AG or GmbH: What Changes for Startup Investors and What Doesn’t

Most startups in Germany are organized as limited liability companies (GmbH), but in 2025 several stock corporations (AG) also sought capital on Companisto. For business angels, the legal form affects their most important rights very little but the process quite a lot: in an AG, investment agreements and later share transfers do not require a notary. Private investors in the second funding phase see bigger changes. Instead of profit participation certificates (Genussscheine) issued by a special purpose vehicle (SPV), they receive shares of their own in an AG. Till Wedemann, senior legal counsel at Companisto, explained the differences in a masterclass in February 2026.

The question came shortly before the end. A participant switched on his camera and asked what exactly he would be acquiring if he did not invest in a GmbH until the second funding phase for private investors. One slide, he said, had stated that in that case you would receive only a share of the profits. So did he have no equity stake at all, and was he more like a silent partner (stiller Gesellschafter)? And what rights did he actually have?

At that stage, you are indeed “not a direct equity investor,” Wedemann replied, adding that with so many investors, it could not be done any other way. The investors receive profit participation certificates from a special purpose vehicle, which in turn invests in the startup; they have no vote of their own in the startup. In a stock corporation, by contrast, private investors in the second funding phase can also subscribe for shares, which makes them shareholders directly.

For many investors, whether they receive profit participation certificates or shares is the most tangible difference between the two legal forms. An AG round also works differently for business angels, who hold direct stakes in both cases: no notary appointment, a subscription form that they now sign electronically, and, later on, a formal general meeting. When it comes to the rights investors negotiate in return for their money, however, the GmbH and the AG are much alike.

Profit participation certificate or share: What private investors in the second funding phase receive

Funding rounds on Companisto take place in two phases. In the first, closed phase, business angels invest, usually starting at €10,000, and become shareholders of the startup directly. This is followed by the second funding phase for private investors, who can participate with as little as €250. How they do so depends on the legal form.

In a GmbH: Profit participation certificates from a special purpose vehicle

In a GmbH, private investors in the second funding phase do not acquire shares in the startup itself. A direct stake is not provided for at this stage; with so many investors, it would hardly be feasible, if only because every subscription for a GmbH share has to be recorded or certified by a notary. Instead, the money goes into one of the platform’s special purpose vehicles, which in turn becomes a shareholder of the startup. The SPV issues the investors profit participation certificates, securities that carry financial claims but no shareholder rights. Through the certificates, investors share indirectly in changes in the startup’s value, for example in the proceeds from a sale. If the startup performs well, their investment can gain value; if it performs poorly, the investment can lose value, up to and including a total loss of the capital invested.

They do not become shareholders of the startup, nor even silent partners in it. The investors’ only contractual counterparty is the SPV, and their claims under the terms of the certificates are against it. The voting, information, and preemptive rights in the startup lie with the SPV, as do any contractual investor rights, such as a liquidation preference, to the extent the SPV’s shares carry them. How much of this reaches the investors is set out in the terms of the profit participation certificates, which are part of the documents for each round.

Investors still have a say, even if only indirectly. The certificate holders vote on upcoming resolutions through the platform, usually by a simple majority of the votes cast, and the SPV casts its vote in the startup accordingly. Before subscribing, investors receive a Key Information Document (Basisinformationsblatt), a standardized document with the most important information on the product, its risks, and its costs.

In an AG: Shares of their own

An AG works differently. The company can issue additional shares, and the private investors subscribe for those shares themselves in the second funding phase. That makes them shareholders of the startup. Where their shares carry voting rights, their votes are pooled, like those of the angels. Which class of shares the investors receive, and whether they are entitled to preferential rights such as a liquidation preference, is governed by the subscription form, the articles of association, and the investment documents for each round.

For the platform, this means more regulatory work, Wedemann said. A public offering of the shares requires a Securities Information Sheet (Wertpapier-Informationsblatt), which, he said, Companisto usually coordinates with the company. It may not be published until Germany’s financial regulator, BaFin, has given permission. BaFin checks only whether all the required information is included, not whether it is accurate.

Investors subscribe for the shares with a subscription form, a written declaration in which they make a binding offer to take up a specific number of new shares at a set price. The subscription agreement is concluded only when the startup accepts the subscription; the investors become shareholders once the capital increase is entered in the commercial register. Depending on the round, the shares are then delivered to a securities account, or there is no delivery to a securities account and the investors are recorded only in the company’s share register.

Not every stock corporation on Companisto is German; Swiss companies, for example, are governed by Swiss stock corporation law, which has its own rules.

Investing without a notary appointment

What is “absolutely key,” Wedemann said, is that an AG has no notarial recording requirement. In a GmbH, the negotiated investment documents as a rule have to be executed before a notary; the notary reads the agreements aloud and records them in a notarial deed. The reason lies in the GmbH Act (GmbHG): agreements in which someone undertakes to transfer GmbH shares must be in notarial form. Investment agreements typically contain such obligations, for example the drag-along, which allows a majority to require all shareholders bound by it to sell. Anyone taking up new GmbH shares must also make that declaration in notarial form.

Having the documents recorded by a notary requires powers of attorney in the prescribed form and, in some cases, extensive documentation under the German Money Laundering Act (Geldwäschegesetz), which the notary checks. The angels do not have to attend; Companisto represents them. All they need is a power of attorney with their signature certified by a notary; that appointment takes about ten minutes and costs around €100. The platform may use the power of attorney only on the investor’s instructions or to fulfill a contractual obligation of the investor, such as one arising from a pool resolution, meaning a joint vote of the angels. The power of attorney can be revoked at any time; agreements already concluded are not affected.

In an AG, there is no notary appointment, no powers of attorney certified by a notary, and no checks by a notary. That is an important advantage, and it also saves time. The parties sign the investment documents in writing, with Companisto usually signing for the investors as their representative. The investors subscribe for their shares themselves with the subscription form, in duplicate, as the law provides. The written-form requirement can be met with a qualified electronic signature (QES), a digital signature that is issued after an identity check and has the same legal effect as a handwritten one. On Companisto, this now happens online as part of the investment process. Without the notarial recording requirement, you gain “flexibility and speed,” Wedemann said.

Even an AG cannot do entirely without a notary, however. A notary must record the general meeting’s resolution on a capital increase and certify the filings with the commercial register. The investors do not have to go to the notary for this, though.

Transferring shares: Notarial agreement or securities account transfer

Profit distributions are unlikely in the early stage, because startups usually reinvest their profits, if they make any at all. Investors can therefore make money mainly by selling their stake: in an exit, meaning the sale of a majority of the company, or in later funding rounds. In Wedemann’s experience, from around Series B, a later growth round, investors aiming for a minimum stake come in time and again and offer to buy shares from existing investors. Investors with direct stakes decide for themselves whether to accept such an offer. Nobody can count on it, though, because there is no telling whether a startup will reach that stage. In each of these cases, shares change hands, and this is where the GmbH and the AG differ markedly.

GmbH shares: Notary and list of shareholders

In a GmbH, the seller and the buyer have to agree on terms and enter into a transfer agreement, which a notary records. The notary then files an updated list of shareholders with the commercial register. As far as the company is concerned, only those named on that list count as shareholders. The list gives the name, date of birth, and place of residence of shareholders who are individuals, as well as each shareholder’s stake, and anyone can inspect it; an AG’s share register is not open to the public.

Then there are transfer restrictions (Vinkulierung): the articles of association (which in a GmbH are also called the Gesellschaftsvertrag) usually stipulate that shares may be transferred only with consent, and as a rule it is the shareholders’ meeting that must consent. The shareholders’ agreement then obliges the shareholders to give their consent in certain cases; in Companisto’s agreements, this usually covers transfers by angels to their own holding companies. Such “in-house” transfers have to be possible without triggering the other shareholders’ rights of first refusal or tag-along rights, Wedemann explained. A right of first refusal obliges the seller to offer the shares to the other shareholders first; a tag-along right allows them to demand to sell their shares alongside the seller on the same terms. Anyone who wants to invest through a holding company of their own should settle this with a tax advisor before investing, above all for tax reasons, Wedemann advised.

AG shares: Securities account transfer or share register

In an AG, no notary is needed for a transfer, which in Wedemann’s view is “an absolutely huge plus.” Startups usually issue registered shares with transfer restrictions (vinkulierte Namensaktien). Unlike bearer shares, they can be made transferable only with consent, and they let the founders keep track of who owns the company: for registered shares, the company keeps a share register, and as far as the company is concerned, only those entered in it count as shareholders.

How the shares change hands depends on whether they are held in a securities account. Shares held in a securities account are usually represented by a global certificate deposited with a central securities depository, in Germany mainly Clearstream; the buyer receives them through a securities account transfer between the banks. Without a securities account, the shares are assigned and re-registered in the buyer’s name in the share register. The company keeps a share register in both cases, and on Companisto both routes occur, depending on the round.

If the shares are subject to transfer restrictions, every transfer requires the company’s consent. It is granted by the management board, but the articles of association can assign that decision to the supervisory board or the general meeting. As with a GmbH, some transfers are permitted, for example to the shareholder’s own holding companies, affiliated companies, or related persons. For shares subscribed through Companisto, a buyer must also join the pooling agreement, so investors should contact the investor service team before selling.

Common or preferred shares?

The Q&A also covered common and preferred shares. Traditional preferred shares carry no voting rights and in return offer preferential treatment in the distribution of profits; all other shareholder rights remain intact. In the AG investments that Companisto carries out for angels, such shares are rather unusual, Wedemann explained, because the angels in those deals have an active vote. But there have also been AG rounds on the platform in which every subscriber, angels and private investors in the second funding phase alike, received half common shares and half non-voting preferred shares. The subscription form states which class of shares an investor receives. In the startup world, moreover, voting shares with special rights, such as priority in the distribution of proceeds, are often referred to as preferred shares. In principle, the class of shares makes no difference for transfers, Wedemann said; what matters is the articles of association.

Easier to transfer does not mean easy to sell

All in all, AG shares can be transferred faster, with less effort, and at lower cost than GmbH shares. That is an advantage for companies whose shareholders change frequently and that raise large funding rounds, Wedemann said. It does not make startup shares easy to sell, though: shares in unlisted companies are not traded on a stock exchange, and on top of that there are the transfer restrictions. Companisto does operate a secondary market where investors can trade GmbH shares, AG shares, and profit participation certificates among themselves. But there is no guarantee that a buyer will be found.

Flexible GmbH, rule-bound AG

A GmbH has two mandatory corporate bodies: the shareholders’ meeting, which is a very powerful body, and the managing directors. An AG has three: the management board, the general meeting, and the supervisory board. More important is the leeway the law allows. The Stock Corporation Act regulates procedures down to the last detail, Wedemann said; an AG’s articles of association may depart from it only where the law expressly permits. The GmbH Act, by contrast, leaves a great deal of freedom. For investors, the difference shows up in four areas:

• Instructions: GmbH shareholders can pass resolutions giving the managing directors specific instructions. The management board of an AG, by contrast, runs the company on its own responsibility; the general meeting decides on management matters only if the board requests it. The board is overseen by the supervisory board, whose shareholder representatives are usually elected by the general meeting.
• Information: In both legal forms, the rights to information are comprehensive and can hardly be restricted, according to Wedemann. But their scope differs: GmbH shareholders can demand information from the managing directors at any time and inspect the books, while AG shareholders can demand information at the general meeting to the extent it is needed for an item on the agenda. In practice, most stock corporations on Companisto also publish regular investor updates; shareholders, however, have no legal right to such reports.
• Meetings: In a GmbH, the articles of association can cover a lot of ground, such as invitations by email instead of registered mail; the law requires only one week’s notice. A general meeting, by contrast, must be called at least 30 days in advance and follows a strict, largely mandatory procedure, often with reports from the management board and the supervisory board that are made available on the platform.
• Resolutions: GmbH shareholders can also pass resolutions without a meeting, by written circular resolution (Umlaufverfahren) or by email, if everyone agrees or the articles of association provide for it; amendments to the articles, such as a capital increase, must be notarially recorded, however. There is no such procedure for the general meeting, but since 2022 it has had the permanent option of meeting virtually if the articles of association allow it.

What applies under both legal forms

Same process, similar contracts

The path to an investment is essentially the same for a GmbH and an AG. The investment team reviews the startup and negotiates the valuation with the founders. The key terms are set out in a largely non-binding term sheet, although in Wedemann’s experience the later negotiations rarely depart from it. Due diligence, the examination of the company, runs in parallel. Companisto’s legal department drafts and negotiates the contracts. Under both legal forms, they consist of an investment agreement with the terms and the warranties, meaning assurances about the state of the company; a shareholders’ agreement with the investor rights; and the articles of association, which are publicly available in the commercial register and are therefore kept lean. For more on this, with worked examples, see the article “First startup investment: What matters in the contracts.”

Why the angels’ votes are pooled

If, say, 20 angels join in a first funding round, the shareholder base grows all at once. The company still has to be able to function, including for later financing rounds: every new investor looks at the cap table, the overview of all shareholders, and asks how the shareholders are pooled, Wedemann said. That is why a voting and pooling agreement applies under both legal forms. The angels first vote among themselves, in what is known as the pool resolution. Companisto, as pool leader, then casts all their votes the same way at the shareholders’ meeting or the general meeting, including on behalf of those who were outvoted in the pool. Voting takes place on the platform in an automated process, so the company knows when it will have a decision.

Liquidation preference and anti-dilution protection

Of the contractual investor rights, Wedemann singled out two. Companisto “always, without exception” negotiates a liquidation preference, also called a proceeds preference, into the contracts, he said; it is “absolutely standard.” When proceeds are distributed, for example in a sale of the startup, the investors in the most recent round usually get their investment back first, as far as the proceeds allow, followed by the investors from earlier rounds. When new investors come in later, the existing ones usually move further back in the order. The preference is not a guarantee on the capital invested. It only determines the order in which the available proceeds are distributed. In an insolvency, creditors are paid first in any case.

Anti-dilution protection is becoming “more and more important” because valuations are cut more often in follow-on rounds, Wedemann said. In such a down round, investors who previously paid a higher price per share may take up additional shares at nominal value, usually €1 per share. How many depends on the calculation method, such as full ratchet or weighted average. This right, too, offers no protection against losses, up to and including a total loss.

When the majority wants to sell

The drag-along is also handled the same way under both legal forms. If a buyer wants to acquire the entire company, the drag-along allows a majority to require all shareholders bound by the agreement to sell. The hurdles are high: as a rule, a qualified majority of all shareholders and a majority of the investors must approve, and Companisto usually negotiates a minimum price that at least matches the price per share paid by its own investors. That does not rule out a sale below this price; it just cannot be forced through via the drag-along. Once the conditions are met, not everyone has to agree; it is enough if “the bulk” of the shareholders back the sale, Wedemann said.

A participant in the first Q&A described what this can feel like for an individual investor. At one of his startups, he said, the founder had made the Companisto investors an offer for their shares and required 75 percent approval for it. By his account, the threshold had been missed on the first attempt and was reached on the second. He himself had voted against it, he said, but was now “along for the ride” anyway.

Wedemann did not comment on the specific case. Besides the good outcomes, he said, there are also sales at a loss and forced sales, for example when founders want to avert insolvency; these, too, usually require a qualified majority. If no drag-along has been agreed on in advance, Companisto never sells angels’ shares without their direct instructions, he said; a pool resolution is not enough for that. Whether an investor with a direct stake has to accept a distressed sale against their will therefore depends on what the drag-along for that round provides, for instance whether a minimum price applies. With profit participation certificates, the holders decide jointly on any sale of the SPV’s stake, and the SPV acts on the result, even if some holders voted against it.

Capital increases follow similar rules

Similar basic rules apply to capital increases under both legal forms. By law, the resolution requires a three-quarters majority, a notary must record it, and the increase takes effect only once it is entered in the commercial register.

The second funding phase for private investors is also based on a capital increase. To avoid the need for another resolution, the shareholders create authorized capital in the first phase, a capital increase held in reserve: the articles of association authorize management to issue new shares later; in an AG, that is the management board, which obtains the supervisory board’s approval to do so. It is “like a kind of capital increase done in advance,” Wedemann said. In a GmbH, the SPV takes up the new shares, again in notarial form; in an AG, the investors subscribe for their shares themselves.

Preemptive rights are equally strong under both legal forms. In a capital increase, existing shareholders may subscribe in proportion to their holdings and so maintain their percentage stake; to do so, however, they have to invest more money. The right can be excluded only under strict conditions, including a qualified majority; in an AG, the management board must also justify the exclusion in writing. Wedemann called the preemptive right “a very, very strong right.” In funding rounds, including on Companisto, however, they are often excluded, or existing shareholders waive them so that new investors can come in. The existing shareholders’ share of the capital then falls. Preemptive rights do not make up for the fact that investors paid a higher price in an earlier round; for that, they agree on anti-dilution protection, which, however, does not protect against losses either.

Why most startups start out as a GmbH

Despite the advantages of the AG, the GmbH remains the classic model for startups, in Wedemann’s experience. In his view, it is better known, founders are more familiar with how it works and how it is administered, and it can be structured much more flexibly. Setting one up is also simpler: a GmbH needs at least €25,000 in share capital, an AG at least €50,000, and the rules for paying in the capital are stricter for an AG. Whether a startup later switches to an AG depends heavily on what it wants to achieve with the legal form, Wedemann said. Companies often switch when they want to take on many shareholders, raise large funding rounds, or go public; one way to do so is to convert the existing GmbH.

GmbH and AG at a glance

The information applies to companies under German law.

Conclusion

As a private investor in a GmbH’s second funding phase, the participant who asked about his rights near the end of the masterclass would not become a shareholder of the startup. He would receive profit participation certificates from a special purpose vehicle, through which he would share indirectly in changes in the startup’s value. If the business did well, his investment could gain value; if it did badly, the investment could lose value, in the worst case to the point of a complete loss of the money invested. He would have no vote of his own in the startup, but he could vote on upcoming resolutions together with the other certificate holders; the details are set out in the terms of the certificates. If the startup were an AG, he could subscribe for shares himself. For business angels, the most important rights remain largely the same under both legal forms, even though the statutory right to information goes further in a GmbH. The differences in process are more pronounced: the AG is more formal and more demanding to set up, but investment agreements, subscriptions, and share transfers do not require a notary.

On Companisto, business angels do not have to attend the notarial recording themselves, even in GmbH rounds. Once they have granted a general power of attorney certified by a notary, they can subscribe for further GmbH investments electronically without going to a notary again. In AG rounds, investors now sign the subscription form online, using a qualified electronic signature.

Neither the legal form nor the platform changes the basic risk. Startup investments are venture capital, a total loss is possible, and shares in an unlisted startup do not readily find a buyer either. Anyone who wants to invest should therefore commit only money they can do without over the long term and spread it across several investments.

Note: This article is based on the Companisto masterclass of February 3, 2026; assessments of market practice and contract design reflect the situation at that time. The legal statements refer to companies under German law; stock corporations under foreign law, such as Swiss law, are subject to their own rules. This text is for general information only and does not constitute legal, tax, or investment advice. Acquiring stakes in startups involves considerable risks and can lead to the complete loss of the capital invested.