🧠 Many people register a company and list themselves as directors… but don’t even know what it really means.
📌 Legally, a “director” isn’t just a fancy title.
➡️ Anyone who makes decisions, influences strategy or controls the company — even without an official title — may be considered a shadow director.
❗If things go wrong (e.g. debts, fraud), directors can be personally sued — not just the company.
👉 If you signed up as a director but don’t understand your role… you just opened the door to legal trouble.
5 CORE DUTIES OF A COMPANY DIRECTOR
✅ Act with integrity
✅ Avoid conflicts of interest
✅ Exercise care, diligence & act in good faith
✅ Keep proper financial records
✅ Don’t misuse power or company information
📌 Reference: Section 213, Companies Act 2016 (Malaysia)
💣 Many directors breach these duties without even realising — and later wonder why they’re penalised.
“I’M JUST A NAME” – The Danger of a ‘Sleeping Director’
😴 Letting someone else run the company while your name is on the papers? That’s dangerous.
If the company gets into legal trouble:
➡️ LHDN (tax) will come after you
➡️ SSM will investigate you
➡️ The court may sue you personally
📌 Legally, your name = your liability, even if you “did nothing”.
🚨 If you don’t want the responsibility, don’t sign. It’s that simple.
CAN DIRECTORS BE PERSONALLY SUED?
🔥 YES – if there’s:
- Fraud
- Misconduct or negligence
- Breach of director’s duties
📌 Courts can “lift the corporate veil” — which means they ignore the company’s legal shield and go after you directly.
Example: Using company funds for personal gain, lying to investors, falsifying records = personal liability.
WHO’S NOT ALLOWED TO BE A DIRECTOR?
❌ Bankrupt individuals
❌ Convicted of fraud or dishonesty
❌ Disqualified by court or SSM
📌 Reference: Sections 198 & 199, Companies Act.
Still acting as director while disqualified?
➡️ You risk a fine up to RM1 million + 5 years’ jail.
🧾 Always check your own status — and your co-directors. One bad apple can sink the whole ship.
SHOULD DIRECTORS HAVE AGREEMENTS BETWEEN THEM?
Absolutely YES. Even if you’re friends, siblings, or spouses.
📄 A director/shareholder agreement protects:
✅ Roles & decision-making power
✅ Exit process for directors
✅ Conflict resolution methods
Real-life issue: When the business grows — one wants to scale, the other wants out — fights happen fast without black-and-white terms.
WHY EVERY DIRECTOR MUST UNDERSTAND THEIR LEGAL RISKS
📌 A director isn’t just a “boss” — you are legally responsible for the company’s conduct.
⚠️ If you don’t understand this:
– You could become the scapegoat when things go wrong
– You could lose your savings due to personal liability
– You could face action from SSM, LHDN, banks or investors
💼 Before you agree to be a director — understand your duties. Understand your risks. Don’t just “trust your partner” — get proper legal advice.
🧠 Knowledge = Power = Protection.
