Whether managing directors are subject to mandatory social security coverage in Germany is determined under Section 7(1) of Book IV of the German Social Code (SGB IV). The key question is whether they are employed in a dependent capacity or are self-employed. For shareholder-managing directors, the decisive factor is primarily the extent of their legally secured authority under corporate law: If they can prevent the shareholders’ meeting from issuing instructions and exercise significant influence over the company’s policies, this points to self-employment. Neither the designation in the managing director’s service agreement nor the way the parties actually conduct their working relationship is sufficient on its own.
Managing directors who hold only a minority interest in the company are generally considered to be employed in a dependent capacity for social security purposes. Only a comprehensive blocking minority can change this assessment. In its most recent case law, the Higher Social Court of Baden-Württemberg (LSG Baden-Württemberg) has recognized narrowly defined exceptions to veto rights in this context. However, an appeal on points of law is currently pending before the Federal Social Court (BSG).
Veto rights and articles of association in a German charitable GmbH
A blocking minority is the ability to block shareholder resolutions despite holding only a minority interest in the company. A veto right is the provision in the articles of association that grants this blocking power regardless of the shareholder’s ownership percentage. The BSG requires that, for an activity to qualify as self-employment, the blocking right must be clearly established in the articles of association and apply to all shareholder resolutions (BSG, judgment of February 1, 2022, case no. B 12 KR 37/19 R).
In the case recently decided by the LSG Baden-Württemberg, the managing director held only 20 percent of the shares. His veto right applied to all resolutions on which he was entitled to vote, with the exception of a special resolution to dissolve the company. In addition, the articles of association provided for voting restrictions in matters involving the shareholder personally. The social security authority classified the managing director as employed in a dependent capacity and subsequently assessed additional social security contributions.
Comprehensive blocking minority despite exceptions
The LSG classified the managing director as self-employed. In the court’s view, despite holding only a 20 percent ownership interest, he had a comprehensive blocking minority. The voting restrictions set out in the articles of association did not affect this assessment because they concerned decisions involving the shareholder’s own interests and were intended to prevent a shareholder from acting as a “judge in their own case.” Comparable voting exclusions can also apply to majority shareholder-managing directors without calling their self-employed status into question. Furthermore, the managing director could generally be removed from office against his will only for good cause.
The LSG also found that the absence of a veto right with respect to the special resolution to dissolve the company was immaterial. Such a resolution concerned only the potential dissolution of the company, not its ongoing business operations. Until dissolution, the managing director could prevent instructions he opposed and influence the company’s balance sheet, financial, business, and personnel policies. Accordingly, the legal authority relevant to determining his social security status was comprehensive and foreseeable from the outset.
Drafting articles of association and our legal assessment
In our view, the voting restrictions require a more differentiated analysis. Statutory voting restrictions, particularly those concerning a shareholder’s own discharge from liability or release from an obligation, are based on Section 47(4) of the German Limited Liability Companies Act (GmbHG) and should generally not preclude a comprehensive blocking minority. The same applies, according to the BSG’s case law, to voting exclusions for good cause that apply only in individual cases.
Contractual voting restrictions that go beyond statutory requirements are less clear-cut. These may include provisions concerning removal from office or the redemption of a shareholder’s own interest in the company. Each clause must be examined separately to determine whether it merely clarifies a statutory voting restriction or independently limits the managing director’s legal authority. If it covers decisions concerning the managing director’s position, the continued existence of their ownership interest, or the company’s strategic direction, it may weigh against the existence of a comprehensive blocking minority.
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We consider the LSG’s functional approach to the resolution to dissolve the company understandable, but not legally certain. The BSG requires the blocking minority to be clearly established in the articles of association and to apply to all resolutions of the shareholders’ meeting. It is therefore questionable whether an expressly agreed exception for a resolution to dissolve the company can be considered immaterial, even if the managing director can prevent all instructions relating to the company’s ongoing business operations until dissolution.
Liability risks and articles of association for nonprofit organizations in Germany
For social service providers and other nonprofit organizations operating in the welfare sector, retroactive social security contribution assessments, together with late payment surcharges, represent a significant liability risk. We therefore recommend continuing to structure veto rights comprehensively until the BSG has ruled on the pending appeal. In cases of doubt, a formal social security status determination procedure should be initiated rather than incorrectly assuming that the managing director is self-employed.
WINHELLER reviews your gGmbH’s articles of association
Do you need advice on drafting legally sound articles of association or determining the social security status of a shareholder-managing director? Our NPO team and Employment Law team will be happy to assist you with all questions concerning the drafting of articles of association and the social security classification of the managing director’s employment. Contact us any time!
Higher Social Court of Baden-Württemberg, judgment of February 10, 2026, L 11 BA 253/25
