Short answer? Yes, they can be.

The Federal Court of Malaysia has recently reaffirmed that a company director can simultaneously be an employee of the same company. The fact that someone sits on the board does not automatically remove the protections afforded by Malaysian employment law.

This issue became the focus of the landmark Federal Court decision in Acexide Technology Sdn Bhd & Anor v Chang Heng Keong & Anor; Acexide Technology Sdn Bhd & Anor v Woon Kim Choy which is likely to become one of the leading authorities on the relationship between company law and employment law.

If you’re a company director, shareholder, founder or employer, this is a case worth understanding.

Looking for a complete guide to employment law in Malaysia, visit Employment Law Malaysia: The Complete Guide for Employees and Employers (2026)

The Common Misunderstanding

Many people assume that a company director is effectively the boss or at least one of the bosses.

After all, directors make decisions, attend board meetings and help steer the company’s direction.

So how can the company employ its own boss?

It sounds like something out of a Malaysian family business where your uncle is simultaneously the Managing Director, HR Manager, company driver and occasionally the office handyman.

But legally, the answer is actually quite straightforward.

A person may wear two completely different hats:

• one as a director, appointed under the Companies Act 2016; and
• another as an employee, working under a contract of employment.

The law treats these as separate legal relationships.

The Acexide Case

The dispute involved Acexide Technology Sdn Bhd, a company founded by three promoters.

All three founders became:

• shareholders;
• directors; and
• actively involved in managing the business.

Years later, the majority shareholder convened an Extraordinary General Meeting and successfully passed resolutions removing two of the founders from the board of directors.

Importantly, the two directors did not challenge their removal as directors.

Instead, they argued something different.

They claimed that although they had been removed from the board, they were also employees of the company and had therefore been dismissed without just cause or excuse under section 20 of the Industrial Relations Act 1967.

That raised an interesting legal question:

Can someone be both a director and an employee at the same time?

The Federal Court answered:

Yes.

The Federal Court’s Decision

The Federal Court unanimously agreed with the Court of Appeal.

It held that:

• a company director may simultaneously be an employee;
• the existence of one role does not exclude the other;
• each case depends on its own facts.

The Court emphasised that this principle was already well-established in Malaysian law. What mattered was whether an employment relationship actually existed not merely what title appeared on the business card.

Being a Director Does Not Automatically Mean You Are an Employee

The Federal Court was equally clear that not every director is automatically an employee.

Simply being appointed to the board is insufficient.

The real question is whether there is a genuine contract of employment between the company and the individual.

The Court looked beyond titles and examined the practical realities of the relationship.

What Factors Suggest That a Director Is Also an Employee?

The Court identified several pieces of evidence supporting the existence of an employment relationship.

These included:

• receiving a regular monthly salary;
• EPF contributions;
• SOCSO contributions;
• monthly PCB (tax) deductions;
• issuance of EA Forms;
• being listed in the company’s register of employees;
• company financial statements treating the directors as employees.

None of these factors alone is conclusive.

Instead, the Court considered the overall picture.

That is often how employment cases work in Malaysia. Courts rarely rely on one “magic document”. They look at substance over form.

Does Removal as a Director Automatically End Employment?

This was perhaps the most practical takeaway from the case.

The answer is:

No.

The Federal Court drew an important distinction between two separate legal events.

Removal as a director

A director may be removed by shareholders under the Companies Act 2016.

This concerns the person’s office as a director.

Termination of employment

If that same person is also an employee, the company must separately terminate the employment relationship in accordance with employment law.

These are two different legal relationships.

Removing someone from the board does not automatically terminate any employment contract that may also exist.

Why This Matters

Imagine this situation.

A founder owns 20% of a company.

She is also:

• Executive Director;
• Head of Operations;
• paid a monthly salary;
• receiving EPF and SOCSO;
• issued EA Forms every year.

The shareholders vote to remove her as director.

Can the company simply tell her to pack up her laptop and go home?

Not necessarily.

If she is also an employee, the company must still demonstrate just cause or excuse before dismissing her.

Otherwise, she may have a valid unfair dismissal claim under the Industrial Relations Act 1967.

That was precisely the principle reinforced by the Federal Court.

Does It Matter That the Director Is Also a Shareholder?

No.

Shareholding and employment are also separate legal concepts.

A person may simultaneously be:

• a shareholder;
• a director; and
• an employee.

Each relationship carries different legal rights and obligations.

In Acexide, the respondents remained shareholders even after being removed as directors, and they separately pursued minority oppression proceedings as shareholders while also bringing unfair dismissal claims as employees.

What Should Employers Learn From This Case?

Many companies, particularly SMEs and family-owned businesses, tend to blur the lines between directors and employees.

The Acexide decision is a timely reminder to clearly document each legal relationship.

If a director is also employed by the company, employers should ensure there is clarity regarding:

• the employment contract;
• salary and benefits;
• reporting structure (where applicable);
• job responsibilities; and
• procedures for terminating employment.

Most importantly, remember that removing someone from the board does not automatically remove their employment rights.

What Should Directors Know?

If you are an executive director or founder who receives a salary and performs day-to-day operational work, don’t assume that you lose all employment protections simply because you sit on the board.

Whether you qualify as an employee depends on the actual nature of your relationship with the company, not merely your title.

Every case will turn on its own facts.

Final Thoughts

The Federal Court’s decision in Acexide Technology Sdn Bhd v Chang Heng Keong & Anor provides welcome clarity on an issue that has long caused confusion in Malaysian corporate and employment practice.

Its message is simple:

A director is not automatically an employee—but neither is a director automatically excluded from being one.

The court will always look beyond job titles and examine the true legal relationship between the parties.

For companies, this means corporate decisions should never be made on the assumption that removing a director also extinguishes any employment rights.

For directors, it serves as an important reminder that your legal protection may extend further than you think.

Frequently Asked Questions

Can a company director sue for unfair dismissal in Malaysia?

Yes, if the director is also an employee under a contract of employment. Simply holding the office of director does not prevent a person from bringing an unfair dismissal claim under the Industrial Relations Act 1967.

Is every director automatically an employee?

No. Whether a director is also an employee depends on the facts, including whether there is an employment relationship supported by factors such as salary, statutory contributions, company records and the duties actually performed.

Does removing a director automatically terminate employment?

No. Removal as a director under the Companies Act 2016 is legally distinct from terminating an employment contract. If the individual is also an employee, the employer must separately comply with employment law requirements and establish just cause or excuse for dismissal.

Continue Reading

This article is part of my comprehensive Employment Law in Malaysia guide, where I explain Malaysian employment law in plain English for both employers and employees.

→ Read Employment Law Malaysia: The Complete Guide for Employees and Employers (2026) to learn about unfair dismissal, employment contracts, probation, wages, disciplinary procedures and your workplace rights.