Company director according to section 196 of the Companies Act 2016 is a natural person who is at least 18 years old and shall ordinarily reside in Malaysia. In a company, the minimum number of directors in a private company is one director, meanwhile, in a public company is two directors.
A director of a company shall not resign or vacate his office if by his resignation or vacation from the office, the number of directors of the company is reduced below the minimum number required.
Fiduciary duties of a company director.
Fiduciary duties of a company director are stated under section 213 (1) of the Companies Act 2023, directors shall at all times exercise their power for a proper purpose and in good faith at all times in the best interest of the company.
Responsibility of a company director for fraudulent trading.
Section 540 (1) of the Companies Act 2016 stated if in the course of the winding up of a company or in any proceedings against a company it appears that any business of the company has been carried on with intent to defraud the creditors of the company of any other person or for any fraudulent purpose, the Court may declare that any person who knowingly a party to the carrying on of the business in that manner shall personally responsible, without any limitation of liability, for all or any debts or other liabilities of the company as the Court directs.
Hence, if a company director carries out a fraudulent trading, the Court stated that he is personally responsible for that matter.
Effects of breaching fiduciary duties.
If you don’t carry out your fiduciary duties properly, can you be sued?
Yes. The effect of breach of fiduciary duties by a company director who breaches his fiduciary duties is you will be responsible for the offense that has been committed and can be imprisoned or fined.
A sleeping or a non-executive director in a company.
Who is a sleeping/non-executive director in the company? A sleeping/non-executive director is a director who is not involved in the daily management and operations of the company. Usually, a non-executive director is appointed according to expertise in matters involving the Board of Directors. Therefore, he will regularly attend Board of Directors meetings, analyze management reports on business, pass resolutions or authorize management to act with the authority of the Board of Directors.
Does a sleeping director have fiduciary duties?
In LKWSP v AR Sdn.Bhd [2003] 4 MLJ 729, P sued D1 until D10 and that D1 was statutorily bound to contribute monthly towards its employees. P contended that D1 failed to pay a huge sum during the period of 1998 to 2000. The senior assistant registrar who heard the P’s application for summary judgment granted the P’s order, but the D4 and D6 appealed. D6 stated that he was informally appointed as a director for the purpose of re-negotiating a joint venture agreement. He also stated that he held neither shares nor equity in D1, and was not involved in the daily running of D1.
The court dismissed D6’s appeal and stated that the directors are the alter ego of a company. It is therefore not appropriate for a director to attempt to escape culpability by pleading that he is a sleeping partner or director, or a silent director or a non-active director.
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