6. DIRECTORS

COMPANY
DIRECTORS

Prepared by: Norzelawati Umar

ROLE OF THE NOMINEE DIR ALTERNATE DIR DE FACTOR DIR SHADOW DIR
- Appointed to When the director Appointed but not Not validly
DIRECTORS. represent certain absent from work described as a appointed as a
group he will be replaced director director
1. MANAGE
2. SUPERVISE THE DIRECTORS

MANAGEMENT OF
COMPANIES

EXECUTIVE C.E.O OTHER EXE. DIR NON-EXE DIR INDEPENDENT DIR

A director and full- Sometimes called May hire another exe. - Those who are not A person who
time employee of the “managing director”. director in addition to involved in the full-time represent the
company. He/she incharge a CEO. management. interest of the
day to day e.g : finance director - Not the employees of shareholders & they
management of the (responsible for the the company. will not interfere
company. financial operation) - They will attend the with the
board meeting. management of the
company.

1. APPOINTMENT 2. QUALIFICATION 3. AGE LIMIT
AND
1. STATUTORY 2. COMMON
DUTIES DISQUALIFICATION LAW DUTIES

DIRECTORS

DUTIES

APPOINTMENT

1. SEC 196 CA 2. SEC 196 CA
2016, private 2016, public
company = min 1 company = min 2

director directors

QUALIFICATION DISQUALIFICATION

1. place of resident in 1. CONVICTED
Malaysia UNDER S 130

2. natural person of full 2. DISQUALIFICATION OF
age DIRECTORS OF

3. undischarged INSOLVENT COMPANIES
bankrupt
3. BANKRUPT 4. INVOLVE WITH
4. has been convicted FRAUD
under any law. Eg ;
imprisonment 3 yrs

Pengarah syarikat didakwa pecah amanah RM19,000
KUALA LUMPUR - Seorang pengarah syarikat mengaku tidak bersalah di
Mahkamah Sesyen di sini hari ini atas pertuduhan pecah amanah
melibatkan wang berjumlah lebih RM19,000.

Kes pecah amanah RM90 000: Bekas kerani penyanyi Sheila
Majid dipenjara 4 tahun

GEORGE TOWN: Seorang pengarah urusan syarikat sebuah ladang ternakan mengaku tidak bersalah di
Mahkamah Sesyen di sini atas 24 pertuduhan melakukan pecah amanah membabitkan nilai RM100,000, enam
tahun lepas.

Mengikut kertas pertuduhan, Tan Soon Thong, 59, didakwa melakukan pecah amanah dengan
menyalahgunakan wang syarikat bagi kegunaan peribadi tanpa kebenaran atau persetujuan ahli lembaga
pengarah syarikat tersebut.

Antara penyalahgunaan wang itu adalah bagi tujuan membayar ansuran bulanan kereta anak lelakinya,
membayar yuran pengajian anak lelakinya di Wawasan Open Universiti dan pembelian bahan mentah

TRUST & HONESTY IS
VITAL TO ALL THE
DIRECTORS AND
LEADERS

WHY?

DUTIES OF
DIRECTORS

Why does truth or honesty matter in a leader?
Leaders who are true, and always speak the truth, create
trust. And trust is vital in all human relations, professional
or private.

No place for any form of bribery or corruption

Prophet Muhammad p.b.u h says..
I will stand surety for Paradise if you save yourself from six
things:

1. Telling untruths,
2. Violating promises,

3. Dishonoring trust,

4. Being unchaste in thought and act,
5. Striking the first blow,
6. Taking what is bad and unlawful.

DUTIES OF
DIRECTORS

1. S. 213(1) – act PUNISHMENT
in proper
purpose & 3. S. 213 (3) – 5 years
good faith imprisonment, not

exceeding RM3m or
both

2. S. 213(2) – care,
skill, diligence

2.CARE Sec 213(2) COMMON LAW

DUTIES

Sec 213(2)

4. DILIGENCE 3. SKILL 1. FIDUCIARY
DUTIES (s.213(1)

Carry power in Act in a proper Avoid conflict
a good faith purpose of interest

FIDUCIARY DUTIES????

OPENNESS AND CONSIDERATION FOR THE INTERESTS OF THE……

OTHER PARTY??

Fiduciary Duties

ACT IN GOOD FAITH & IN DUTY TO AVOID CONFLICT OF DUTY TO ACT IN PROPER PURPOSE
COMPANY’S INTEREST INTEREST - s. 213(1) Director may act for the
best interest of the company.
- S. 213(1) ….director shall at all - S. 221- The director should not
time act in proper purpose & in enter into engagement in which CASE : HOWARD SMITH
good faith in the best interest of there is a possibility that their Court held : they breached their duty
the company..(members, creditors, personal interest could conflict with if they use their power to increase the
employees, suppliers, community company’s interest number of majority shareholders at
e.t.c) the expense of the minority.
- E.g : avoid selling personal assets
CASE : Re W & M ROITH to his company, avoid using co.
Court held ; when the director make a property
contract to provide pension for his
wife after his death, he is not think CASE : COOK vs DEEK
about the interest of the company. Court held : there was a breach of
duty, the contract they were entered
into was belong to the company.

QUESTION ONE
Bob is a director of Huhu S/B. He had purchased five units of
computer for the company. Each unit costs rm4,000.00. in the

process of negotiating the price of the units, Bob used his
position as a director of Huhu S/B to obtain a commission for
himself amounting to rm3,500.00. Huhu S/B discovered about

the commission and wishes to take action against Bob for
breach of duty. Advise Huhu S/B.

ISSUE : ??
LAW : ??
APPLICATION : ??
CONCLUSION : ??

COMMON LAW DUTIES – s. 213(2) CA 2016

SKILL CARE DILIGENCE

- Rule : director is not required to - A director owes a duty of care to - The standard required is

have this duty. the company. REASONABLE DILIGENCE.

- If unskillful it is not a breach of duty. - The standard is REASONABLE CARE - EXAMPLE : try not to rely on

- If possessed any special qualification (e.g must follow the AOA and law) officers information but find it by

such as lawyer/accountant he is - If acts against the law then he’ll be themselves.

required to use such skill. breach of duty of care.

- If use lesser than qualification he - He must take care of the affairs of

had, then it is a breach. the company.

CASE : RE CITY EQUITABLE FIRE INS CASE : RE BRAZILIAN RUBBER[1911] CASE : RE FOREST OF DEAN [1879]
Court Held : the higher level of skill he Court held: the director must exercise Court held : the director must use fair
has, the higher standard of skill care as expect in reasonable in his and reasonable diligence and to act
required. position. honestly for the company’s interest.
CASE : DANIELS vs AWA Ltd [1995]
Court held: as a director they have to
obtain the information regarding their
company’s financial status.

RESPONSIBILITIES OF DIRECTOR

1. SECTION 214 CA 2016 – BUSINESS JUDGMENT RULE
2. SEC 215 CA 2016 RELY ON INFORMATION PROVIDED BY OTHERS

3. SEC 216 CA 2016 – RESPONSIBILITIES OF ACTION TAKEN BY
OTHERS

BUSINESS JUDGMENT RULE (BJR)
SECTION 214 CA 2016 if; ……

TUTORIAL QUESTION 1

ABU, CHUA AND RAMA ARE DIRECTORS OF BINATEGUH BHD A CONSTRUCTION COMPANY.
RECENTLY, CHUA WAS SENT TO INDONESIA ON BEHALF OF THE COMPANY TO NEGOTIATE A
CONTRACT FOR A BUILDING OF A TRIPLE TOWER. THE INDONESIAN COMPANY WAS NOT
PREPARED TO OFFER A CONTRACT TO BINATEGUH BHD BUT INDICATED THAT IT MIGHT BE
WILLING TO OFFER THE CONTRACT TO CHUA IF HE WAS INTERESTED IN IT.

CHUA, UPON HIS RETURN, REPORTED TO THE BOARD THAT THE CONTRACT WAS UNSUCCESSFUL.
SUBSEQUENTLY, CHUA RESIGNED FROM BINATEGUH BHD AND SUCCESSFULLY OBTAINED THE
INDONESIAN CONTRACT IN HIS OWN NAME.

ABU AND RAMA NOW DISCOVERED THESE FACTS AND WISH TO CLAIM ACTION ON BEHALF OF
THE COMPANY TO SUE CHUA FOR THE PROFIT THAT HE HAS MADE FROM THAT CONTRACT.
ADVISE ABU AND RAMA ON THEIR CHANCES TO SUCCESS.

TUTORIAL QUESTION 2

KARAN IS A DIRECTOR OF EXPOSURE S/B. HE IS ALSO A MANAGING
PARTNER OF ABC ENTERPRISE, A PARTNERSHIP DEALING IN COMPUTERS.
KARAN, ON BEHALF OF ABC ENTERPRISE ENTERED INTO A CONTRACT
WITH EXPOSURE S/B FOR THE SUPPLY OF 100 COMPUTERS.

ADVISE EXPOSURE S/B ON WHETHER KARAN HAD BREACHED HIS DUTY
AS DIRECTOR OF EXPOSURE S/B.

TUTORIAL QUESTION 3

EN MUNIR, A DIRECTOR IN BUMI SDN BHD HAS DONE THE FOLLOWING;

A. HE HAS BOUGHT A PIECE OF LAND ON BEHALF OF THE COMPANY AND WAS PAID A
COMMISSION BY THE SELLER WHICH HE KEPT.

B. HE RARELY WENT FOR A MEETINGS AND USED TO DELEGATE HIS DUTIES TO HIS SUBORDINATE
OFFICERS. AT ONE TIME HIS COMPANY SUFFERED LOSS DUE TO HIS CONDUCT.

WITH REFERENCE TO THE PROVISION OF THE COMPANIES ACT 2016 AND CASE LAW, CONSIDER
WHETHER THERE IS A BREACH OF DUTY BY ENCIK MUNIR

The end