Director's removal not tantamount to employee's dismissal - tribunal

A director of a company cannot describe himself as an employee because his relationship with the company is based on trust and not merely employment, an industrial tribunal has ruled.

Thus, the tribunal decided, the removal of a director from a company was not tantamount to an employee's dismissal and its fairness or otherwise was not a matter for debate before the tribunal.

Tribunal chairman Harold Walls gave his decision in the case instituted by Paul Zammit against Mira Group of Companies.

Zammit explained he had been a director of Mira Group of Companies along with his brothers before their relationship soured and they initiated proceedings to remove him.

Zammit said his brothers called several meetings until a resolution was approved on May 8, 1998, through which Zammit was removed as director of Mira Holdings Limited.

A second resolution on May 29, 1998, saw Zammit removed from subsidiary companies.

Zammit then went before an industrial tribunal and claimed he had been unfairly dismissed.

But the company claimed that Zammit's relationship with it was not governed by the concept of employment but was regulated by the Companies Act.

The tribunal noted that the law laid down that "a company may remove a director before the expiration of his period of office by a resolution taken at a general meeting of the company and passed by a member or members having the right to attend and vote, holding in the aggregate more than 50 per cent in nominal value of the shares represented and entitled to vote at the meeting".

The tribunal ruled that a director's relationship with other directors and shareholders was based on trust and shareholders had the right to appoint a director they trusted to administer their business.

The tribunal also noted that one of the ways to establish the relationship between an individual and a company was the class of national insurance contribution chosen by the individual.

Zammit paid NI as a self-employed person.

The tribunal ruled that his case did not fall within its competence.

Dr John Refalo appeared for Zammit while Dr George Abela appeared for Mira Group of Companies.