Background: As a rule, minority shareholders (i.e. shareholders of a GmbH who hold less than 50%) are classified as dependent employees and are therefore subject to mandatory social security contributions.
Where exceptions apply, these must be set out in the articles of association.
In a very recent ruling of the Sozialgericht Reutlingen dated 28 June 2016, Az. S 8 R 1775/14, the court held that the following arrangement is sufficient to establish adequate freedom from directives and thus to result in an employment relationship exempt from social security:
The underlying facts represented a standard case, i.e. the articles of association provided that resolutions of the company were to be passed by simple majority.
Deviating from this, however, the shareholders had agreed that amendments to the managing director's service agreement or the removal of the managing director additionally required the consent of the shareholder-managing director concerned.
On the basis of this additional arrangement, the SG Reutlingen takes the view that the relationship no longer constitutes dependent employment and that the shareholder-managing director concerned has sufficient freedom from directives. The employment relationship was therefore classified as exempt from social security.
Frequently asked questions
Frequently asked questions
Are minority shareholder-managing directors of a GmbH subject to social security contributions?
As a rule, yes. Shareholders holding less than 50% of a GmbH are deemed to be dependently employed and are therefore subject to mandatory social security contributions. Exceptions are only possible if the articles of association contain provisions ensuring sufficient freedom from instructions.
How can a minority shareholder-managing director be exempted from social security contributions?
By including a special provision in the articles of association that grants sufficient freedom from instructions. A common arrangement is that changes to the employment contract or the removal of the managing director require their own consent. This enables them to block resolutions made to their detriment.
Which specific clause did the SG Reutlingen recognize as sufficient for freedom from directives?
The Sozialgericht Reutlingen (judgment of 28 June 2016, Az. S 8 R 1775/14) deemed sufficient an agreement under which amendments to the managing director's service contract as well as the removal of the managing director additionally require the consent of the affected shareholder-managing director. This additional provision, alongside the simple majority for other resolutions, was enough to rule out dependent employment.
Is a contractual side agreement between shareholders sufficient to ensure exemption from social security contributions?
No, the blocking provision must be set out in the articles of association themselves. Only then does it have the required corporate law effect, which establishes sufficient freedom from instructions and thus exemption of the managing director from social security contributions.
What are the consequences of being classified as an employment relationship exempt from social security?
No contributions to statutory pension, health, long-term care, or unemployment insurance are payable for this employment relationship. The managing director must arrange retirement provision and health insurance independently, but in return is not required to pay any mandatory contributions. A prior status determination procedure with the Deutsche Rentenversicherung Bund is essential to obtain legal certainty.