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Minority shareholding managing directors – Social insurance payment obligation despite special rights

In recent years, case law related to the assessment of a managing director under social security law has steadily developed further. The Federal Social Court (Bundessozialgericht, BSG) recently decided that even the special right conferred on a minority shareholding managing director to assume a management role does not exclude them from compulsory insurance coverage in the German social security system.


For managing directors of a GmbH [German limited company] it is usually of great relevance whether they are classified as self-employed persons or dependent employees. This is because, depending on the status that is determined, social security contributions might have to be paid into the statutory insurance schemes for pensions, healthcare, long-term care and unemployment.

Distinguishing criteria 

In the context of status determination, shareholding managing directors and external managing directors are classified differently.

In the case of external managing directors who do not have holdings in the share capital of the GmbH, normally, there is a dependent employment relationship and, thus, such employees are obliged to pay mandatory social security contributions because they are subject to the instructions of the shareholders’ meeting.

The criteria that can be used for shareholding managing directors include 

  • the size of the holding in the share capital and 
  • the degree of influence over the company.

Therefore, what matters is whether or not, at the shareholders’ meeting, the managing director can exert influence beyond their position of that of a normal shareholder in order to be able to determine the fate of the company. At any rate, that would be the case if the managing director had a holding of more than 50%. 

By contrast, a managing director who is a minority shareholder is basically a dependent employee. As an exception, they would only be regarded as a self-employed person if, on account of a special arrangement in the shareholder agreement, they were able to block all the resolutions of the other shareholders (a so-called comprehensive blocking minority). It would not be sufficient to have a blocking minority that is restricted to particular matters (a so-called ‘false’ blocking minority). In fact, a managing director has to be able to exert influence over all the key decisions.

Special right to assume a management role

A special right conferred on a minority shareholder to assume a management role does not yet however create a sufficiently comprehensive blocking minority in order to be regarded as a self-employed person. The BSG, in its ruling of 1.2.2022 (case reference: B 12 KR 37/19 R), decided that the managing director was obliged to pay mandatory social security contributions. The managing director’s holding in the GmbH was 49% and, in the shareholder agreement he had been granted the right, for the duration of his holding in the company, to be a managing director who is an authorised sole representative and is exempted from the restrictions under Section 181 of the German Civil Code (BGB), or alternatively to appoint such a managing director. In the opinion of the judges, such a right would indeed prevent him from being dismissed, however, it would not confer the decision-making power on the managing director that would enable him to exert influence over all the shareholder decisions and, thus, the entire company policy. 

Please note: It is generally recommended to clarify the question of compulsory insurance coverage in connection with self-employment or dependent employment already prior to starting work. If a managing shareholder is registered as an employee then the clearing unit of the German Federal Pension Scheme would automatically initiate a mandatory status determination procedure.

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