Removed from the board. What about your employment rights?

CASE UPDATE

Acexide Technology Sdn Bhd & Anor v. Chang Heng Keong & Another Appeal [2026] 7 CLJ 687

Federal Court — 24 June 2026

You helped build a company, own shares and work in its business. The majority shareholders then vote to remove you as a director. Can the company also stop your salary and duties on that basis?

The Federal Court’s decision explains why a person’s positions as director, shareholder and employee must be examined separately.

BRIEF FACTS

Chang Heng Keong and Woon Kim Choy were founding shareholders and directors of Acexide Technology Sdn Bhd. They also worked as Project Director and Technical Director respectively.

At an extraordinary general meeting in November 2019, the majority shareholders removed them as directors. The meeting minutes also recorded that they would be relieved of all duties and would no longer receive salaries.

They did not challenge their removal from the board in these proceedings. Instead, they pursued unfair-dismissal claims as employees under the Industrial Relations Act 1967.

The Industrial Court and High Court rejected their claims on the basis that they were not workmen. The Court of Appeal reversed those decisions. The company appealed to the Federal Court.

DECISION

The Federal Court dismissed the appeals and upheld the Court of Appeal’s decision. The material points were:

One person may hold separate roles.

Being a director or shareholder does not prevent a person from also being an employee. Employment status must nevertheless arise from a genuine contract of employment; the directorship itself does not create it.

The company’s own records supported employment.

Although there were no written employment contracts, the court considered salary records, the employee register, EPF and SOCSO contributions, tax documents and the parties’ conduct. The individuals were also accountable to the board as a whole. No single factor was conclusive; the relationship had to be assessed as a whole.

Removal from the board did not automatically terminate employment.

Here, the minutes showed that the company had also ended their employment by discharging their duties and stopping their salaries. The absence of separate termination letters did not change that conclusion.

The company still had to justify the dismissals.

It had not produced evidence of the alleged misconduct at the Industrial Court. The Federal Court upheld the finding of unfair dismissal and the awards of backwages and compensation in lieu of reinstatement. The company was not entitled to a rehearing merely to present a defence it had not proved earlier.

WHAT’S NEXT?

For business owners, passing a resolution to remove a director may address only one part of the relationship. Before stopping that person’s salary or duties, examine the employment arrangement, the company’s constitution and the reasons for any proposed dismissal.

For an affected director, the useful evidence may already exist in payroll records, EA forms, statutory contributions and documents showing your day-to-day responsibilities. The absence of a signed employment agreement does not, by itself, end the enquiry.

The remedy must also match the right affected. A challenge concerning directorship belongs in the civil court; an unfair-dismissal claim by a qualifying workman follows the industrial-relations process. Losing a board seat does not automatically extinguish the rights attached to employment or share ownership.

Industrial Relations Act 1967

Share this article