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ELRCPartially AllowedNot stated in the judgment text provided· [2025] KEELRC 1937 (KLR)

Mughal v Springtech (K) Limited & 5 others (Cause E956 of 2024) [2025] KEELRC 1937 (KLR)

Employment and Labour Relations Court
30 June 2025
BMB. O. M. Manani
1,373 words in judgment
View original judgmentRead on Kenya Law Watch case
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·~5 min to read original · ~4 min brief

The bottom line

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Kenya's Employment Court ruled that company directorship and shareholding disputes belong in the High Court, but a director with pay slips can still sue as an employee.

What this practically means

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Executive summary

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The Claimant sued the 1st Respondent, a company in which he is a director and shareholder, and its five co-directors (2nd to 6th Respondents), claiming reliefs for alleged unfair termination of his role as Managing Director, plus directorship fees, an injunction against removal from directorship, and valuation of his shareholding. The Respondents filed a preliminary objection contending the court lacked jurisdiction because the relationship was one of directorship, not employment, invoking Article 162 of the Constitution and section 12 of the Employment and Labour Relations Court Act. The court held that disputes relating to directorship and shareholding are commercial disputes falling within the High Court's realm and outside the ELRC's jurisdiction. Following Rift Valley Water Services Board v Geoffrey Asanyo, it struck out the claims against the 1st Respondent relating to shareholding and directorship, and, applying Kashonga v Kashonga, struck out the entire claim against the 2nd to 6th Respondents as founded on the shareholding dispute. However, applying Kuria v Tigoni Water Supply Co Ltd, the court held that a director may simultaneously be an employee under a separate contract. The Claimant's pay slips showing salary, NSSF, NHIF and PAYE deductions constituted preliminary evidence of an employment relation, so the employment claim against the 1st Respondent was sustained for trial. The Claimant was permitted to amend the Memorandum of Claim and given liberty to pursue the directorship and shareholding dispute in the High Court. The decision was delivered online on 30th June 2025 with the parties' consent.

Key legal issues

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01

Jurisdiction over directorship and shareholding disputes

Holding

Struck out for want of jurisdiction; such disputes belong to the High Court

Reasoning

The ELRC's jurisdiction is confined to employment and labour relations disputes under section 12 of the ELRC Act read with Article 162 of the Constitution. Disputes about directorship fees, shareholding valuation and removal from directorship are commercial disputes within the High Court's realm, not employment disputes, and so the claims founded on directorship and membership were struck out.

p. 3
02

Whether a director can simultaneously be an employee

Holding

Yes; a director may be engaged as an employee under a separate employment contract, giving rise to a distinct employment relation

Reasoning

Following Rift Valley Water Services Board v Geoffrey Asanyo, mere directorship does not make one an employee. However, a company and its directors may enter separate employment contracts for specific positions. The Claimant's pay slips showing salary, NSSF, NHIF and PAYE deductions were preliminary evidence that he was engaged as the 1st Respondent's employee, sustaining the employment claim for trial.

p. 3

Legal principles established

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  • A director of a company cannot claim employment by the mere fact of directorship, but a director may simultaneously serve as an employee under a separate employment contract.
  • Disputes relating to directorship and shareholding in a company are commercial disputes outside the ELRC's jurisdiction and belong to the High Court.

Court orders

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  1. 1.The Claimant's claim against the 1st Respondent relating to his shareholding and directorship is struck out
  2. 2.The Claimant's claim against the 1st Respondent relating to the alleged employment relation is sustained and will go for trial
  3. 3.The claim against the 2nd to 6th Respondents founded on the directorship and shareholding dispute is struck out
  4. 4.The Claimant is permitted to amend his Memorandum of Claim to reflect the changes occasioned by the ruling
  5. 5.The Claimant has liberty to pursue his directorship and shareholding dispute in the High Court

Authorities

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Legislation

  • Constitution of KenyaArticle 162
  • Employment and Labour Relations Court ActSection 12
  • ELRC Procedure RulesRule 28(3)

Cases cited (3)

  • Rift Valley Water Services Board & 3 others v Geoffrey Asanyo & 2 others
    [2014] KECA 363 (KLR)
  • Kuria v Tigoni Water Supply Co Ltd
    [2023] KEELRC 1473 (KLR)
  • Kashonga v Kashonga & 2 others
    (Petition E34 of 2022) [2023] KEELRC 316 (KLR) (3 February 2023)
Jurisdiction invoked
Article 162 of the Constitution as read with section 12 of the Employment and Labour Relations Court Act

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Mughal v Springtech (K) Limited & 5 others (Cause E956 of 2024) [2025] KEELRC 1937 (KLR)", Case Analysis (2025). Not stated in the judgment text provided. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2025/1937/eng@2025-06-30

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.