Directors’ Duties in Malaysia

>> Board Requirements in Malaysia

Appointment of Directors

Directors are usually appointed by the existing directors for filling of casual vacancies or to appoint additional directors. In addition shareholder can appoint directors at General Meetings.

Subject to the constitution of the company a director shall hold office until retirement or resignation or disqualified to act. Disqualification occurs if the director is declared a bankrupt or has been convicted of an offence involving fraud or mismanagement of a company.

The following are the minimum requirements in order for an individual to be appointed as a director: only a natural person can be appointed

  • the individual must be at least 18 years of age
  • the individual must be of sound mind
  • the individual must not be disqualified under the Act There must be at least one director who must have Malaysia as his or her principal or only place of residence.

The following persons are excluded from being appointed as directors without permission from the Malaysian Court:

  • an individual who has been convicted of any offence in connection with the promotion, formation or management of a company
  • an individual who has been disqualified by a court order for directorship of an  insolvent company
  • a person who has been convicted for any offence involving fraud or dishonesty, with a conviction for imprisonment of 3 months  or more
  • a person who has been convicted for failing to act honestly and use reasonable diligence in the discharge of the duties of directorship
  • a person who has been convicted for improper use of any information acquired by virtue of his position as an officer or agent of the company or officer of the Stock Exchange to gain directly or indirectly an advantage for himself or for any other person or to cause detriment to the company
  • a person (who is an officer, agent or employee of a company or officer of the Stock Exchange) who has been convicted for dealing in securities of the corporation by making improper use of specific confidential price sensitive information acquired by virtue of his position to gain advantage for himself or any other person
  • an undischarged bankrupt. The disqualification period is 5 years

Conflicts of Interest

It is the duty of the director, under common law, to not place himself in a position where there is a conflict between his duty to the company and his personal interests. Therefore, it is the duty of every director who meets either of the below criteria to declare at a meeting of directors of the company the nature of his interest or the fact and the nature, character and extent of the conflict respectively as the case may be:

  • is in any way directly or indirectly interested in a contract or proposed contract with the company
  • holds any office or possesses any property whereby directly or indirectly duties or interest might be created in conflict with his duties or interests as director

The declaration must be made:

  • in the case of interest in contract – as soon as practicable after he has knowledge of the relevant facts
  • in the case of interest in property or office – at the first meeting of the directors held:
  • after he becomes a director
  • if already a director, after he has commenced to hold the office or to possess the property

Latest version updated 4th April 2018

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