Company’s Management

S.2:

 Directors include a person in accordance with whose directors or instructions

the majority of directors
 Board includes directors of the company who number not less than the required
quorum acting as a board of directors or if the company has only 1 director, that
director
 Officer includes director, secretary or employee of the corporation

- de jure: by right
- de facto: in effect

Corporate Affairs Commission v Drysdale – A person who continues to participate in the

management of the company after the expiration of the term of appointment as if still a
director may be regarded as a de facto director

S. 196 CA2016 - Private company (at least 1 director)

- Public company (minimum 2 directors)

Types of directors

 Shadow Director
 Alternate/Substitute Director
 Managing Director
 Associate Director
 Governing Director
 Nominee Director

Shadow Director

Someone who is not appointed as a director but who gives directions or instructions
that the directors of the company are accustomed to act upon. Such person is a de facto
director and is held equally liable for the obligations of the company

Re Hydrodram – A shadow director does not claim to act as a director

Alternate/Substitute Director
If a person is unable to act as a director like attending meetings or business matters due
to illness or other commitments he may appoint a substitute. The substitute must be in
register of director S.57(7). Has the same power as an actual director

Anaray Pty Ltd v Sydney Futures Exchange Ltd – A substitute director is an officer of the
company and is subject to all duties of directors and is not merely an agent of the
appointer

Managing Director/CEO (3rd schedule Para 22-25)

In charge of the day to day operation of the company

 Para 22 – BOD to delegate some of its function to managing director

 Para 25 – Managing director has BOD’s power as conferred by the directors

Shirlaw v Southern Foundaries – A managing director is a director to whom the board

being empowered to do so by AA, delegate its powers of management and is usually
made subject to the overriding authority of the BOD

Associate Director (3rd schedule Para 26-27)

Do not have to attend any vote or meetings unless there is an invitation by the board.
The duties and powers can be fixed, changed or canceled

 Para 26: BOD to appoint associate director

 Para 27: BOD may determine the powers, duties & remuneration of an associate
director

Non-Executive Director

Usually work part time and not involved in day to day management. Appointed from the
outside the company. The role is to provide and independent view to the BOD’s
deliberations

Daniel v Anderson – Standard of care applied to non-executive director should not be

lower than an executive director

Cadbury Report - Person apart from directors' fees and shareholding are independent of
the management and free from any business or other relationships which could
materially interfere with the exercise of independent judgment

Nominee Director
Appointed to represent the interest of particular shareholders or creditors on the BOD

Scottish Cooperative Wholesale Society Ltd v Meyer - Must avoid conflicts of interest.
The interest of the company prevail over personal or private interest of the nominator

Industrial Concrete Products Bhd v Concrete Engineering Bhd - Where nominee director
has allowed his duty to conflict, he is breaching his fiduciary duty to the company

Qualifications (S.196(2)-(4))

 Must be at least 18 years old

 Ordinarily reside in Malaysia

 S.199(1) – ROC may apply to court to restrain a person from acting as a director
 S.208(1)(e) – Office of director shall be vacated if that director becomes of
unsound mind
 S.136 & 137 Contract Act 1950 – A person that appoints an underage person as
an agent does so at his own risk. The principle is liable for the underage agent’s
act

Fong Poh Yoke v The Central Construction Co (M) Sdn Bhd – ‘Residence’ means the
person must be residing in the place with some degree of continuity

A company’s constitution may require its director to hold minimum number of shares in
the company. Previously in AA it often requires a director to hold a minimum number of
shares to attract shareholders to see that directors are risking their own money as well
as other members

Disqualification (S.198)

A person shall not hold office as a director of company if:

 Is and undischarged bankrupt

 Has been convicted of offence related to promotion, formation or management
of corporation
 Disqualified by the court under S.199

PP v Allan Ng Poh Meng – Conviction for insider trading would result in disqualification
as a director and the legislation did not require the prosecution to prove fraud or
dishonesty
Queck Leng Chye v AG – The court refused application for leave to act as directors as
the appellants failed to discharge the onus to satisfy the court that they

Disqualified by court order under S.199

 director of 2 companies – wound up due to insolvency within 5 years

 breach of duties
 habitual contravention

S.264(1)(c)(iii)(a) – An auditor of a company cannot also be an officer of the company

First & Subsequent Appointment

S.202(1) – First director shall be the persons named in the application for incorporation.
He must have consented to be a director and not disqualified under the act (s.201 & 14).
He shall hold office from the date of incorporation

Subsequent directors (S.202) may be appointed by:

 Ordinary resolution (S.291)

 BOD (S.202(3)

For public company it is by way of separate resolution (S.203)

Termination of Directorship

 Vacant
 Retirement
 Resignation
 Removal
 Casual Vacancy

Retirement (S.205) – 1st and subsequent directors

 S.205(1) – Public Company

 S.205(2) – Private Company

Applies only if there is no provision on retirement of directors in the constitution and

the terms of appointment of the director

Resignation (S.208(2))
Resignation will be effective on the date the Board receives the letter or the date stated
in the letter

S.209(1) – Resignation not effective if it will result in the company having no director

S.196(3) - Resignation not effective if it will cause the numbers of directors fall below
the minimum numbers required

Removal (S.206 & 207)

CA2016 does not provide procedure for the removal of director in private company,
thus have to refer to company’s constitution. If a company does not have constitution or
the constitution does not contain procedure on removal of director then may be
removed by ordinary resolution

Protection: Removal of director before the expiration of his term of office cannot be
passed as a written constitution by the Board or any member of a private company
(S.297(2)

For public company

Protection:

 Must hold general meeting and special notice (S.206(3) & S.322)
 Director has right to be heard and make representation (A.207)

Tien IK Sdn Bhd v Peter Kuok – Held that company’s articles stating that removal of
director by notice from holders of 75% is permitted as it does not abrogate right of
members

Casual Vacancy

Any vacancy in the office of director arising otherwise than by retirement at the end of
the term like death of director, resigns or unable to continue

S.208(4) – BOD have power to appoint any person to fill the casual vacancy

S.209(5) – If sole director dies must appoint within 6 months

S.209(6) – If sole director becomes unsound committee appointed to manage the estate
may appoint a new director

Director’s Remuneration
CA1965 no provide authority for director’s remuneration thus have to refer to AA.

 S.230(1) CA2016 – Director may receive fees and benefits as approved at general
meeting
 S.227 – Compensation for loss of office
 S.230(4)&(5) – Members with 10% voting rights may require member’s approval

Indemnifying the directors

Common law allows directors to be excused from any liability that were caused by their
negligence by the inclusion of an exclusion clause in AA

S.288 – Any provision in the constitution that exempts the officer against liability shall
be void

S.289 – Indemnity for cost in defending himself when the judgment is in the directors
favour

Compensation for loss of office: Payment or account of loss of office or retirement

S.277(1) - It shall not be lawful for a company to make payment by way of compensation
to any director for loss of office

S.277(5) – Not include:

 Agreement made before CA2016

 Payment under an agreement disclosed to members
 Bona fide payment for damages for breach of contract
 Bona fide payment for pension