The issue of social security coverage for shareholders of limited liability companies has for years raised significant practical doubts. Particular controversy has concerned majority shareholders who hold almost all of the shares in a company and, in practice, exercise full control over its operations.
According to the case law of the Supreme Court, shareholders holding a significant majority of shares (99%) are not subject to social security contributions under Article 8(6)(4) of the Social Insurance System Act.
Particular attention should be paid to the Supreme Court Resolution of 21 February 2024 (case no. III UZP 8/23). In that resolution, the Court held that a shareholder of a two-shareholder limited liability company who owns 99% of the shares is not subject to social security insurance. The key issue in dispute was whether the slight difference between a sole shareholder and a shareholder holding 99% of the shares in a two-shareholder company is significant enough to justify mandatory social security coverage.
In the Supreme Court’s view, the answer to this question must be negative. The fact that a shareholder owns 99% of the shares is irrelevant in light of the wording of the law. The statutory basis for mandatory social security coverage applies exclusively to a shareholder of a single-member limited liability company. A shareholder in a two-shareholder limited liability company does not change their legal status regardless of the number of shares held and therefore cannot be treated as a sole shareholder.
The Court further noted that the Social Insurance System Act does not provide a separate definition of a shareholder in a limited liability company but refers only to a shareholder of a single-member company. According to the Court, a single-member company should be understood as a capital company in which all shares are held by one shareholder, in line with Article 4(1)(3) of the Polish Commercial Companies Code.
The Supreme Court also addressed the argument that such an interpretation creates a legal loophole and considered this objection unfounded. Social security coverage is determined by the legislature, and while the system is intended to be universal, there are limits to that universality. The Polish Constitution clearly states that the scope and forms of social security protection must be defined by statute. Consequently, if the law expressly covers only shareholders of single-member companies, it is not possible to create an additional title for social security coverage by extending the interpretation to dominant shareholders holding 99% of the shares.
The Supreme Court revisited the issue in its judgment of 15 January 2025 (case no. I USKP 164/24). An important aspect of that judgment was the Court’s reference to the resolution of 21 February 2024 (III UZP 8/23). The Court noted concerns regarding the composition of the panel that adopted the resolution, pointing out that it included judges appointed with the participation of the National Council of the Judiciary formed under the Act of 8 December 2017 amending the Act on the National Council of the Judiciary and certain other acts. In light of the resolution of the combined chambers of the Supreme Court of 23 January 2020, this could raise concerns regarding the proper composition of the court.
At the same time, however, the Supreme Court did not challenge the substantive interpretation adopted in the resolution. On the contrary, it emphasized that merely referring to the resolution’s operative part is insufficient and that the issue should be assessed in the broader context of the established case law (including Supreme Court judgments of 30 November 2023, III USKP 17/23, and 7 January 2024, III USKP 73/23), which consistently emphasizes the primacy of the literal interpretation of legal provisions and the prohibition against extending statutory grounds for social security coverage.
The judgments and decisions referred to above stressed that it is impermissible to “artificially search” for a basis for social security coverage contrary to the clear wording of the law and the conscious decision of a shareholder regarding the chosen business structure. Although the social security system aims to provide broad coverage, it does not encompass everyone, and social security obligations may arise only where there is a clear legal basis.
In this context, despite the formal concerns regarding the composition of the panel that issued the resolution, its key conclusion remains consistent with the Supreme Court’s broader line of case law: a shareholder of a two-shareholder limited liability company holding 99% of the shares is not subject to social security insurance solely on that basis.