When is a shareholder an employee?

This vexed question tends to crop when the owners of a company claim a statutory redundancy payment from the DTI following the company's insolvency.

Underhill J. considers a number of conflicting authorities, the best-known of which, Bottrill, poses the question 'who really owns the company?'. He sets out his view (as obiter) that:

"the fact that a claimant under the employment protection legislation is a majority shareholder and a director of the company which employs him does not affect his status as employee unless the tribunal finds that the company is a 'mere simulacrum' ... (and thus, by the same token, that the contract between it and the putative employee is a sham)" (para. 29)

Nesbitt v Secretary of State for Trade and Industry