Public limited company – advantages & disadvantages

The shareholders of a joint stock company must pay a defined amount of share capital into their company, which is made available for creditor protection. The required minimum amount depends on the national legal requirements.

A stock corporation is managed by the management board, which is controlled by the supervisory board. The owners are the shareholders, but they cannot give instructions to the management board and – unlike the shareholders of a private limited company – cannot intervene in the operational business of the company.

One advantage of stock corporations over private limited companies is that rights to shares are more fungible than rights to private shares. Whereas the transfer of private shares to new shareholders must always be notarized, rights to shares can change hands informally.

On the other hand, the administrative burden is greater in stock corporations than in limited liability companies. Stock corporations must have a supervisory board, which in many cases expects an expense allowance. Duties to document and publish plans and activities are considerably stricter than for private limited companies, which are bound by law, due to the requirements of the Stock Corporation Act.

In a stock corporation, executive and supervisory board members can be held personally liable for breaching due diligence obligations. If you hold a management or supervisory board position, have yourself included in the company’s D&O insurance. The company will agree to this if only because it means that it can file claims for damages against the insurance company if necessary, where it is easier to get larger sums paid than for a member of the management or supervisory board.


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