In its 60th year of existence, the German public limited company (AG) has lost much of its appeal and is in danger of falling behind foreign legal forms such as the Dutch N.V. An attractive legal framework with significant improvements in equity financing, the revitalisation of the Annual General Meeting, in particular with a reform of the law on defective resolutions and a reorganisation of the supervisory board, offers the opportunity to make the AG and the German financial centre as a whole more competitive. The EU's commendable plan to create a genuinely European legal form for all 27 member states for the first time with the introduction of an optional 28th regime in company law promises positive impetus.

"In our study, we put company law to the test and show where procedures are too slow, rules too inflexible and structures no longer competitive. We see a clear need for action, because modern company law determines whether companies can grow flexibly, finance innovation and operate successfully on the capital market in order to create jobs in Germany,‘ explains Henriette Peucker, Chief Executive and Member of the Board of Deutsches Aktieninstitut.

This is the result of the study ‘60 years of the Stock Corporation Act: Evergreen or obsolete?’, published today by White & Case and Deutsches Aktieninstitut. It is based on a written survey of the heads of legal departments at listed companies in Germany and interviews with experts from business, research, consulting and employee representation. Their responses make it clear that the pressure for reform goes far beyond the decision-making deficiencies identified as in need of reform by the CDU, CSU and SPD in their coalition agreement. The Stock Corporation Act needs to be fundamentally revised.

‘The starting point was the question we were often asked whether the AG (stock corporation) still makes sense as a corporate form,’ emphasises Dr Alexander Kiefner, partner in corporate and capital markets law at White & Case LLP in Frankfurt am Main. "This study shows that there is a considerable need for action at all levels. The particular merit of the study is that it conveys the overall picture in an understandable way and compares reform ideas discussed among experts with practical know-how. In addition to the long-overdue reform of the law on defective resolutions, there is a particularly clear call for foreign employees to be represented on the supervisory boards of internationally active corporations."

The reform recommendations at a glance:

1. Simplify equity financing: An ordinary capital increase takes far too much time, from the invitation to the Annual General Meeting to the entry in the commercial register. The scope for raising equity capital should be increased and made more flexible, for example through so-called at-the-market facilities (continuous equity programmes) and raising the limit of 50 per cent of share capital for authorised capital.

2. Reduce bureaucracy at General Meetings: The right to challenge resolutions and the risk of resolutions being contested lead to excessively long and formalistic general meetings and years of legal disputes. A constructive debate between company management and shareholders requires that challenges to management's responses to shareholder questions be limited to particularly serious errors and that unnecessary formalities be eliminated. Mere formal and procedural errors should be excluded as grounds for invalidating resolutions, and the legal consequences of challenges should be redefined.

3. Modern adjustments to the supervisory board: The increased requirements for the supervisory board should be given greater consideration in the Companies Act. Companies with large co-determined supervisory boards should be given the right to determine the size of their committees themselves, together with their shareholders, instead of a mandatory size of 16 or even 20 members for the supervisory board. In the case of internationally active corporations, employees abroad should also be given the right to vote and stand for election to the employee bench. The powers of the supervisory board chair also deserve to be sharpened.

4. Introduce a 28th regime for Europe: To date, there is no single truly European legal form for the 27 Member States of the EU. The EU's plan to introduce a so-called 28th regime in company law, a genuinely European legal form that companies can opt for, thereby expanding the range of legal forms available to pan-European companies, therefore deserves support. It is important to create a legal framework that is flexible enough for young and growing companies, but also works for large companies on the capital market. A change in legal form should not be necessary for an initial public offering. In addition, a 28th regime should be applicable in corporate structures and linked to other areas of law in such a way that a truly uniform European regime is created.

In its 60th year of existence, the German public limited company (AG) has lost much of its appeal and is in danger of falling behind foreign legal forms such as the Dutch N.V. An attractive legal framework with significant improvements in equity financing, the revitalisation of the Annual General Meeting, in particular with a reform of the law on defective resolutions and a reorganisation of the supervisory board, offers the opportunity to make the AG and the German financial centre as a whole more competitive. The EU's commendable plan to create a genuinely European legal form for all 27 member states for the first time with the introduction of an optional 28th regime in company law promises positive impetus.

"In our study, we put company law to the test and show where procedures are too slow, rules too inflexible and structures no longer competitive. We see a clear need for action, because modern company law determines whether companies can grow flexibly, finance innovation and operate successfully on the capital market in order to create jobs in Germany,‘ explains Henriette Peucker, Chief Executive and Member of the Board of Deutsches Aktieninstitut.

This is the result of the study ‘60 years of the Stock Corporation Act: Evergreen or obsolete?’, published today by White & Case and Deutsches Aktieninstitut. It is based on a written survey of the heads of legal departments at listed companies in Germany and interviews with experts from business, research, consulting and employee representation. Their responses make it clear that the pressure for reform goes far beyond the decision-making deficiencies identified as in need of reform by the CDU, CSU and SPD in their coalition agreement. The Stock Corporation Act needs to be fundamentally revised.

‘The starting point was the question we were often asked whether the AG (stock corporation) still makes sense as a corporate form,’ emphasises Dr Alexander Kiefner, partner in corporate and capital markets law at White & Case LLP in Frankfurt am Main. "This study shows that there is a considerable need for action at all levels. The particular merit of the study is that it conveys the overall picture in an understandable way and compares reform ideas discussed among experts with practical know-how. In addition to the long-overdue reform of the law on defective resolutions, there is a particularly clear call for foreign employees to be represented on the supervisory boards of internationally active corporations."

The reform recommendations at a glance:

1. Simplify equity financing: An ordinary capital increase takes far too much time, from the invitation to the Annual General Meeting to the entry in the commercial register. The scope for raising equity capital should be increased and made more flexible, for example through so-called at-the-market facilities (continuous equity programmes) and raising the limit of 50 per cent of share capital for authorised capital.

2. Reduce bureaucracy at General Meetings: The right to challenge resolutions and the risk of resolutions being contested lead to excessively long and formalistic general meetings and years of legal disputes. A constructive debate between company management and shareholders requires that challenges to management's responses to shareholder questions be limited to particularly serious errors and that unnecessary formalities be eliminated. Mere formal and procedural errors should be excluded as grounds for invalidating resolutions, and the legal consequences of challenges should be redefined.

3. Modern adjustments to the supervisory board: The increased requirements for the supervisory board should be given greater consideration in the Companies Act. Companies with large co-determined supervisory boards should be given the right to determine the size of their committees themselves, together with their shareholders, instead of a mandatory size of 16 or even 20 members for the supervisory board. In the case of internationally active corporations, employees abroad should also be given the right to vote and stand for election to the employee bench. The powers of the supervisory board chair also deserve to be sharpened.

4. Introduce a 28th regime for Europe: To date, there is no single truly European legal form for the 27 Member States of the EU. The EU's plan to introduce a so-called 28th regime in company law, a genuinely European legal form that companies can opt for, thereby expanding the range of legal forms available to pan-European companies, therefore deserves support. It is important to create a legal framework that is flexible enough for young and growing companies, but also works for large companies on the capital market. A change in legal form should not be necessary for an initial public offering. In addition, a 28th regime should be applicable in corporate structures and linked to other areas of law in such a way that a truly uniform European regime is created.

In its 60th year of existence, the German public limited company (AG) has lost much of its appeal and is in danger of falling behind foreign legal forms such as the Dutch N.V. An attractive legal framework with significant improvements in equity financing, the revitalisation of the Annual General Meeting, in particular with a reform of the law on defective resolutions and a reorganisation of the supervisory board, offers the opportunity to make the AG and the German financial centre as a whole more competitive. The EU's commendable plan to create a genuinely European legal form for all 27 member states for the first time with the introduction of an optional 28th regime in company law promises positive impetus.

"In our study, we put company law to the test and show where procedures are too slow, rules too inflexible and structures no longer competitive. We see a clear need for action, because modern company law determines whether companies can grow flexibly, finance innovation and operate successfully on the capital market in order to create jobs in Germany,‘ explains Henriette Peucker, Chief Executive and Member of the Board of Deutsches Aktieninstitut.

This is the result of the study ‘60 years of the Stock Corporation Act: Evergreen or obsolete?’, published today by White & Case and Deutsches Aktieninstitut. It is based on a written survey of the heads of legal departments at listed companies in Germany and interviews with experts from business, research, consulting and employee representation. Their responses make it clear that the pressure for reform goes far beyond the decision-making deficiencies identified as in need of reform by the CDU, CSU and SPD in their coalition agreement. The Stock Corporation Act needs to be fundamentally revised.

‘The starting point was the question we were often asked whether the AG (stock corporation) still makes sense as a corporate form,’ emphasises Dr Alexander Kiefner, partner in corporate and capital markets law at White & Case LLP in Frankfurt am Main. "This study shows that there is a considerable need for action at all levels. The particular merit of the study is that it conveys the overall picture in an understandable way and compares reform ideas discussed among experts with practical know-how. In addition to the long-overdue reform of the law on defective resolutions, there is a particularly clear call for foreign employees to be represented on the supervisory boards of internationally active corporations."

The reform recommendations at a glance:

1. Simplify equity financing: An ordinary capital increase takes far too much time, from the invitation to the Annual General Meeting to the entry in the commercial register. The scope for raising equity capital should be increased and made more flexible, for example through so-called at-the-market facilities (continuous equity programmes) and raising the limit of 50 per cent of share capital for authorised capital.

2. Reduce bureaucracy at General Meetings: The right to challenge resolutions and the risk of resolutions being contested lead to excessively long and formalistic general meetings and years of legal disputes. A constructive debate between company management and shareholders requires that challenges to management's responses to shareholder questions be limited to particularly serious errors and that unnecessary formalities be eliminated. Mere formal and procedural errors should be excluded as grounds for invalidating resolutions, and the legal consequences of challenges should be redefined.

3. Modern adjustments to the supervisory board: The increased requirements for the supervisory board should be given greater consideration in the Companies Act. Companies with large co-determined supervisory boards should be given the right to determine the size of their committees themselves, together with their shareholders, instead of a mandatory size of 16 or even 20 members for the supervisory board. In the case of internationally active corporations, employees abroad should also be given the right to vote and stand for election to the employee bench. The powers of the supervisory board chair also deserve to be sharpened.

4. Introduce a 28th regime for Europe: To date, there is no single truly European legal form for the 27 Member States of the EU. The EU's plan to introduce a so-called 28th regime in company law, a genuinely European legal form that companies can opt for, thereby expanding the range of legal forms available to pan-European companies, therefore deserves support. It is important to create a legal framework that is flexible enough for young and growing companies, but also works for large companies on the capital market. A change in legal form should not be necessary for an initial public offering. In addition, a 28th regime should be applicable in corporate structures and linked to other areas of law in such a way that a truly uniform European regime is created.