As a managing shareholder you can design the corporate contracts in a way that you are no longer obligated to pay social insurances in Germany, especially pension insurance. What’s more, in most cases you do not even have to change the power dynamics to do so!
Basic determination
In principle, the criteria for determining the obligation to pay social insurance are straightforward: If you as the managing director own at least 50% of the shares in the company, you are not obligated. If you own fewer shares, you should be obligated.
Simple solution via corporate veto right
However, the company bylaws or articles of association can grant the managing shareholder a veto right so that shareholder resolutions no longer require the simple majority of votes, but a higher quorum. If e.g. the managing director holds 30% in shares, he can veto any resolution if a quorum of 75% is required.
Problem of changing the power dynamics
With this solution a problem occurs for the other shareholders: While they could outvote the managing shareholder before, now they do require his consent to resolve every single time.
Refined solution: veto right + contractual binding of votes
Jurisdiction and German Pension Fund on voting contracts
However, you can avoid this shift in power by taking advantage of the determination practices by the German Pension Fund (Deutsche Rentenversicherung, DRV) and the jurisdiction of social courts.
How the voting binding works
In the past managing directors had tried to force the other shareholders to vote along with them, not via a corporate veto right, but contractually with a voting agreement. Under this contract the other shareholders had to vote no whenever the managing shareholder did. This obligation had the same effect as a corporate veto right: The no of the managing director led to a denial of the resolution.
Why DRV and courts rejected this
And yet, the contract did not suffice for DRV and social courts to waive the obligation to pay social insurances, even if the contract had a duration of 10 years and hedged the voting obligation with a severe contractual penalty. They argued that the obligation is merely contractual and does not prevent a valid vote in violation of the voting agreement. The real reason for the rejection though is that - in contrast to notarial deeds such as the company bylaws - you can easily fake and backdate mere handsigned contracts. Otherwise the following scenario would have been possible: In an audit the obligation to pay social insurance is determined for several years and the DRV charges the company with six figures of social contributions plus punitive damages. Shareholders would now be tempted to fake, backdate and submit a contract and thereby kill off those claims. In effect, the stance of administration and jurisdiction is based on a matter of proof and to prevent fraud.
Solution with a voting agreement
You can take advantage of this stance when agreeing on a corporate veto right: If a voting contract can be disregarded anyways, it doesn’t harm to enter into one so that the managing shareholder always has to vote with the majority of all votes. This way, his veto right becomes de facto worthless and does not change the internal power dynamics. Despite that, if the DRV and social courts stay true to their position, they have to rule that the managing shareholder is free of social contributions.
Check via status determination check
Practically I advise you to enter into a status determination check (Statusfeststellungsvefahren) with the DRV at the beginning of the aforementioned changes. This way, you gain clarity early on and avoid the danger of facing retroactive charges over years. You can even do the check before the managing shareholder is supposed to receive a salary. In that case you can react accordingly on the outcome of the status determination check and only then pay a salary.
Other solutions required for several managing shareholders
This solution faces its limit when the company has several managing shareholders who want to be free from the obligation to pay social insurances, but who only jointly have the majority of votes in the shareholders’ meeting. In that case the managing shareholders would in a voting agreement need to vote along with the minority. Giving up this much power is usually not intended. But do not worry, we also have a solution at hand for this scenario that will likely result in becoming free of the obligation to pay social insurance. I will cover this solution in one of the next articles.
Conclusion
Even as a managing director who is a minority shareholder you can avoid the obligation to pay social insurances, especially the German pension insurance. If you design this in a clever way, the solution does not change the balance of power in the company. Accordingly, the other shareholders should not object to the changes either. Beware that the intricacies of the solutions are complex and depend on the circumstances of the individual case. Therefore, if you need assistance in amending your company bylaws and drafting a voting agreement or if you have another scenario, feel free to reach out to hi@streiff.law. This matter requires expertise in corporate law, labour law and experience in front of social courts, which only few law firms combine.
Published on 22.02.2026