Chapter 7 provides an account of German company law, 1794–1897, showing both the slow adoption of German law to the corporation—a process similar to that in other countries—and, more unusually, the development of other business forms as well. To speak of ‘German’ law is something of a misnomer for much of the century, as the German Empire only came into existence in 1871, and before then (and sometimes after it) company law could vary significantly from state to state. Much of corporate law’s development in this era turned on whether would-be incorporators had to seek specific permission from the state to incorporate, and the law developed from a system in which the state granted a firm a specific charter and accompanying privileges (Oktroi), to a concession system in which the state issued charters in a more standardized, regularized process, as adopted in Prussia’s 1843 Corporations Act, to a liberalized, general incorporation system in which any group of entrepreneurs could have access to incorporation (1870 Corporations Act). This chapter also provides an account of business forms other than the corporation, notably the Cooperative, which played an unusually important role in the German economy, and the GmbH, a hybrid business form established near the end of the nineteenth century that would become widespread in the twentieth.
Carsten Burhop, Timothy W. Guinnane and Richard Tilly
Germany’s industrialization started long after Britain’s, and Alexander Gerschenkron famously attributed to Germany’s banks a causal role in the rapid growth that followed. The German financial system was also more heavily bank based than the US or UK systems. For these and other reasons, the German financial system has long played a central role in discussions of finance and economic growth. This chapter traces the development of that system from the early nineteenth century to World War I. Germany’s political fragmentation, along with competition among the several pre-1871 states, helped shaped policy toward note-issuing banks in ways unlike the Anglo-Saxon countries. Several different types of banking institutions emerged, each with distinctive balance sheets, products, and clienteles. In additional to several different types of commercial banks, Germany also saw the development of savings banks as well as credit cooperatives aimed at small farmers and urban artisans. The famous, large universal banks that emerged in the later nineteenth century, indeed played a role in underwriting securities, but their role in corporate governance is less clear. German financial development suggests the drawbacks to classifying financial systems as either bank based or market based; the universal banks could only underwrite securities because Germany had developed active markets for corporate issue.