Sometimes, an individual can wear multiple hats in a company – such as being both a director and an employee, as we previously wrote here. Similarly, a shareholder can also be an employee and/or a director. Each hat has different obligations, responsibilities and rights.
Therefore, can an aggrieved shareholder pursue the remedy of minority oppression, and also claim unfair dismissal at the same time? Does the choice to pursue a minority oppression claim mean that the individual is not an employee?
The Court of Appeal provided a conclusive answer to this in Woon Kim Choy v Acexide Technology Sdn Bhd & Anor & Another Appeal [2024] CLJU 2622.
Brief Facts
- The Appellants were the directors and shareholders of the Company. However, the majority shareholders convened an emergency general meeting (EGM) to remove the appellants as directors of the Company.
- After the Appellants were removed as directors, they commenced an action for minority oppression against the majority shareholder. At the same time, the Appellants also filed an unfair dismissal complaint with the Director General of Industrial Relations.
- At the Industrial Court, it was held that the Appellants did not fall within the definition of a “workman” under section 2 of the Industrial Relations Act 1967 (“IRA 1967”). Instead, they were considered as the “directing mind and will” of the Company. As such, the Appellants failed to establish that they were “workmen” / employees and therefore could not pursue a claim of unfair dismissal.
- The Appellants then filed an application for judicial review at the High Court. In affirming the Industrial Court’s decision, the High Court held that the Appellants are not without their remedies as they have already commenced a minority oppression action, and that is consistent with the fact that they are not an “employee” or a “workman” of the Company.
- Dissatisfied with the High Court’s decision, the Appellants filed an appeal to the Court of Appeal.
Court of Appeal’s Findings
The Court of Appeal held that there is nothing incompatible between a person exercising his role as executive director of the Company and at the same time having a contract of employment with the Company. Therefore, it is not uncommon for a director to be removed from their directorship but continue in their designated role as a high-ranking senior employee.
The Court of Appeal overturned the Industrial Court and High Court’s findings, and held that the Appellants were employees of the Company:
- Despite the lack of a formal written contract of employment between the Appellants and the Company, the Court of Appeal held that an oral contract of employment existed.
- The Appellants were listed in the “Register of Employees” of the Company
- The Minutes of the EGM stated that the Company would no longer pay “salaries” to the Appellants, which shows that the Company had been treating them as its employees.
- EPF and SOCSO contributions were made on behalf of the Appellants.
- The Appellants were subjected to Monthly Tax Deductions.
- The Appellants were issued with EA forms, which recorded their income flow from salaries as an employee.
The Court of Appeal also held that there is no correlation between the minority action from a shareholders’ action (which is premised on shareholding) and an unfair dismissal claim (which is premised on employment contract). Pursuing the remedy under minority oppression action as a shareholder should not prejudice their claim for unlawful dismissal under a contract of employment with the company in the Industrial Court. Any minority shareholder who is aggrieved by the action of the majority would have the locus to pursue the remedies available for oppression of a minority shareholder’s rights irrespective of whether that shareholder is an employee of the company.
The Court of Appeal went further to explain how one person can have multiple hats and how these roles should not be conflated:
“The removal of the appellants as directors of the Company does not in the circumstances of this case, automatically result in a dismissal of them as employees of the Company. In fact, the roles of shareholders, directors, and employees in a company are separate and distinct, each governed by its own legal framework of duties and responsibilities.
The fact that these roles coalesce in a person does not warrant a conflation of what must remain conceptually and functionally distinct and separate, within a corporate structure where the person may be one and at the same time a director, shareholder and employee of the company…”
Key Takeaways
This decision confirms that aggrieved shareholders who are also employees can pursue both minority oppression and unfair dismissal claims simultaneously, provided they have valid causes of action.
For companies, this raises the stakes when removing directors who are also employees and shareholders. Each role must be carefully evaluated, and the implications of any action on each relationship should be clearly addressed. For instance, if the removal of a director is not meant to affect his corresponding employment relationship, this should be explicitly stated. Without such clarity, companies risk unnecessary litigation.
This decision also reiterates the importance of clear contractual arrangements. Silence or lack of documentation does not negate a relationship, as circumstantial evidence and conduct may still be assessed to establish rights and obligations. Companies should avoid leaving these matters to interpretation, and ensure all arrangements are explicitly documented.
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This article was written by Leow Ho Eng (Associate) from Donovan & Ho’s employment law practice.
Donovan & Ho is a law firm in Malaysia, and our employment practice group has built a reputation for providing strategic employment advice to local and global organisations. Our team of employment lawyers provide advice on employment law and industrial relations including review of employment contracts, policies and handbooks, advising on workforce reductions, and managing dismissals of employees for poor performance or misconduct. We also represent clients in unfair dismissal claims and employment-related litigation.
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