarding these claims, vis-à-vis the founders, the persons liable besides the founders, and the members of the management board and of the supervisory board (sections 46 to 48) only once three (3) years have lapsed since entry of the company in the Commercial Register, and only in those cases in which the general meeting approves this being done and no minority, the aggregate of whose shares is at least equivalent to one tenth of the share capital, raises an objection and has it recorded in the minutes. The above limitation in time shall not apply where the party obligated to provide compensation is unable to pay his debts as they become due and concludes a compromise with his creditors in order to avert insolvency proceedings or if the compensation obligation is provided for in an insolvency plan.

Section 51
Prescription of the claims to compensation

The company’s claims to compensation pursuant to sections 46 to 48 shall become statute-barred within five (5) years. The period of prescription shall commence running upon the company being entered in the Commercial Register or, if the measure obligating the party to provide compensation was taken at a later time, upon the measure being so taken.

Section 52
Post-formation agreements

(1) Agreements of the company with founders or with stockholders participating in the company with an ownership interest of more than 10 percent of the share capital, pursuant to which agreements the company is to purchase existing facilities or facilities yet to be created or other assets in return for remuneration that is in excess of one tenth of the share capital, and which agreements are concluded in the course of the first two (2) years following the company’s entry in the Commercial Register, shall enter into force only if the general meeting has consented to same and by being entered in the Commercial Register. Where the general meeting has not granted its consent or the purchase has not been entered in the Commercial Register, the legal transactions serving its implementation shall likewise be invalid.

(2) Unless different requirements as to form have been stipulated, an agreement pursuant to subsection (1) must be made in writing. From the time onwards at which the general meeting is convened that is to adopt a resolution as to the consent, the agreement is to be kept available at the company’s business premises for inspection by the stockholders. Upon a corresponding demand being made, each stockholder is to be provided with a copy without undue delay. The obligations pursuant to the second and third sentences shall not be applicable if the agreement is accessible, for the same period of time, via the company’s website. The agreement is to be made accessible at the general meeting. At the outset of the meeting, the management board is to give a presentation on the agreement. The agreement is to be attached to the minutes of the meeting as an annex.

(3) Prior to the general meeting adopting a resolution, the supervisory board is to review the agreement and is to submit a written report (report on post-formation agreements). Section 32 subsections (2) and (3) governing the formation report shall apply mutatis mutandis to the report on post-formation agreements.

(4) Furthermore, an audit is to be performed by one or several formation auditors prior to the adoption of the resolution. Section 33 subsections (3) to (5), sections 34, 35 governing the formation audit shall apply mutatis mutandis. Subject to the pre-requisites set out in section 33a, the audit by the formation auditors may be refrained from.

(5) The resolution adopted by the general meeting shall require a majority of at least three quarters of the share capital represented at the time such resolution is adopted. Where the agreement is concluded in the first year following the company’s entry in the Commercial Register, the shares of the consenting majority must furthermore be equivalent at a minimum to one quarter of the aggregate share capital. The by-laws may stipulate a greater majority ratio of capital instead of the above majorities and may impose further requirements.

(6) Following consent having been granted by the general meeting, the management board is to file an application for entry of the agreement in the Commercial Register. The report on post-formation agreements and the report of the formation auditors, along with the supporting records and documents, are to be attached to the application for entry in the register. Where an external formation audit is refrained from pursuant to subsection (4), third sentence, section 37a shall apply mutatis mutandis.

(7) Where there are concerns regarding the entry in the register because the formation auditors declare, or because it is obvious, that the report on post-formation agreements is inaccurate or incomplete or does not comply with statutory regulations or that the remuneration granted for the assets to be purchased is excessive, the court shall have the option of refusing to enter the company in the register. Where the application for entry in the register includes the declaration pursuant to section 37a (1), first sentence, section 38 (3) shall apply mutatis mutandis.

(8) The date on which the agreement was concluded and the consent granted by the general meeting are to be entered in the register, as well as the party or parties concluding the agreement with the company.

(9) The above regulations shall not apply if the assets are purchased in the normal course of the company’s business, by way of compulsory enforcement, or by trading on the stock exchange.

(10) (repealed)

Section 53
Claims to compensation in the context of post-formation agreements

Sections 46, 47, 49 to 51 governing the company’s claims to compensation shall apply mutatis mutandis to post-formation agreements. The members of the management board and of the supervisory board shall take the stead of the founders. They are to exercise the due care of a prudent manager faithfully complying with his duties. Inasmuch as periods commence running upon the company being entered in the Commercial Register, the entry of the post-formation agreement in the register shall take the stead of the company’s entry in same.

Table of contents (Stock Corporation Act)