Where to Draw the Line When It Comes to Things a Malaysia Director Cannot Do?
Director duties touch almost every aspect of a company. The highest level in a company food chain is dominated by the shareholders, followed by the board of directors. That said, directors have a range of powers conferred and trusted onto them to ensure the company affairs sail smoothly. However, they are not immune to compliance policies. So, where do we draw the line when it comes to things a Malaysia director cannot do? If you are a new director or a director-to-be, this will make an exciting read for you!
What Are the Director’s Duties?
A director’s duties are very much colourful as he or she gets to manage business strategies, supervise the staff, direct corporate operations, and almost everything under the sun. A director is a stand-in appointed by the shareholders to run the business on their behalf. Therefore, most significant decisions need to be taken by a director in good faith and in fair purpose. Having a fiduciary duty is no easy task; a director must always act in the best interest of the company. Plus, he or she will need to exercise their powers with the utmost diligence and skill.
What Can’t a Director Do?
There are just as many things that a director cannot do. Some of the things a Malaysia director cannot do includes:
- Mistreating the workers or threatening them.
- Conducting fraud.
- Spending the company’s money for personal use.
- Using the company’s property or facilities for personal use.
- Leaking top confidential information.
- Accepting bribery.
- Falsifying records, especially finance records.
And many more along the lines of that list. Simply put, acting out of their jurisdiction power is a breach of duty.
Who Will Keep the Director in Check?
In recent years, the Malaysian government has taken the effort to enforce stricter laws with heavier punishments to curb mismanagement happening at the top level. Replacing the Company Act 1965, a more comprehensive and updated law, the Company Act 2016 was introduced and came into effect in February of 2017.
In Section 213 (1) of the Companies Act 2016, the law has stated that a company director must exercise his power with caution, good faith and for the betterment of the company, per the Act. This means that the director gains power from the law and the company’s constitution. Moving on, Section 221 in the Act applies the meaning that a director must not abuse the given position for personal gain. If the director were to accept third party gifts, make deals with other organizations for his own benefit and not the company. It is a clear violation, as he or she did not act in the best interest of the said company.
Having said this, with great powers, there also comes great penalties if a director commits a breach of duty. Accountable for the responsibilities along with the mistakes during the period of tenure, the Malaysian law has set a 100-fold fine, with RM3 million or a five-year-imprisonment term, or both, if found guilty.
Great Help Comes Easy
A competent director is like a good captain; he steers the ship in the right direction, leads the expedition with a well-informed decision, oversees the management and cares not only for the welfare of his crew members but for other people aboard as well. The same goes for a company director. A proficient director in a company who excels in leadership and tends to motivate the staff to perform their very best will do wonders for the growth of the company.
We at 3E Accounting believe that a company’s success reflects on the skill and diligence of a team-playing director. This is why we bring you our top-notch Nominee Director Service. If you need a nominee director to supervise the company business affairs in a fair and an unbiased manner, we have got you covered. Let us help you to find your ideal captain. For more information on Nominee Director Service, contact us.