Article 25 Introductory Act on the Commercial Code, as to be amanded by the Balancing Law Reform Act

paragraph 1:

(clause 1:) Section 319 paragraph 1 Commercial Code has to be applied as follows:

no 1: stock companies, limited companies and other companies with no liability of a natural person, if the majority of shares and of the vote are being held by cooperatives or auditing associations which are authorized to audit cooperatives, and

no 2: undertakings which are not registered cooperatives and were approved as non-profit housing organizations or as organs of the national housing policy on December 31st, 1989,

can be audited by the auditing association they are a member of, if the members of the executive board of the auditing association are by more than 50 % chartered accountants.

(clause 2:) One of the members of the executive board of the auditing association has to be a chartered accountant, if the executive board has no more than 2 members.

iQ: This is German thoroughness, isn´t it?

(clause 3:) Sections 319 paragraphs 2 - 4 and 319a paragraph 1 Commercial Code are to be applied analogously.

paragraph 2:

(clause 1:) The audit certificate has to be signed by a chartered accountant.

(clause 2:) The chartered accountants acting for the audit association have to work intependently, conscientiously, discreetly and self-responsibly.

(clause 3:) They have to behave unbiasedly, in particular when they prepare the audit certificate.

(clause 4:) Persons who are no chartered accountants are not authorized to give the chartered accountants instructions.

(clause 5:) The number of chartered accountants working for the audit association has to be adequate, so that the signing chartered accountants can responsibly audit.

paragraph 3:

If an undertaking in the sense of paragraph 1 clause 1, no. 2 is a stock company, a limited association by shares or a limited company obligated to draw up a group account and a group situation report as defined by the Commercial Code, the auditing association will be annual auditor for the group account, too.

iQ: A limited association by shares (Kommanditgesellschaft auf Aktien, KGaA) is a hybrid of a stock company and a limited partnership. That is why it would not be perfectly correct to call it a "limited partnership by shares". It consists of at least one (natural or legal) person bearing unlimited liability. Instead of limited partners, however, there are share holders (“Kommanditaktionäre”). Additionally, the limited partnership by shares - other than the ordinary limited partnership and alike the stock company - is a legal person. Vide sections 278 et seq. German Stock Corporation Act (Aktiengesetz, AktG).

CLM