Are you aware of your responsibilities as a company director according to Malaysian law? If you hold a position as a director in your company, you need to carry out your responsibilities in accordance with section 213 of the Companies Act 2016, a director of a company shall at all times exercise his powers for a proper purpose and in good faith in the best interest of a company. Besides, a company director shall exercise reasonable care, skill and diligence with the knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities and any additional knowledge, skill and experience which the director in fact has. 

Besides, section 214 (1) and (b) of the Companies Act 2016 also stated that a company director in making a business judgment must make the business judgment for a proper purpose and good faith. 

Other responsibilities are also stated in the Companies Act 2016 such as ensuring that the company maintains proper accounting records and disclosing if there is a conflict of interest within the company.

Your company director breached his duties? What to do?

If a director in your company breached their responsibilities, the company or shareholders can bring a civil claim in Court against the director to get the compensation for any losses suffered as a result of the director’s irresponsible actions. 

Section 347 of the Companies Act 2016 allows the complainant to initiate a proceeding if there is a breach of rights and responsibilities within the company. 

The director may have to pay compensation to any third party who has suffered loss as a result of the breach. The damages awarded depends on the type and level of the breach and the loss suffered.

What is the difference between company directors and shareholders?

Company directors and shareholders have different liabilities towards the company. Company directors have fiduciary duties towards the company, while shareholders have no such fiduciary duties. Company directors can also be subjected to certain actions if they breach their duties and are held personally liable for the breach, whereas shareholders are usually not held personally liable for the company’s debts.

You want to sue the company?

You want to sue the company? Before you want to sue a company, you need to know a few matters which are, you need to know the type of company, whether it is, a limited company or a sole proprietorship. You also need to make sure that the company exists and is still active. Finally, don’t forget to get legal advice before starting a lawsuit, so you don’t make a mistake. 

Why do you need to know the type of company before starting a lawsuit? This is to avoid any mistakes in naming the parties in your suit If you want to sue the company 

Conflicts in a family company?

The case of Ying v Cheong [2010] was decided in the Court where the Court allowed the Plaintiff’s claim. The plaintiff was the executrix of the estate of her late husband who was a director and shareholder of the first defendant company. The first defendant was a family company established. The other defendants were the brothers and sisters of Low or persons holding in trust for them or their children. At all material times, Plaintiff’s late husband was the majority shareholder in the company. He held 52% of the shareholding in the company. However, the second defendant allotted 157,579 shares of RM1 par. As a result, Plaintiff’s late husband shareholding in the company was reduced to about 42%. Thus, he no longer had majority control in the company. The plaintiff alleged that the purpose of the issuance and allotment of the shares was to dilute his majority control over the company. The plaintiff therefore sought a declaration that the allotment of the 157,579 shares were in breach of the directors’ fiduciary duties and therefore were unlawful; and that the said allotment should be declared null and void. 

The court said that when the board of directors decided to allot and issue shares to the other shareholders by capitalising the dividends, and in the case of Plaintiff’s late husband to use his dividends to set off against the loan taken by him, the board comprising of the second defendant did not act bona fide. The board knew that by doing so Low Lai Kui’s shareholding in the company would be reduced or diluted. It would render his majority control of 52% to about 42%. 

Punishment for breach of fiduciary duties by company directors.

If you are a company director and you do not carry out your fiduciary duties properly, you can be punished as follows: 

.1 Fine / Compound 

2. Removal from being a company director 

3. Freezing of company accounts 

Are you having problems in your company?

Are you plagued by problems in your company? Need legal advice? Do you want to take the action to Court? Contact us to set up an appointment with our lawyers. Our lawyers are always ready to assist you. 

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