Aktiengesellschaft

The German term Aktiengesellschaft (abbreviated AG) means a corporation which is limited by shares, i.e., owned by shareholders. It may be traded on the stock market. The term is used in Germany, Austria and Switzerland.

Meaning of the word

Aktien means shares, and Gesellschaft means business association in this context. Thus, the term compares to its British equivalent, company limited by shares.

Reasons for setting up a corporation

When a corporation is started, it has to collect a lot of money and banks provide only a limited amount, especially if it is as yet unknown whether that corporation is going to earn enough money to repay all the loans plus interest on time. But some members of the public will take a risk and provide money in exchange for a piece of paper, or just a book entry, that can be sold to others on the stock market, and that has a value that keeps fluctuating a lot(?), depending on, for example, whether the shares concerned will pay dividends, and if so, how much per year, or what percentage of the current price of the shares.

Legal basis

The legal basis of the AG is, in Germany and Austria, the respective Aktiengesetz (abbr. AktG), in Switzerland a part of the Obligationenrecht (OR). As the law requires all corporations to specify their legal form (which gives the limitation of liability) in the name, all German and Austrian stock corporations bear Aktiengesellschaft or AG as part (usually suffix) of their name.

See also

• Gesellschaft mit beschränkter Haftung (GmbH; limited liability company)
• Public limited company (the corresponding concept in the UK and in Ireland)