In practice, the advisory field of direct pension commitments to controlling managing directors or managing directors of corporations is mainly pursued by financial services and sales companies with the aim of brokering the company’s own products as reinsurance investments. Unfortunately, the formal framework conditions are often forgotten in such procedures. Because each consulting beginning in connection with a direct pension commitment to a controlling partner managing director and/or partner executive committee, which is led exclusively over the product selling, can
lead easily to the failure and can the person entitled to benefit concerned including associated capital company into an unfortunate situation bring, because the main starting points are to be looked for to large parts in the civil and tax law.
As a reminder: Company pension commitments to employees and persons similar to employees are generally subject to the protection of the Company Pensions Act (BetrAVG) in accordance with § 17 Para. 1 of the Act to Improve Occupational Pensions. However, this does not apply to shareholder-managing directors who exercise a dominant position within the meaning of labour law by virtue of their shareholding in a Ltd.
For direct pension commitments to the aforementioned persons who are not subject to the scope of application of the BetrAVG, the usual civil law principles apply. Thus, under the aspect of contractual freedom, the corporation and the controlling shareholder can conclude a pension contract completely privately and autonomously, which can be equipped with freely selectable regulatory elements. Thus, the partially “restrictive” provisions of the BetrAVG do not have to be observed.
Due to the possibility of a privately autonomous contract between a corporation and a controlling managing director or executive board member, it is in the nature of things that the tax authorities and the courts place high demands on the tax recognition of such pension commitments from a fiscal point of view, since considerable tax structuring possibilities can arise as a result of a successfully installed direct pension commitment for the corporation making the commitment.
In addition, supplementary audit criteria under labour and social security law must also be observed, because the aforementioned group of persons is generally employed as “entrepreneurs in their own company”.
