IN PURSUIT OF AN UNSURPRISING AND MUNDANE POINT OF LAW
Posted on 17th July 2026
English company law has since the House of Lords decision in Southern Foundries (1926) Ltd v Shirlaw [1940] AC 701, long established that the office of director and his position under his service contract (if any), gave rise to separate sets of rights and obligations. That principle is often burnished into the jurisprudential cognition of many an aspiring company lawyer.
That principle decisively established that a director may hold an office created under company law while separately enjoying rights arising under a contract of employment. Removal from the office of director under company law does not automatically terminate the employment relationship without consequence.
Consequently, it is surprising that parties in Acexide Technology Sdn Bhd & Anor v Chang Heng Keong & Another Appeal [2026] 5 MLRA 455 saw it necessary to pursue their claims on an identical point of law all the way to the Malaysian Federal Court which curiously, would have granted leave to appeal under section 96 of the Courts of Judicature Act only on a point of legal novelty or public importance.
Unsurprisingly, the Federal Court decision in Acexide was broadly consistent with the orthodox position under English company law that a person may simultaneously be a director and an employee, and that removal from office as a director does not, by itself, extinguish employment rights. The Federal Court held that the respondents, although directors and shareholders of Acexide, were also employees (“workmen”) within the meaning of the Industrial Relations Act 1967 and upheld the Court of Appeal’s finding that the respondents had been unlawfully dismissed (even as they were lawfully removed from the board).
This recognition also reinforces the legal separation between a company and its directors (another well-settled principle of company law). The fact that as directors of Acexide, the respondents may have directed their own actions as an employees, this did not demolish the fact that they remained workmen of the company which had a separate legal identity. Equally surprising was the fact that the Industrial Court and the High Court seemingly overlooked this fundamental principle of company law.
The common law position in the UK is expressly enshrined under s.168(5) of the UK Companies Act 2006 where the statutory power to remove a director is expressly preserved, but removal is stated to be “without prejudice” to any compensation or damages payable under the director’s service contract.
The express caveat is missing in the Malaysian Companies Act 2016 so Acexide may well serve as an appropriate clarification (though of doubtful necessity), for the missing proviso in the Malaysian Act.
Conclusion
Acexide is largely consistent with, and arguably reinforces, the orthodox English position. Both systems recognise that an executive director can wear two hats: one as a director and another as an employee. Removal from the board does not automatically extinguish employment rights. The significant development in Acexide is that the Malaysian Federal Court expressly recognised the respondents as “workmen” and therefore entitled them to the full protection of Malaysian unfair dismissal legislation, moving beyond the purely contractual remedies that historically dominated the English approach.
Loong Caesar, LLM
RASLAN LOONG, SHEN & EOW