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Stock corporation

Stock corporationAn incorporated firm whose capital stock is divided into shares. Stock corporations are legal entities; in Germany, they are regulated by the provisions of the German Stock Corporation Act. A person who invests in a stock corporation is called a shareholder or stockholder.

Founding a stock corporation requires a minimum capital stock of 50,000 euro. The capital stock is divided into equal shares with identical par values; the minimum par value is currently one euro. Owing to the launch of the euro, many stock corporations now issue no-par shares to avoid the complications involved in converting deutschmarks to euros. Instead of being assigned a par value (and thus a monetary value), these shares represent the percentage of the capital stock accounted for by a single share.

A shareholder owns part of a company's capital stock, and is only liable for the amount of the investment. A shareholder cannot be made personally liable.

In Germany, a stock corporation is required by law to have three administrative bodies:

The executive board manages the stock corporation, representing it both in and out of court.

  • The most important tasks of the supervisory board are to appoint and dismiss members of the executive board, audit the financial accounts and management report, and, at the annual general meeting, to inform stockholders of developments that took place within the company during the financial year.
  • The annual general meeting comprises the company's shareholders. It elects a shareholders' representative to sit on the supervisory board, makes decisions regarding the application of profit and the payment of dividends, and grants discharge to the executive and supervisory board.

Large firms are typically organised as stock corporations because this enables them to raise large amounts of equity capital, primarily by going public. Another way to procure additional funding is through a capital increase, which can take one of several forms. A company that issues a large number of small shares with low par values will often have a large number of shareholders.

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