More Than a New Nameplate: When Converting from a GmbH to an AG Really Pays Off
Updated: Oct 8
“AG” sounds like size. Yet the conversion of a limited liability company (GmbH) into a stock corporation (Aktiengesellschaft) by way of a change of legal form (Formwechsel) is not an image project. It changes who makes decisions in the company, how shares are transferred and which obligations the company bears. For some mid-sized companies that is exactly right – for many it is not.
When a conversion makes sense
Succession and external management: The managing director (Geschäftsführer) of a GmbH is bound by the instructions of the shareholders (Gesellschafter) (cf. § 37(1) GmbHG). The management board (Vorstand) of an AG, by contrast, runs the company under its own responsibility (§ 76(1) AktG). That fits where the owner family withdraws from day-to-day business and appoints external management. The family then exercises control through the supervisory board (Aufsichtsrat), which appoints and oversees the management board – and no longer through individual instructions.
Many shareholders, employee participation, investors: The transfer of GmbH shares always requires a notarised contract (§ 15(3) GmbHG). Shares of an AG can be transferred without a notary. Those who nevertheless want to control who becomes a shareholder can issue registered shares with restricted transferability (vinkulierte Namensaktien): the transfer then requires the company’s consent (§ 68(2) AktG).
Limited information rights: Every GmbH shareholder can demand information and inspection of the books at any time (§ 51a GmbHG). A shareholder (Aktionär) of an AG, by contrast, has a right to information only at the general meeting (Hauptversammlung) and only insofar as the information is necessary to assess the agenda (§ 131(1) AktG). Where there are many minority shareholders, this creates calm and confidentiality.
Social insurance exemption for the management board: Members of the management board of an AG are not subject to compulsory insurance in the statutory pension and unemployment insurance in the company on whose management board they sit (§ 1 SGB VI, § 27(1) no. 5 SGB III); group companies are treated as a single company in this respect. The position is different for a GmbH managing director: anyone who does not hold at least 50% of the shares or a comprehensive blocking minority (Sperrminorität) is, according to the Federal Social Court (Bundessozialgericht), regularly in dependent employment and therefore liable to pay contributions (BSG, judgment of 14 March 2018 – B 12 KR 13/17 R). This concerns above all external and minority managing directors. Members of the management board must therefore provide for their own retirement. The special rule does not apply to health and long-term care insurance.
Capital market: A later IPO (Börsengang) requires a legal form that issues shares. The AG is the standard route for this.
What speaks against it
Minimum capital: The share capital (Grundkapital) of an AG amounts to at least EUR 50,000 (§ 7 AktG).
Less freedom of design: The articles of association (Satzung) may deviate from the Stock Corporation Act (Aktiengesetz) only where the law expressly permits it (§ 23(5) AktG). Tailor-made provisions, as are customary in a GmbH’s articles of association, are often not possible.
More organisation: Every AG needs a supervisory board with at least three members (§ 95 AktG). General meetings and reporting lines mean ongoing effort.
How the conversion works
In a change of legal form, the company remains the same entity; it merely continues to exist in its new legal form (§ 202(1) no. 1 UmwG). Contracts, employees and assets therefore do not have to be transferred. Because no assets pass, no real estate transfer tax (Grunderwerbsteuer), for example, is incurred. The remaining tax consequences must nevertheless be reviewed in advance.
The shareholders resolve on the change of legal form by a majority of at least three quarters of the votes cast (§ 240(1) UmwG); the resolution must be notarially recorded (§ 193(3) UmwG). The share capital of the AG may not exceed the net assets (Reinvermögen) of the GmbH (§ 220(1) UmwG). In addition, a formation audit (Gründungsprüfung) by one or more auditors is mandatory (§ 220(3) UmwG).
Conclusion: The change of legal form pays off if ownership and management are to be separated permanently, social-insurance-exempt external management is to be secured, the circle of shareholders is to be widened or the capital market is to be prepared. Those who merely want to appear “bigger” pay with less flexibility and more formalities.
This article provides a general overview and does not replace legal advice in an individual case.
