Stock Corporation

What is AG?

Aktien Gesellschaft is also known as "Stock Corporation", "Open Corporation", or "C Corporation". In many cases, especially the number of shareholders is more than 30 (e.g. the corporation is planning an IPO or private equity), we recommend that the customer register Stock Corporation.

 

Owing to respect on the integrity of management decisions given by the Delaware Corporation Law and cases for the past 200 years, Stock Corporations are allowed autonomous and flexible space to a large extent.

 

Generally, there are 3 levels of Stock Corporation: shareholders, directors, and management staffs, each level has its own different rights and obligations.

Shareholders are the owners of the corporation, but they do not manage the corporation. Usually, in accordance with the number of shares they hold (one vote per share), the shareholders have the right of voting for the Board members and the right of voting for other important matters of the corporation.

The shareholders who hold the majority of the shares issued by the corporation may control the corporation. They are referred to as the controlling shareholders. For the minority shareholders, the controlling shareholders shoulder more responsibilities.

The minority shareholders (any shareholders without the control rights of the corporation) usually do not need to take any responsibility. They can sell their shares, or delegate their voting rights to or give them to any people they selected.

There are 2 ways for shareholders to get benefits:

(1) they enjoy the dividends in accordance with their shares when the Board declares the dividends;
(2) the value of their shares may increase as the growth of the corporation.

Directors are responsible for the operation and the management of the corporation. They are responsible for all the major business activities such as issuing stock, electing management staff, hiring the key management team, making policies and setting the salary and welfare of themselves and major management staff.

Directors decide whether give the shareholders dividends and the how much the dividend is. Directors issue stock and may own the stock of the corporation.

Directors have the fiduciary duty of the corporation. They shall be loyal to the company, make independent decisions in accordance with the situation, can not do bad behaviors such as jobbery or fraudulent transactions, and shall take the best interests of the corporation and the shareholders into consideration.

Directors may make decisions and take actions through one of the following ways: attending the board meeting with pre-announced requisite quorum; or all the directors sign the written consent without meeting. Directors can not give or sell their voting rights to other directors or vote by proxy.

Generally speaking, as long as the shareholder’s vote is more than half of the votes, the directors may be removed or replaced by some reasons or no reason. That’s why the controlling shareholders can control the corporation.

The management staffs work for the Board of directors and handle the daily affairs. They implement the decisions and polices made by the Board. Management staffs are usually presidents, vice presidents, secretaries and treasurers. However, the Board can also specify other management staffs as they see fit, such as CEO (Chief Executive Officer), CFO (Chief Financial Officer), sales managers, operation managers and any other job title they want to set.

Management may get stock as a reward, or purchase the stock under the direction of the Board.

Factors:
●Three level of management modes: shareholders, directors, management staffs.
●A clear division of responsibilities.
●Unlimited scale.
●Directors operate the corporation.
●Directors are elected by shareholders.
●Shareholders own the corporation.
●The minority shareholders have no responsibility for the corporation.
●If meet all the conditions, the corporation may apply to become S-Corporation.

 

Generally used for:
●Corporations who intend to go public.
●Raising funds.
●Merging other companies.
●The globalization of business.