This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
There are various forms of associations under German law of which the stock company (Aktiengesellschaft), and the limited liability company (Gesellschaft mit beschrankter Haf-tung, usually abbreviated m.b.H.) are the two most popular, forms.
The stock company may be regarded as, for most practical purposes, equivalent to a corporation or joint-stock company under English and American law. It usually has both a board of directors (Vorstand) and a board of managers (Auf-sichtsrat), but does not necessarily possess a president, secretary, and treasurer. Executive power, in other words, is lodged in the board and not in individual officers.
The German limited liability company has been described as a cross between an American corporation and a partnership. "In contemplation of German law, it is an artificial person or juristische Person, and has an existence of its own separate and distinct from that of its founders and shareholders; and is therefore a body corporate. This corporate form is much simpler than the Aktiengesellschaft or stock company. Its capital is not divided into shares and no certificates of stock are issued. Individual interests or holdings in the company may be transferred in whole or in part by notarial or judiciary act*
This form of association is used chiefly for small companies in which only a few persons are interested. The management is usually determined by agreement among the various persons interested, much as in an ordinary partnership, though in the larger companies of this type there may be a board of control.
* Report on the Commercial Laws of England, Scotland, Germany, and France, by Archibald J. Wolfe in collaboration with Edwin M. Borchard, issued by the Bureau of Foreign and Domestic Commerce, Washington, D. C, 1915. Much of the information contained in the preceding section also is abstracted from this report.