Four students decided to draft documents to incorporate a limited liability company in Germany.

They want to formalise their relationship such as member of a pop band. Three of them

periodically play music in pubs and bars; the fourth one helps the others in looking for the

available pubs/bars, in contracting the fees with the owners, in setting up musical instruments

and all the technological supports to play. They are known as "The Watchers". So, all of them

effectively contributed to the band's success: the three musicians, writing new songs and

playing their music; the fourth one, acting as the agent of the others.

The articles of association already drafted contain many clauses: read them, think about their

scopes and their usefulness; try to make comments about the clauses marked in yellow, and

do it in light of the actual relationship between those guys as well as of the (desirably positive)

development of their musical activities.

Each group should deliver me a synthetic report on pros and cons of marked clauses

3. Advisory Board 27 Appointment and structure Responsibilities of the Advisom Board (1) The Company shall have an advisory board. It shall consist of at least three members who shall be appointed and withdrawn by the shareholders' meeting. Where the Advisory Board shall consist of only three members, these shall be appointed and withdrawn by the shareholders' meeting acting by simple majority. In case the Advisory Board shall consist of more than three members, the fourth and any other supplementary member shall be appointed and withdrawn by the shareholders' meeting with the majority of 9%. of the votes of all shareholders. The advisory board consists of the managing directors and one director intended by the majority shareholder. They shall elect a chairman and a deputy chairman amongst its members. The chairman and, in its absence, its deputy, shall represent the advisory board externally and shall be authorised to make all declarations necessary to implement resolutions of the advisory board. (2) Membership of the advisory board may also be awarded to individuals who have no shareholding in the Company but who may not be an employee of the Company or an employee of a company in which the Company has a share of more than a quarter or of which it is the general padnen IV. Prohibition of Competition 28 Release from the Prohibition of Cometition ESCP Europe Business School - Contract and Business Law in Europe One or more managing directors who are under a prohibition of competition may be released therefrom. If the release affects a shareholder, the release shall require a resolution passed by the shareholders' meeting. If a managing director is to be released, the release shall be included in a contractual agreement. The details of this release shall be regulated in the resolution to be passed by the shareholders' meeting or the contractual agreement if this should be a compulsory requirement for the validity of the release. V. Annual Financial Statements and Appropriation of Profits 29 Annual Financial Statements (1 ) The managing directors shall prepare the annual nancial statements and management report in the respectively prescribed form in the rst three months after the close of a financial year. To the extent the legal regulations permit a longer period in general or in the individual case, the annual financial statements and management report shall be prepared within the maximum permitted period provided for in accordance with these regulations. (2) The annual nancial statements shall be adopted by the shareholders' meeting by simple majority. (3) If the accounting records, annual financial statements and management report require an audit by an auditor in accordance with compulsory legal regulations, the auditor shall be elected by the shareholders' meeting. 30 Appropriation of Prots (1) The shareholders' meeting shall decide on the appropriation of profits. (2) A minimum of 70 per cent of the balance sheet prot is to be distributed to the shareholders. (3) Provided that a distribution of the balance sheet prot of 10 per cent of the share capital of the company can be canted out. the management is entitled to transfer up to 30 per cent of the balance sheet prot to a profit reserve or profits carried fonivard. (4) The shareholders' meeting can pass a resolution on the appropriation of the balance sheet prot differing to the regulations of the provisions of paragraphs (2) and (3) with a majority of 45 of the votes of all shareholders. VI. Final Provisions 31 Amendments to the Articles of Association Amendments to these Articles of Association may only be made with the majority of GM of the votes of all shareholders