The assessment of whether a managing director of a German private limited company (GmbH) is subject to social security contributions cannot be based solely on the provisions set out in the service contract with the managing director. If a GmbH managing director is also a shareholder in the company, the amount of the shareholding held by the managing director in the company and the resulting influence exerted by him/her on the company are important factors in distinguishing between dependent employment and self-employment.

A managing shareholder is not self-employed per se by virtue of the shareholding, but must have the legal power, over and above his/her position as a shareholder, to determine the fate of the company by exerting influence over the shareholders’ meeting. Such legal power exists in the case of a shareholder who holds more than 50% of the share capital. By contrast, a managing director who does not have this equity interest and is therefore not a majority shareholder is in principle a dependent employee.

If a shareholder does not hold more than 50% of the shares in the company, the shareholder can, according to the previous case law of the Federal Fiscal Court, be treated in the same way as a controlling shareholder if the shareholder cooperates with other shareholders pursuing similar material, i.e. financial, interests, in order to form policy for the corporation in line with their shareholder interests.

In its decision of 27 June 2022, the Baden-Württemberg Higher Social Court ruled that this cannot form the basis for a decision concerning the obligation to pay social security contributions. Even voting agreements under the law of obligations are irrelevant for the assessment of the insurance obligation of a managing shareholder.

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