A stock corporation under German law recognizes three corporate bodies:
The decision-making authorities of the three corporate bodies are strictly delimited from one another.
Tasks and Areas of Responsibilities of the Corporate Bodies
The Board of Management is responsible for independently managing and representing the enterprise in dealings with third parties, whilst the Supervisory Board appoints and dismisses the members of the Board of Management and supervises management. Therefore German law provides for a two-tier management structure in a stock corporation, i.e. the strict division between Board of Management and Supervisory Board. Membership of both bodies is not permitted, i.e. members of the Board of Management may not at the same time be members of the Supervisory Board and vice versa.
The Annual Meeting is not involved in the decisions of day-to-day management of the enterprise. However, it exercises an indirect influence on corporate governance because the Annual Meeting elects half the members of the Supervisory Board and the Supervisory Board in turn appoints and dismisses the Board of Management. Furthermore, the Annual Meeting resolves on the ratification of the actions of the Board of Management and Supervisory Board, on the appropriation of distributable profits and the appointment of the external auditor.
In addition, certain fundamental measures require the approval of the Annual Meeting. These include amendments to the Articles of Incorporation, capital measures, the dissolution of the enterprise, mergers, spin-offs or other transformation measures as well as the transfer of the total or majority of the assets of the enterprise.