DIRECTORS

DEFINITION
Directors

are the person in whom the management of the company is entrusted

TYPES OF DIRECTORS
Executive

Directors

Executive directors are full time employees of the company Their role is to carry out the day to day affair of the company business They are the senior management of the company

TYPES OF DIRECTORS
Non-Executive

Directors A person who is not involved in the full time management of the company and is not an employee of the company. He will attend meetings of the board of directors and meetings of those committees of the board to which he has been appointed

NUMBER OF DIRECTORS
Company

must have at least two directors each of whom has his principle place or place of residence within Malaysia (S 122(1)

APPOINTMENT

First directors are the persons who are named as such in the relevant documents for the incorporation of the company On the Companys incorporation they are deemed to have been appointed as the directors Subsequent directors are usually appointed by the company in the general meeting

APPOINTMENT
Retiring

directors are eligible for reelection and if art 75 of Table A is adopted, a retiring director who offers himself for re election will be automatically elected unless a resolution not to fill the vacancy is passed

APPOINTMENT
The

board of directors may also appoint additional directors up to maximum permitted under its articles

QUALIFICATIONS
There

is no requirement that directors must posses any form of educational or professional qualification a person may be disqualified from being appointed or continuing to act as a director in certain circumstances

However

QUALIFICATIONS
a) b) c)

S122(1) Director must have his principal or only place of residence within Malaysia S122(2)-Must be a natural person of full age S125(1)-Disqualified-Undischarged bankrupts cannot act as director or be involved in the promotion, formation or management of a company unless he obtains leave of the court by which he was adjudged bankrupt

QUALIFICATIONS
d)

S 130-disqualified-person convicted of any offence in connection with the promotion formation or management of a corporation; involving fraud or dishonesty punishable on conviction with imprisonment for three months or more; or any offence under section 132, 132A or 303

QUALIFICATIONS
e)

f)

S 129-Age 70 or above- Person who have attained the age of 70, are not qualified to be appointed as a director in a public company. No age restriction in a private company Consent to the appointment: S 123.

REMOVAL OF DIRECTORS

In certain events directors may be removed from office by disqualification arising under the statutory provisions or under the terms of the articles S28- For public companies, general meeting may by ordinary resolution to remove a director before the expiration of his or her period in office The office of director then becomes vacant on the passing of the resolution

REMOVAL OF DIRECTORS
S123(2)&(3)-

special notice to the director within 28 days must be given for him or her to defense himself both by written representation and by addressing the meeting before a vote is taken A proper procedure must be followed whether a director is removed in accordance with the AOA or under section 128

REMOVAL OF DIRECTORS
In

the case of private companies, the procedures for removal of directors is governed by the AOA Table A, Article 69 and most AOA of private companies do provide for the removal of directors by ordinary resolution

THREE TYPES OF DIRECTORS DUTIES

i)

ii)
iii)

Fiduciary Duties-S 132 Duties of skill, care and diligence132(1A) Statutory duties

FIDUCIARY DUTIES
o o o

Director owes fiduciary duties to the company Relationship between a person in a position of trust S 132-exercise power for a proper purpose and in good faith Duty to exercise power in good faith and in the interest of the company The directors occupy a fiduciary position and must therefore exercise their power in good faith and in the interest of the company as a whole. Case: Re Smith & Fawcett Ltd (1942) -Lone Greene MR: They must exercise their discretion bona fide in what they consider and not what the court may consider to be in the interest of the company.

i.

FIDUCIARY DUTIES
Duty not to make secret profits Director must not obtain profit out of corporate assets, information and opportunities. Case: Cooks v Deeks (1916)
ii.

FIDUCIARY DUTIES
Duty to avoid conflict of interest Directors should not enter into engagement in which there is possibility that the directors personal interest could conflict with those of the company, which they were bound to protect Case: Cooks v Deeks (1916)
iii.

FIDUCIARY DUTIES
iv.

Duty to act for proper purpose A director might be acting honestly in what he considers to be the companys interest and yet still be in breach of his fiduciary duties This would occur if he misapplies the companys assets or he uses the powers he is delegated for the wrong purpose Case: Howard Smith Ltd v Ampol Petroleum Ltd (1974)

DUTIES OF SKILL, CARE AND DILIGENCE

S 132 (1A)-Exercise reasonable care, skill and diligence

The rule is that the director does not have to possess any skill for the job and the fact that he is unskillful is not a breach of contract The director is under duty to exercise the power using the level of skill he has If he uses less than the level of skill that he has, he is in breach of this duty Reasonable care-measured by the care an ordinary man might be expected to take in the same circumstances on his own behalf

Knowledge, skill and experience which reasonably expected of a director; and, Additional knowledge, skill & experience which Director in fact has.

DUTIES OF SKILL, CARE AND DILIGENCE

Case: Re Equitable Fire Insurance Co Ltd

Formerly-Low standard of care Director must act honestly, act within express power in AOA and statute-Director wont be liable for error of judgment Executive and Non Executive must guide, monitor management; Keep inform of co.s activities; Maintain familiarity with financial account; and Lay down responsibilities for delegates.

Latest development-Higher degree of standard

STATUTORY DUTIES

S 132C- Approval of company required for disposal by directors of companys property S 132D-Approval of company required for issue of shares by directors S 142-Hold general meeting and forward statutory report S 144-Convening of extraordinary general meeting on requisition S 154-lodge with the registrar resolutions and agreements S 156-Keep minutes of proceedings S 167-Keep accounting records-explain transactions and financial position S 169-lay down at AGM-profit and loss account, balance sheet and directors report S 170-Sent to members profit and loss account, balance sheet and directors report 14 days before AGM S 167A-Ensure system of internal control for assets of company S 131B-Director to manage business and affairs of company