Nominee Director in Malaysia

All companies in Malaysia need to appoint at least one Malaysian resident director. It is fairly common for foreigners to establish a company with a nominee director in Malaysia serving as the local director, to ensure that the company is in good standing. The nominee director is legally bound by the Malaysian Companies Act 2016 and needs to fulfill fiduciary duties towards the company and the shareholders of the Malaysia Company. Failure to do so can lead such a person to criminal penalties or removal from the company as the director.

Why Should I Hire a Nominee Director in Malaysia?

• According to the Malaysia Business Act, all companies must have at least one director who has his major or exclusive place of abode in Malaysia.
• Foreigners may wish to hire a local nominee director as the company’s representative on all compliance matters. This includes submitting a Malaysia annual return to The Companies Commission of Malaysia (SSM) or filing Malaysia corporate tax returns to Lembaga Hasil Dalam Negeri Malaysia (LHDN)
• Even though most of the Malaysian population can speak English, many government officials still prefer to communicate in Malay Language. Having a nominee director who speaks the local language can be helpful when communicating with government officials.
• A nominee can be appointed as a non-executive director with no financial, operational, or management obligations for the firm.

Responsibilities of a Nominee Director

1. Act in the best interest of the company

A company director must exercise their power in the best interest and good faith of the company. This means that the director must always exercise decisions whilst considering the long-term effects it may have on the company. They must ensure the interests and relationships of the company stakeholders are well maintained., and that the company does not violate the Companies Act, the company’s constitution, or any legal or official regulations.

2. Reliance on information from others

The director of the company can rely on the information provided by other stakeholders when performing his duty as a director. This can be information provided by an employee of the company who has relevant experience on the subject matters, or another director. They may also choose to rely on externally appointed experts or professionals. Some companies also form a committee consisting of people with different backgrounds, to provide the director with insights when needed.

3. Responsibility for the action of the delegate

If a director chooses to delegate any power on the board to another director, employee, external expert, or committee, the director could then discharge his duty if there is reasonable assurance to support that the delegate will be able to exercise power and his duty competently.

4. Responsibility for implementing a system of internal control

If the Malaysian Company is a Public Limited Company or a subsidiary of a listed company, the director will also ensure the company has implemented a reliable internal control system. This serves to safeguard the company’s assets and allow it to operate without harming the stakeholders.

Benefits of Hiring a Nominee Director

1. Cost Efficient

International investors looking to set up a Sendirian Berhad (Sdn Bhd) prefer to be appointed as one of the executive directors of the new company. Hence, they will not require a Malaysian executive in the initial stage. Thus, appointing a nominee director will be relatively cost-efficient as compared to employing a full-time individual to take on the position.

2. Expertise

Individuals who decide to be the nominee director in Malaysia are usually employees of a professional firm. By appointing a nominee director, the company can utilize his/her expertise on many different portfolios. Furthermore, professional firms that provide nominee directors will take extra precautionary measures and ensure that the client’s company is in good standing. As such, an arrangement like that us extremely beneficial for a company that does not wish to incur significant overhead costs.

Who is Qualified to be a Nominee Director?

According to the Malaysia Companies Act, a Shd Bhd Company must at least appoint one director who has his principal place of residence in Malaysia and resides in Malaysia. For public limited companies, two resident directors are required.

A person must be at least 18 years old and must not be disqualified under Section 198 of the Companies Act in 2016 to qualify for appointment as the company director.

This person must be an ordinary resident of Malaysia at the time of appointment and throughout his directorship.

Who is Prohibited from being a Company Director in Malaysia?

According to the Malaysian Companies Act, a person cannot become a company director in Malaysia if:

• A person is undischarged bankrupt.
• A person is convicted of an offense relating to fraud, dishonesty, or bribery.
• A person is disqualified by the court.

Should an individual violate any of the above requirements and accepts an appointment as a director, he/her will be liable to a jail term of up to 5 years and fines amounting up to RM 1 million.

Documents Needed for Appointment of A Nominee Director

The following list comprises of the proper documentation needed for the appointment of a nominee director in Malaysia:

• A nominee director agreement Malaysia
• Form 45B and Form 49
• Due diligence documents of the director and beneficial owner of the Malaysia company
• The company resolution for the appointment and consent to act as the director