Challenges of Nominee Directors in Malaysia and Essentials You Should Know
Your company may want to employ a nominee director, but you are not sure what it entails. Let’s assume that for some reason, your company director has to leave your company. According to the Companies Act in Malaysia, if such resignation or termination took place, it must not affect the required directors’ required numbers. This depends on the type of company, but you will need to have someone take over first if it does. This is not necessarily easy as it can take time to find the right person for the job. Moreover, the fact that the statutory requirement will still have to be fulfilled. Still, they are distinct to that of the conventional company directors as will be explored here in this article—the Conflicts and Challenges of Nominee Directors in Malaysia, the essentials that you should know.
Overcoming Challenges of Nominee Directors
Understandably, nominee directors are also humans and, thus, are capable of making mistakes. That is usually acceptable, but there are cases where the nominee directors’ actions can be deemed questionable. Note that a company director is legally required to perform his duties as stated in Section 132(1E) (fiduciary duties) under the Companies Act 2016 and act in the company’s best interests and stakeholders. There are many challenges for nominee directors, and the following are examples of such situations.
1. Commercial Transactions
This means an improper allocation of funds or transactions. Depending on the type of company and situation, the general rule of thumb would be that such transactions are used for the company and not for the nominee director’s expense or benefit. It can be regarded as an abuse of resources.
2. Confidential Information
When a nominee director conceals information, especially about that of his or her dual loyalty outside the company, it counts as leaking confidential information. Some may be harmless, but others may prove to be detrimental to the company and is a breach of duty. This also applies to the abuse of information gained through the position.
3. Company Insolvency
The nominee director will also be put in a challenging situation when the company is insolvent. His or her actions may not be as clear-cut on who to prioritize, the company or the creditor. Conflict of interest is also not appropriate in this case.
Working With a Professional Service Provider
If you cannot find a reliable or suitable nominee director in time, there is, fortunately, another workaround in this situation by employing nominee director services. 3E Accounting Malaysia is recognized for our excellence standards that transcend beyond Malaysia and on a global level. Our nominee directors’ service is backed by our experienced, reputable, and qualified team of professionals ready to assist. Plus, you will never have to face the problems mentioned above (1, 2 & 3).
However, it is important to note several things regarding our services. In the context of this service, we will only help you fulfil the statutory requirements, and our personnel will not be an authorized signatory or bank signatory. Our personnel will also not engage in your company’s administration and management, but we can help you comply with the law until you find someone who can. You may also visit our website for a full list of our comprehensive services or a more detailed description of this service. Consult us here for more details.