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Shareholder, Director…… and employee??

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Can you be all 3: shareholder, director and employee?

The government has appealed against an Employment Tribunal decision that a company’s controlling shareholder and company director could also be classified as an employee and as such entitled to a payment in the event of company insolvency.  The government argued that the employment contract was a sham, particularly in light of the fact that, as a controlling shareholder, the employee/ director/ shareholder was in control of his own employment.  They also asked whether, if the contract was not a sham but a genuine contract whether it could in fact be a true contract of employment.

The Court’s decision 

The Court ruled that if the ‘employee’s’ conduct under a claimed contract was convincingly carried out then it was not for the court to disregard the status of an employee with a valid contract of employment and the appeal was dismissed.

Result and effect in employment law

You can be an employee, director and controlling shareholder of a company… all at the same time!

You can read about this in the Law Gazette’s excellent article

1 Comment

  1. Acumen Business Law • Would you be happy for your co-directors to resign from work but still hold shares in your company? - 15/06/2009

    […] In most small and medium businesses, some or all of the directors are also the shareholders of the company. A point that is often missed is that shareholding and directorship are two distinct legal capacities with different rights and obligations attached to each in law (see our previous post). […]

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