Learn More on the Extent of Director Duties Today!
Being on the top level of management, directors are usually conferred with a vast range of authority. But it’s best to understand the extent of director duties in Malaysia as not to overstep the boundaries given. In any company, on behalf of the shareholders, a minimum of one director will be hired to oversee the company. However, the chosen director must adhere to the set standards. This is to protect the best interest of the company and avoid unwanted negligence from happening.
What Does the Law Say?
In Malaysia, there are several acts written to govern a director’s role in the company. The new Companies Act 2016 replaced the previous Companies Act 1965 and came into full force in early 2017. This new regulation promotes stricter laws accompanied by heavier fines. According to the Companies Act 2016, directors of an organisation can be sued for breaching their duties. A director who breaches the law will face up to RM3 million in fine (a 100-fold increase from the previous law). It also adds a maximum imprisonment term of five years if found guilty.
Additionally, Section 214 of the Act has stated that a director is required to carry out assigned tasks and make a reasonable business judgment in good faith for a proper purpose. That is to say, he or she must not have a personal interest in the business judgment and must act in the best interest of the company.
What is the Extent of Director Duties?
All companies, regardless of whether they are public or private, have directors as a stand-in for the shareholders. As for private limited, these companies are known to have at least two directors working for the company at all times. If you are a new director or a director-to-be, it is essential to understand the circumference of your jurisdiction in the company.
At any given time, a director is normally the highest authoritative figure in a company. Consequently, the main purpose of a director is to direct and lead the company and its staff. A director is conferred with powers to make strategic decisions, govern his or her workers, and guide the company to achieve its mission and vision. In short, a director’s responsibility is to manage and supervise business operations and steer it in the right direction to benefit the company.
On the other hand, directors are not to breach their general duties. Directors need to take responsibilities upon themselves to respect the fiduciary duties they are granted by acting well and within their powers.
What consist of a breach are as follows:
- Conducting false or misleading reports.
- Approving unauthorised transaction.
- Using the company’s property or money for personal use.
- Leaking highly confidential information that could jeopardise the company’s status.
- Abuse of power.
- Accepting third party benefits.
- Ill-treatment of staff.
Also, doing anything that intentionally violates the company’s compliance policy is deemed as breaching. Besides being subject to removal from office, a fair trial will be conducted to see if the director is truly guilty or if the situation really called for the director’s action.
Competent directors are one of the crucial building blocks in making a successful company. Contrary to the popular adage, good help does come easy these days, provided you know where to seek. We at 3E Accounting Malaysia are passionate about helping companies to live up to their fullest potential. That’s why we offer our Nominee Director Service so you and your team can have a qualified, reliable nominee director that fully understands the extent of director duties in Malaysia at a cost-effective rate. For more information on our nominee directors services and fee, contact us.