The Companies Act of Malaysia specifies certain information with regard to the role of a director in the country. This is done in Section 196 of Subdivision 2. A company in Malaysia is to have at least one director if it is a private company or at least two directors if it is a public company. For this reason, the director of a company in Malaysia is barred from resigning or vacating the position if doing so would reduce the number of directors of the company to a number below the required minimum. Should the director attempt to do so, this attempted resignation or absence will not take effect unless a person is appointed to replace the director who is leaving. The director also has to be a natural person, and the age of the director must be at least 18 years or older. Every one of a Malaysian company’s directors is to be an ordinarily resident of Malaysia. This means that each director is to have a primary residential location in Malaysia. Alternate or substitute directors are not allowed to be selected.
Every company is allowed to specify any additional requirements to be fulfilled for one to become a director of that company. This is because the Companies Act does not mention any specific academic or work qualifications which have to be fulfilled by a person who plans to become the director of a company in Malaysia. Nevertheless, it is often advisable for a prospective company director to hold individual shares in the company. Although doing so will not necessarily grant the person eligibility for director status, it will nonetheless aid the person’s chances of becoming a director.
People Who Are Connected with Directors in Malaysia
The Companies Act also specifies which people are considered to have close connections with directors in Malaysia. According to the Companies Act, those who are deemed to be connected with a director can be divided into four groups of people or entities. The first group contains members of the director’s family. These people include the director’s spouse, parent, child (including any stepchild or adopted child), sibling, and spouse of the director’s child or sibling. The second group contains bodies corporate which are directly linked to the director in question. The Companies Act also defines which bodies corporate are directly linked to a director. Such entities are those which are obliged or which have a majority of directors of the body corporate being obliged to act in such a way as to suit the director. Should the director have a controlling interest in the body corporate, the body corporate will also be deemed to be connected with the director. Such is also the case if the director or anyone else connected with the director have the authority to either exercise or control the exercise of at least 20% of the votes related to voting shares in the body corporate.
Trustees of a trust from which either the director or a member of the director’s family benefits are the people who comprise the third category. Such people do not include trustees of an employee share scheme. The final category includes people who are partners of the director in question or partners of people connected with the director.
Duties and Responsibilities of a Director
The director of a company has to carry out many important tasks. Thus, the director has responsibilities to the company and its shareholders.
Company directors are appointed to manage a company’s business and affairs. They are to make decisions and determine policies to be put in place for the company, then see to it that they are implemented. Directors are also to prepare and file any required statutory documents with the agencies which require such documents from companies. They also call meetings including annual meetings of shareholders, annual general meetings (AGMs), and extraordinary general meetings (EGMs). Directors also maintain and keep records. One other duty of a director is brokering contracts with lenders, suppliers, and others who interact with the company. Any further duties and responsibilities might be stated in the company’s constitution.
A responsible director is one who acts in a manner that serves the best interests of the company at all times. The director must also ensure that no actions taken, whether by the director or company, violate the Companies Act, the company’s constitution, or any other legal or official regulations. In general, directors are to use their power while serving in the role for the proper purposes.