The statutory agent of a private limited company (GmbH). The appointment mechanism of managing directors must be effected through the general meeting of shareholders. In companies which have a supervisory board (Aufsichtsrat) these powers of appointment are not transferable to the board; only the actual agreement on terms and conditions of appointment (Anstellungsvertrag) may be transferred. The general meeting's decision is adopted by a simple majority. According to prevailing legal opinion, a managing director who is not also a company member (Fremdgeschäftsführer) is almost always classed as an employee, while a managing director who is also a company member (Gesellschafter-Geschäftsführer) is classed as an employee only if his or her shareholding is insufficient to block the general meeting's instructions (i.e. if the managing director concerned does not hold a controlling minority (Sperrminorität)). This is because only by possessing a controlling minority can a managing director oppose the company members' instructions, to which he or she is otherwise subject. Although in principle managing directors who are classed as employees enjoy the benefit of the protective provisions of labour legislation, they are not covered by, for example, general protection against dismissal, protection regarding working hours, protection in the event of insolvency or the provisions of works constitution law. From the social insurance point of view, managing directors who are classed as employees are, like other employees, subject under the General Social Insurance Act (Allgemeines Sozialversicherungsgesetz) to compulsory health, industrial injuries and pensions insurance. Other managing directors, as self-employed persons, are subject to compulsory insurance in accordance with the Self-Employed Social Insurance Act (Gewerbliches Sozialversicherungsgesetz).
As distinct from the managing director of a private limited company, the expression gewerberechtlicher Geschäftsführer (general manager) denotes a person who may (and in certain cases must) be appointed by the owner of a business to be responsible for its operation. Such a general manager is liable to the owner for the satisfactory running of the firm from a business point of view and to the authorities as regards observance of the relevant trading regulations. In a private limited company the general manager may be, but does not necessarily have to be, a managing director within the meaning of the Limited Liability Companies Act (Gesetz über Gesellschaften mit beschränkter Haftung).