What Are the Rights and Duties of Company Directors in Malaysia?

Appointing a company director is one of the fundamental steps when starting a business in Malaysia. However, the position of a director is far more than a title—it carries substantial legal responsibilities and expectations. Whether you are in the process of incorporating a new company in Malaysia or have recently been appointed to the board, a clear understanding of a director’s obligations is crucial.

In Malaysia, directors are governed by the Companies Act 2016, which outlines both the powers they hold and the standards to which they are held. Unfortunately, many individuals unknowingly breach their duties simply because they are unaware of what is legally required of them. A director plays a central role in ensuring the company operates responsibly, ethically, and within the framework of the law. This includes making informed decisions, maintaining accurate records, and overseeing the company’s overall direction. For any business—whether newly formed or well-established—having informed and responsible directors is key to long-term success and regulatory compliance.

Whether you are preparing to register a Sdn Bhd, planning to create a new company, or already serving as a director, it is essential to understand the legal framework and responsibilities that come with the role. 

This guide offers a practical overview of directors’ rights and duties in Malaysia and provides useful insights to help you stay compliant while contributing effectively to your company’s growth and success.

Who can be a Company Director in Malaysia?

To be a company director, you’ll have to meet the following basic legal requirements outlined under Section 196(4) of Malaysia’s Companies Act 2016: 

• You must be at least 18 years old.
• You must be of sound mind and not declared bankrupt.
• Have no recent convictions for fraud or dishonesty within the past five years.

There are different types of directors, such as:

What are the Duties of Directors Under Malaysia’s Companies Act?

Directors generally oversee operations, ensure compliance with legal standards, and guide the business strategically. Their duties typically fall into three categories:

What are the Directors’ Rights and Powers in Malaysia?

While the role comes with responsibilities, directors also have rights and powers. These include:

• Access to Company Information: Directors can view financial and operational records.

• Decision-Making Authority: Can participate in board meetings and vote on company matters.

• Protection from Liability (If Acting in Good Faith): The law offers some protection if the director acts honestly and reasonably.
• Right to Delegate Duties: Directors can assign tasks to officers or professionals (e.g., accountants or lawyers).

What are the Common Mistakes that Directors Make and Penalties in Malaysia?

Some common mistakes directors make include:

• Failing to submit annual returns
• Not keeping proper financial records
• Engaging in transactions with a conflict of interest
• Ignoring audit or tax responsibilities

Here is a table depicting some common offences committed by directors in Malaysia and their corresponding penalties:

What are the shareholders’ Roles and Rights in Malaysia?

What is a Shareholder?

A shareholder is an individual or entity that owns one or more shares in a company. In simple terms, shareholders are the company’s owners. While a director manages the company’s daily operations, a shareholder’s role focuses on ownership and overall decision-making.

It’s worth noting that a person can simultaneously be a shareholder and a director, especially in smaller or private companies. However, their duties and rights in each role are different.

Role of a Shareholder

• Appoint or remove directors through a vote
• Approve or remove auditors (in public companies)
• Approve directors’ salaries (public companies)
• Agree to changes in the company’s constitution
• Approve the issue of new shares 

Rights of a Shareholder

• Sell or transfer their shares
• Vote on company matters like electing directors
• Nominate directors and propose resolutions
• Receive dividends if declared
• Access key company information
• Take legal action for breach of fiduciary duty
• Buy new shares before outsiders (pre-emptive rights)
• Claim leftover assets after company liquidation

Shareholders vs. Directors: What’s the Difference?

Understanding the distinction between shareholders and directors is essential for any company in Malaysia. Although both play crucial roles in the company, their responsibilities and scope of authority differ significantly. Here’s a quick comparison:

Foreign investors often serve as shareholders in Malaysia’s companies, but many also take on the director role. This helps them maintain direct control over business decisions daily in small businesses and startups. However, as mentioned earlier, at least one director of a private limited company (Sdn Bhd) must be a resident.

Read our guide: Nominee Director Services in Malaysia

Conclusion

In Malaysia, Directors play a vital role in the success of companies. Their responsibilities are wide-ranging and critical, from setting long-term strategies to ensuring legal compliance. In today’s fast-changing business environment, directors must be adaptable, forward-thinking, and committed to strong governance. They can guide their companies through challenges and drive sustainable growth by staying informed on industry trends and regulatory changes.

Directors who act in good faith, stay informed, and seek professional support are far more likely to lead successful companies while remaining compliant with laws in Malaysia. With the proper guidance, you can confidently fulfill your duties and make smart decisions for your business.

Need help navigating your role as a director? Contact 3E Accounting today for expert corporate support tailored to your business.

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