When is it advisable to convert a GmbH into an AG?
April 20, 2024 | 45,00 EUR | answered by Christian Ahlert
Dear Attorney specializing in Corporate Law,
My name is David Hoffmann and I am the managing director of a GmbH that has developed very well in recent years. Now I am considering whether it would be beneficial to convert my GmbH into a public limited company (AG). I am faced with the decision of whether a conversion to a public limited company would be advantageous for my company.
The current situation of my GmbH is stable and the business is doing well. We have a solid customer base and regularly generate profits. However, I want to further expand the company and operate on an international level. In this context, the question arises whether a conversion to an AG would be the right decision to promote the growth and expansion of the company.
My concern is that I am not sure what legal and tax implications a conversion to an AG could have on my company. I am also uncertain whether the benefits of a public limited company justify the costs and effort. Therefore, I would like to know from you at what point a conversion of a GmbH into an AG could be sensible and what specific advantages an AG offers compared to a GmbH.
Furthermore, I would like to learn about possible risks or disadvantages of a conversion to an AG in order to make an informed decision. It is important for me to understand the long-term implications of such a conversion in order to make the right strategic decision for my company.
Thank you in advance for your assessment and advice.
Kind regards,
David Hoffmann
Dear Mr. Hoffmann,
Thank you for your inquiry regarding the conversion of your GmbH into an AG. Such a decision should be carefully considered, as it not only has legal and tax implications, but also long-term consequences for your company.
First and foremost, it is important to understand at what point a conversion from a GmbH to an AG may be advisable. Typically, companies opt for a conversion when they plan to make larger investments, raise capital from external investors, or go public. An AG offers more options for raising capital, as shares can be issued to generate new capital. Additionally, an AG can be more easily sold to strategic partners or subsidiaries.
Another advantage of an AG compared to a GmbH is the limitation of liability. As the managing director of a GmbH, you are personally liable with your entire assets, whereas in an AG, liability is limited to the company's assets. This can be an important aspect if your company plans to operate internationally and take on associated risks.
However, there are also risks and disadvantages that must be considered when converting to an AG. The bureaucratic effort is significantly higher for an AG than for a GmbH. A general meeting must be convened, a supervisory board established, and regular reporting obligations fulfilled. Additionally, the founding costs of an AG are higher than those of a GmbH, and there are regular costs for the publication of financial reports.
Overall, converting a GmbH into an AG can be advisable if your company plans to take larger growth steps, operate internationally, or raise capital from external investors. However, it is important to carefully weigh all aspects and, if necessary, seek advice from a specialized attorney to make the right decision for your company.
I hope that this information was helpful to you and I am available for further questions.
Best regards,
Christian Ahlert
Attorney specializing in corporate law
