What Does a Nominee Director Do in Malaysia?

What Does a Nominee Director Do in Malaysia and Why You Need Them?

– Who is a nominee director?
– What are the types of nominee directors?
– What are the duties of a nominee director?

The above are among the list of crucial questions that must be answered for a better understanding of a nominee director, who is involved in most companies in Malaysia operated by foreigners.

Definition

A nominee director is a person appointed by a certain appointer to the board of directors of a company. The appointer is generally the actual director or an individual or company with a large number of shares in the firm. Furthermore, the nominee director only acts in the interest of the appointer.

Types

Not all nominee directors act as the executive in the company they represent. In this sense, a nominee director is classified into two: (1) non-executive, and (2) executive. A non-executive, also called independent, nominee director does not involve in the regular activities of the company. So, he can avoid conflicts of interest in the company by refraining from participating in decision making.

In opposite, an executive nominee director has a dual duty to the company and to his appointer. On one hand, he has to regard his rights, duties and obligations as a director. On the other hand, he has to keep his appointer informed and use his voting power in meetings in the interest of his appointer. The latter type often counteracts with conflicts of interest, between the company and the pointer.

What Does a Nominee Director Do in Malaysia: Duties

In general, a nominee director acts as the representative of the appointer and uses his voting power at meetings in the interest of the appointer. In the case of an executive nominee director, the director also acts in the best interests of the company. The dual duty of an executive nominee director often creates conflicts of interest and further problems. Thus, when appointing this nominee director, the appointer must clearly specify his functions, rights, and duties.

To avoid unnecessary, time-wasting conflicts in the company, many joint venture companies engage with a nominee director service to get an independent nominee director. It seems to be the best attempt to avoid conflicts of interest and to create conditions where a nominee director can act correctly based on his functions, rights, and duties.