First, as a general rule, capital contributions by the stockholders should be made in cash.109 Any non-cash contributions (so-called contributions in kind) are considered an exception and are subject to specific auditing requirements confirming the value of the asset contributed.110

Second, the contribution stocks have to at least equal the par value of the stocks. Stocks must not be issued for an amount below the portion of the registered stock capital attributable to them (Verbot der Unter-Pari-Emission).111

Third, the contribution stocks have to be made in a timely manner.Astockholder who fails to pay in her/his contribution owed will be granted a grace period. But in case of her/his continued failure to pay her/his contribution following the expiry of such period, her/his stocks and any contribution already made will be forfeited.112 In addition, any predecessor of such stockholder may be held liable for the remaining amount if the expelled stockholder is unable to pay.113 The company may neither release the stockholder nor its predecessor from their contribution obligations.

Fourth, contributions may principally not be repaid to the stockholders. This includes any payments made by the company to one of its stockholders, which do not consist of a distribution of balance sheet profits according to a valid distribution resolution of the stockholders’ meeting, or for which the company, in return, does not receive at least equal consideration.114

Finally, theAG may acquire its own stocks only pursuant to a stockholders’resolution and only up to an amount of 10% of the total stock capital. The costs of such acquisition have to be covered by free reserves, i.e. assets which otherwise would have been available for distribution to the stockholders (distributable profit, profit reserves and profits carried forward).115 To prevent a circumvention of these rules, the AktG provides for any transaction to be null and void by which the AG grants any advance payment, loan or security to a third party for the purpose of acquiring stocks in such company.116

2.4  Formation, Dissolution and Liquidation of the AG

2.4.1  Formation

An AG may be established by one or more natural or juristic persons for any legal purpose. The formation procedure of an AG is quite similar to that of a GmbH.

109  See Sec. 54 para. 2AktG.

110  See Sec. 34 para. 1 no. 2AktG. 111  See Sec. 9 para. 1AktG.

112  See Sec. 64AktG.

113  See Sec. 65AktG.

114  See Sec. 57AktG.

115  See Sec. 71AktG.

116  See Sec. 71aAktG.

It takes several steps beginning with drafting the articles of association and ending with applying for registration of the AG into the Commercial Register; this entry is the prerequisite (as in the case of the GmbH) for the AG to come into legal existence.

The first step to establish an AG is to draft the initial articles of association, which must include, inter alia, the corporate name, the registered office, the purpose of the company, and the amount of the registered stock capital.117 As in the case of the GmbH, the articles have to be established in the form of a notarial deed.

In addition to the legal requirements for the GmbH, the AktG further stipulates an obligation to set-up a notarized deed of formation (Gründungsurkunde), which states the founders, the paid up amount of the registered stock capital, as well as the class and volume of the stocks to be subscribed by each founder.118 As the actual subscription (Übernahme der Einlagen) 119 has to be notarized as well, it is included in the formation deed.120

Having subscribed to the stocks, the founders then have to appoint the first supervisory board and the first auditor.121 These appointments shall be made in the form of a notarial deed. The supervisory board then, in turn, appoints the initial management board. The period of office for both initial bodies expires automatically by operation of law at the first stockholders’meeting.

As the next step, the founders have to pay in the stock capital contributions subscribed to in the deed of formation.122 In case of cash contributions, at least 25% of the lowest issue price has to be paid.123 Non-cash contributions (contributions in kind) have to be made in full.124

The founders must also prepare a specific formation report (Gründungsbericht), explaining the formation procedure.125 In particular, the formation report shall provide details as to the fair value of any contributions in kind made. Based upon, but not limited to, the findings of the formation report the management board and the supervisory board shall audit the formation procedure. If a member of one of the boards has subscribed to stocks of the AG or if contributions in kind were involved, an additional formation audit by independent formation auditors (Gründungsprüfer) is required.126

After the AG has made an application for registration in the Commercial Register, which has to include, inter alia, the notarized articles of association, the deed of formation and the report concerning the formation audit, the court will examine

117  See Sec. 23 para. 3AktG. 118  See Sec. 23 para. 2AktG. 119  See Sec. 29AktG.

120  See Sec. 23 para. 2 no. 2AktG. 121  See Sec. 30AktG.

122  See Secs. 36, 54AktG. 123  See Sec. 36a para. 1AktG. 124  See Sec. 36a para. 2AktG. 125  See Sec. 32AktG.

126  See Sec. 33 para. 2AktG.