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 need to fulfill fiduciary duties towards the company and the shareholders of the Malaysia Company. Failure to do so can lead such person to criminal penalties or removal from the company as the 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. He/she 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. He/she 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.

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.

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.

Only a person of at least 18 years of age and is not disqualified under Section 198 of the Companies Act in 2016 can be appointed as the company director. This person must be an ordinary resident of Malaysia at the time of appointment and throughout his directorship.

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

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.

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