EmploymentDirector and controlling shareholder of company - service agreement with company - director employee despite controlling shareholdingConnolly v Sellers Arenascene Ltd: CA (Pill and Chadwick LJJ and Wright J): 2 February 2001The applicant had been the majority shareholder in a company, E Ltd, of which A Ltd was a subsidiary and subsequently became the employer.

The applicant was managing director of both companies and had a service agreement with them.

They were subsequently acquired by a holding company, whereupon the applicant's became employed by the holding company as chief executive and managing director of E Ltd and A Ltd.

Receivers of the holding company were appointed, who then dismissed the applicant.

The industrial tribunal dismissed his claim for unfair dismissal on the ground that it had no jurisdiction to entertain the application because his employment had not begun before the acquisition and so he had not been employed for the qualifying period.

The Employment Appeal Tribunal allowed the applicant's appeal.

The employer appealed.John Hand QC (instructed by Eaton Smith Marshall Mills, Huddersfield) for the employer.

John Bowers QC and Colin Bourne (instructed by Jackson Heath, Leeds) for the employee.Held, dismissing the appeal, that a controlling shareholding in a company, although significant, was not a determinative factor when considering whether a shareholder or director of a company was an employee within the meaning of section 230 of the Employment Rights Act 1996; that the industrial tribunal had therefore been wrong to regard the applicant's controlling shareholding as decisive and to give that factor a significance which excluded a proper consideration of other relevant factors; and that, the tribunal having rightly found that the service agreement was not a sham, on the facts the only reasonable conclusion was that the applicant had been an employee prior to acquisition.