Director of a company (B)

Disqualifications of director

Section 198(1)(a) of Companies Act

  • An undischarged bankrupt unless he obtained the leave of the Official Receiver or the Court.

Section 198(1)(b) of Companies Act

  • Convicted of an offence relating to the promotion, formation or management of a corporation.

Section 198(1)(c) of Companies Act

  • Convicted of an offence involving bribery, fraud and dishonesty.

Section 198(1)(d) of Companies Act

  • Convicted of an offence under Sections 213, 217, 218, 228, and 539

Section 198(1)(e) of Companies Act

  • Disqualified by the Court under Section 199 on their power to disqualify persons from acting as director or promoter of a company.

Removal of directors

Private company

Section 206(1)(a)

  • Subject to its constitution, a director may be removed by ordinary resolution.

Section 206(3)

  • Special notice is required of a resolution to remove a director under this section or to appoint another person instead of the director at the same meeting.

Section 297(1)(a)

  • the ordinary resolution for the removal of director must be passed at a physical general meeting and cannot be passed by way of a written resolution

Public company

Section 206(1)(b)

  • A director may be removed in accordance with Section 206 provided in the Act

Section 206(2)

  • Not with standing anything in the constitution or any agreement between a public company and a director, the company may by ordinary resolution at a meeting remove the director

Section 206(3)

  • Special notice is required of a resolution to remove a director under this section or to appoint another person instead of the director at the same meeting. No special notice is required if the removal was exercised under the constitution.

Section 297(1)(a)

  • the ordinary resolution for the removal of the director must be passed at a physical general meeting and cannot be passed by way of a written resolution.

Section 207(2)

  • right to make oral representation or written representation

Section 207(3)

  • right for the written representation to be notified to the members

Section 207(4)

  • if the copy of representation is not sent as required, the director may require that the representation be read out at the meeting.

Director Duties

  1. Loans to directors

General Rule - Section 224(2) of Companies Act

i. A company shall not make a loan to a director of the company and vice versa

ii. Exceptions in Section 224(2) of Companies Act

  • Funds incurred for the purposes of the company/perform his duties
  • Funds for full-time employment director-to acquire home
  • Funds for full-time employment director-for approved schemes for employer
  1. Loans to persons connected with directors

General rule- Section 225(1) of Companies Act

i. Company is generally prohibited from making loans/provide security to persons connected with its directors.

ii. Exceptions -Section 225(2) of Companies Act

  • Loans to ‘connected person’ are allowed in case of

a. Loan of subsidiary or holding company

b. Company whose ordinary business include lending money

c. Loan to persons connected with directors for purchase of home or loans under approved scheme

Person connected with directors

i Section 197(1) of Companies Act

  • a person connected with the director’ mean a member of the directors’s family, a body corporate which is associated with that director, a trustee of a trust which the director is a beneficiary, a partner of the director

ii Section 197(2) of Companies Act

  • A member of that director’s family’ shall include his spouse, parent, child (including adopted child and stepchild), brother, sister and the spouse of the director's child, brother or sister.

Type of Director’s Duties

  • Statutory duties
  • Duties of skill, care, and Diligence

Statutory Duties

  • A director of a company shall at all times exercise his power in accordance in this Act, for a proper purpose and in good faith in the best interest of the company
  • Case: Petra Perdana Bhd V Tengku Dato Ibrahim Petra Tengku Indera Petra & Ors (2015)
  • A director of a company without the consent or ratification of general meeting, shall not

i. Use the property of the company

ii. Use any information required by virtue of his position as a director

iii. Use his position as a director

iv. Use any opportunity of the company which he became aware of, in the performance of his functions as the director

v. Engage in business which is in competition with the company

Other statutory duties

Section 216 of Companies Act

  • Responsibility for action of delegate power to any committee, director, officer employee, expert or any other person

Section 219 of Companies Act

  • Duty to make disclosure by notice in writing

Other statutory duties

Section 221 of Companies Act

  • Duty to disclose of interest in contracts, proposed contrasts, property, offices, etc

Section 222 of Companies Act

  • Duty not to participate or vote for any interested contract entered into or proposed to be entered into by the company

Section 223 of Companies Act

  • Approval of company required for disposal by directors of company’s property or undertaking

Section 312 of Companies Act

  • Duty to call meetings required by members

Section 324 of Companies Act

Duties of skill, care and diligence

Section 213(2)

  • A director of a company shall exercise reasonable care, skill and diligence with
  • The knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities
  • Any knowledge, skill and experience which the director in fact has

Section 214 of Companies Act

  • Business judgment rule

Section 215 of Companies Act

  • Reliance on information, professional and expert advice, opinions, reports or statements made by any officer of the company, expert or professional person, other directors or any committee of the Board.
  • Duty to circulate member’s statement for public company