Are you a company director? Do you know the fiduciary duties as a company  director according to the law in Malaysia?  

According to section 213 (1) of the Companies Act 2023, it is the duty and  responsibility of directors to exercise their power for a proper purpose and in  good faith at all times in the best interest of the company. 

WHAT ARE THE FIDUCIARY DUTIES OF A COMPANY DIRECTOR?

Among the fiduciary duties that a company director needs to take into account: 

1. Act honestly in the interest of the company.  

2. Cannot use information obtained in the capacity of a director of a  company for own benefit or a party other than the company.

3. Cannot use the director’s position for own benefit.  

4. Cannot keep or use profits in secret.

CAN A COMPANY DIRECTOR BE SUED?

Yes. The effect of breach of fiduciary duties by a company director who  breaches his fiduciary duties is you will be responsible for the offense that has  been committed and can be imprisoned or fined.  

WHAT CASE THAT HAS BEEN DECIDED IN COURT?

Among those that have been decided by the Court regarding breach of  fiduciary duty is Soh v Syn [2019] 2 MLJ 379. This case is an appeal case at  the Putrajaya Court of Appeal. The appellant worked as the chief executive  officer of the respondent. About four years after his appointment to the position,  an internal audit conducted by the respondent showed that the appellant had  been responsible for several irregularities in the respondent’s business  dealings with two other companies which caused the respondent to incur huge  losses. The respondent sued the appellant for breaching his fiduciary duties  as an executive officer which caused him to suffer a loss of RM16,389,788.71.  The High Court allowed the claim and awarded judgment for that amount.  Therefore, the appellant has appealed the decision in the High Court. 

The Court of Appeal affirmed the decision of the High Court and held that the  appellant had breached his fiduciary duty as an executive officer to the  respondent. However, the Court set aside the award of RM 16,389,788.71 to  the respondent because the respondent failed to prove the claim of RM  15,389,788.71. 

DO YOU WANT TO KNOW WHAT ARE THE PUNISHMENT FOR  BREACHING FIDUCIARY DUTIES?

What can be charged against you if you do not properly perform your fiduciary  duties as a company director? You can be punished as follows: 

1. Fine or compound.

2. Removal from being a company director.

3. Freezing company accounts. 

OTHER CASE THAT HAS BEEN DECIDED IN COURT

Another case that has been decided in the Court is TL Sdn Bhd v T Sdn Bhd  & Ors [2019] 3 MLJ 510. In this case, the Defendants are the directors  of TL Sdn Bhd who have the duty to provide all information to TL Sdn Bhd for  its progress. The allegation by TL Sdn Bhd is that its entire business was  transferred to, and acquired by T Sdn Bhd through acts and omissions  resulting in breach of fiduciary duty by the fourth and fifth Defendants and  conspiracy to acquire the business of TL Sdn Bhd resulting in loss and damage  to it. This conspiracy consists of the deliberate transfer of business, assets and  employees of TL Sdn Bhd to T Sdn Bhd by the Defendants. 

Therefore, the actions of the Defendants who failed to give and obtain approval  or ratification at the general meeting for the establishment of T metals and  continued to act in disregard of fiduciary duties, the Defendants have clearly  breached the duties. 

Want to know more about the fiduciary duties of a company director? Don’t  miss the opportunity to set up an appointment with our lawyers. Contact us  now! 

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