In the first part of this article, we outlined the criteria that case law uses to classify a GmbH managing director as self-employed or employed.
Now we want to use specific case groups to illustrate how the question arises for the legal practitioner.
To summarize: The numerous criteria used in case law rarely allow for a clear-cut classification.
In court practice, it therefore always comes down to the question of whether the shareholder-managing director can prevent the shareholders‘ meeting from issuing instructions to him on the basis of his legal position.
If he can, he will not be considered to be bound by instructions; if he cannot, he is bound by instructions and is subject to social security contributions.
An overview of the case groups:
a) Sole shareholder
If there is only one shareholder who is also the managing director, the question obviously does not arise.
Whose will should he be subject to if not his own?
The sole shareholder is not bound by instructions and is therefore not subject to social security contributions.
b) Majority shareholder
If there are several shareholders, one of whom holds the majority of the voting shares, it can usually be assumed that this shareholder can significantly influence the company’s decisions.
As a rule, the majority shareholder is therefore not subject to social security contributions.
Unless otherwise stipulated in the articles of association of the GmbH, resolutions of the shareholders‘ meeting are passed by a simple majority.
The shareholder who holds more than 50% of the votes can prevent decisions by the other shareholders at any time if they do not suit him.
Based on his position under company law, he can therefore prevent any instructions to him as managing director.
The same applies to the shareholder who holds exactly 50% of the votes, because the other shareholder(s) can never make a majority decision without him.
If they join forces, they can at best reach 50%, which is not sufficient for a majority decision.
The acquirer of corresponding company shares must also be counted as a majority shareholder who is not subject to instructions as soon as the shares have been effectively transferred to them.
This also applies even if the updated list of shareholders has not yet been submitted to the commercial register.
§ Section 16 para.
1 GmbHG does not preclude this.
The standard states that an acquirer is only to be considered a shareholder vis-à-vis the company once the updated list of shareholders has been submitted to the commercial register.
In plain language, this means that the acquirer may only exercise his rights as a shareholder, including the right to vote, once this has been done.
At first glance, it seems reasonable to assume in such a case that the acquirer can only influence the fate of the company and prevent instructions against him as managing director once the list of shareholders has been received.
However, the idea must be taken one step further.
Two aspects lead to the result that the acquirer is also free to issue instructions between the legal acquisition and entry in the commercial register.
Firstly: From § 16 Para.
1 sentence 2 GmbHG shows that the acquirer is not legally prevented from exercising his shareholder rights in accordance with his shares.
On the other hand, the legal act is only pendingly ineffective as long as the list of shareholders has not been entered in the commercial register.
If it is submitted immediately after the legal act has been carried out, the legal act becomes effective retroactively.
This is therefore only a temporary state of suspension.
As the BSG likes to emphasize, a certain degree of permanence and duration is required for classification under social security law.
The question of status should not be dependent on the whims of the contractual partners.
Secondly, the acquirer, if he is also the managing director, can end this state of limbo at any time.
He can submit the list to the commercial register.
If he does so, nothing stands in the way of him exercising his full voting rights.
If the demarcation criterion is the answer to the question of whether the managing director can avert unpleasant decisions by the shareholders‘ meeting, then the acquirer must also be free from instructions until entry in the commercial register.
If he does not like a decision of the other shareholders, he can submit the list to the commercial register at any time and thus establish his majority of votes in the shareholders‘ meeting and avert the decision.
As far as can be seen, there is no reliable case law on this constellation of cases.
As has been shown in consulting practice, the German Pension Insurance (still) seems to have a different tendency.
c) Minority shareholders
A shareholder who holds less than 50% of the shares will generally be considered to be bound by instructions and is therefore generally subject to social security contributions.
However, case law again recognizes exceptions to this principle.
Even if the BSG repeatedly emphasizes that company law and company contract structures such as the criteria described above only have an indicative effect for social security classification: The BSG recognizes that the classification as subject to instructions or free from instructions may well be influenced by details of the contractual arrangement.
If the legal position of the minority shareholder – although he has less than 50% of the voting shares – gives him the opportunity to avert unpleasant decisions of the shareholders‘ meeting at any time, the case law assumes that the shareholder-managing director is not bound by instructions.
The following conclusions for the minority shareholder can be drawn from the case law of the BSG:
(1) Blocking minority in the articles of association
If the articles of association stipulate that a resolution of the shareholders‘ meeting does not require the usual simple majority, but that the managing minority shareholder can prevent a decision of the shareholders‘ meeting with his share of voting rights, the managing director with less than 50% of the voting rights is also not to be regarded as bound by instructions.
(2) Right of veto
A right of veto is probably to be assessed differently.
The articles of association may contain a clause stating that the managing director does not have to follow instructions, i.e. that he has a veto right.
However, if he cannot prevent resolutions through his voting weight in the shareholders‘ meeting, he cannot prevent the articles of association from being amended and the right of veto being abolished.
This means that the degree of consistency required by case law for the status issue is no longer achieved.
This applies all the more if the veto right was not agreed in the articles of association but in the managing director’s employment contract with the managing director (BSG, judgment of 11.11.2015 – B12 KR 10/14 R).
(3) Voting trust agreement between shareholders
Since a groundbreaking decision by the BSG in 2015 (BSG, judgment of 11.11.2015, B 12 KR 13/14 R), it has now been clarified by the highest court that a contract between the shareholders in which they agree that they will only exercise their voting rights uniformly or in a certain way (voting trust agreement) is generally not suitable for answering the status question.
Such agreements are possible in principle under company law and do not require any particular form.
However, according to the BSG, a voting trust agreement is not sufficient to allow a managing director who is actually bound by instructions to become free of instructions.
The core argument of the case law is again that such an agreement is not of the required duration.
This applies in any case if the agreement can be terminated with effect for the future – even if only extraordinary termination for good cause is possible.
The same also applies to simple written contracts between two married shareholders that grant the minority shareholder more voting rights than he is entitled to according to his shares in the company (BSG, judgment of 11.11.2015 – B12 R 2/14 R). .
(4) Revocable power of attorney
According to the BSG, a power of attorney granted by the majority shareholder to the minority shareholder is also not sufficient.
Under company law, it is possible – within limits – to transfer one’s voting rights to another by means of a legal power of attorney.
However, the principle applies that the voting rights are inseparably linked to the company shares.
The voting rights cannot be permanently separated from the company shares and transferred separately.
A power of attorney for voting rights can therefore not be granted irrevocably, otherwise it is invalid.
However, if it is only granted revocably, the BSG’s dogma that the necessary permanence is lacking applies again.
The status should not depend on the whims of the contracting parties.
III Conclusion
We can state that a shareholder-managing director is not subject to instructions and is therefore exempt from social security contributions if he can prevent shareholder resolutions that he is uncomfortable with due to his legal position in the company.
This demarcation criterion will be sufficient to determine the status in the vast majority of cases.
In the case of minority shareholders, the situation is complicated in individual cases and depends to a large extent on a clean contractual arrangement that is adapted to the interests.
If a clear result has not yet been reached, all relevant aspects (structure of the employment contract, day-to-day work, entrepreneurial risk, etc.) must be weighed up on a case-by-case basis.
In practice, however, these criteria cannot be used to make a reliable forecast of how the pension insurance institutions will assess the status.
It is not uncommon for the pension insurance company’s decision to deviate from the managing director’s subjective feeling that he is, of course, his own boss.
Particularly when shares are sold and voting rights change, the consequences for social security must be kept in mind in addition to the complicated agreements under company law.
Otherwise, in the worst-case scenario, there is a risk of substantial additional payments to social security institutions if the status of a managing director has been carelessly misjudged.