Directors, Auditors

& Company
Secretary
Azlina
SUC
• A company, being persona ficta may only act through the agency of natural persons.

• Therefore companies need agent to act on its behalf.

• Whether the act done by an agent will bind the company or otherwise depend on the
nature

• and extent of authority of the agent.

DIRECTORS

• Sec 2 CA 2016: includes any person occupying the position of director of a corporation by whatever name called and includes a
person in accordance with those directions or instructions the majority of directors of a corporation are accustomed to act and an
alternate or substitute director. Any person occupying the position of a corporation includes an alternate or substitute director, a de
facto director and a shadow director. An alternate or substitute director is a person nominated by another director to attend
meetings or perform duties on his behalf.

• Section 196(1) and (4) CA2016 provides that a company must have at least 1 director, who; Shall ordinarily reside in Malaysia by
having a principal place of residence AND shall not include an alternate of substitute director. Word “residence” means the person
must be residing in the place with some degree of continuity - Fong Poh Yoke V The Central Construction Co (M) Sdn Bhd (1998).

• Section 196(10) provides that a private company shall have a minimum of one director and a public company shall have a minimum
of two directors.

• Sec 2 CA 2016: includes any person occupying the position of director of a corporation by whatever name called and includes a
person in accordance with those directions or instructions the majority of directors of a corporation are accustomed to act and an
alternate or substitute director. Any person occupying the position of a corporation includes an alternate or substitute director, a de
facto director and a shadow director. An alternate or substitute director is a person nominated by another director to attend
meetings or perform duties on his behalf.

• Section 196(1) and (4) CA2016 provides that a company must have at least 1 director, who; Shall ordinarily reside in Malaysia by
having a principal place of residence AND shall not include an alternate of substitute director. Word “residence” means the person
must be residing in the place with some degree of continuity - Fong Poh Yoke V The Central Construction Co (M) Sdn Bhd (1998).

• Section 196(10) provides that a private company shall have a minimum of one director and a public company shall have a minimum
of two directors.
POSITION OF DIRECTORS

• B. Trustee.

• A director per se is not a trustee but may become one when he is in possession of certain
property given to him for certain purposes or on behalf of the company.

• C. Agent of the company.

• Director is not an agent of the company but may become one when he is acting on behalf of
the company.

• D. Alter ego of the company.

• Since a director is the other half of the company, he is considered as the alter ego of the
company, the mens rea of the directors is the mens rea of the company

• Leonard’s Carrying Co v Asiafic Petroleum

• The act of director is attributed to the company, the cause of the accident at the sea is due to
director’s negligent conduct and his fault is the company’s fault.
APPOINTMENT & QUALIFICATION

• Section 201: A person shall not be allowed to be appointed as a director unless he

hasconsented in writing to be a director and make a declaration that he is not
disqualified.

• A director must at least 18 years old before he can be appointed. This is in line with the
conceptof capacity under the law of contracts. No age limit for a director.

• Probably extended residency requirement: a director must be ordinarily reside and have
a principal place of residence. Under the old Act, a director is only required to have a
principal or

• only place of residence in Malaysia.

• A director may be appointed to hold office during the incorporation or appointed

subsequently after the incorporation by way of ordinary resolution (Section 202).. The
board also may at any time appoint additional director and he shall hold office until next
AGM (for public company) or in accordance to the terms of appointment (for private
company).
DISQUALIFICATIONS

• A person shall not hold office as a director: Is an undischarged bankrupt – Section

198(1)(a). Section 198(3) provides that bankrupt may be appointed or hold office with
the approval of either the Official Receiver or the court.

• Has been convicted of an offence relating to the promotion, formation or management

of a corporation

• Has been convicted of an offence involving bribery, fraud or dishonesty;

• Has been convicted of an offence under Sections 213, 217, 218, 228 and 539, even it
occurred outside Malaysia.
• Court’s approval needed if offences covered in section 198(4):

• - offences in connection with the promotion, formation or management of a company.

• - offences involving bribery, fraud or dishonesty.

• offences for breach of fiduciary duty, improper use of company’s property.

• Section 199 – Court’s power to remove a director. Section 199(10) provides that the ROC
may

• apply to the court to restrain a person from acting or holding office as a director or
promoter or taking part in the management of a company.

• Not an auditor of the company - Section 264(1)(c)(iii)(A) provides that an auditor of a

company cannot also be an officer of the company. His spouse also cannot be an officer
of the company.

• Not unsound mind - Section 208(1)(e) provides that the office of the director shall be
vacated if that director becomes of unsound mind.
• Not disqualified by the constitution:

• (a) Share qualification

• A company may still in its constitution, require its directors to hold a minimum number
of

• shared. However, as the CA 2016 does not provide a grace period, then the terms in the

• constitution shall apply without any exception.

• (b) Other situations - Absent without permission of the directors from meetings of the

• directors for more than six months.

• First directors

• Section 202(1) provides that the first director(s) of the company shall be the person(s)
named in the application for the incorporation of the company. He must have consented
to be a director of the company.

• Subsequent directors

• All subsequent directors may be appointed as follows:

• By ordinary resolutions - section 202(2)

• By the board of directors - section 202(3)

RESIGNATION, VACATION OR DEATH OF LAST REMAINING DIRECTOR – SECTION
209

• The office of a director may become vacant in one of the following events:

• (i) He retires from the office;

• (ii) He is disqualified;

• (iii) He resigns from the position;

• (iv) He is removed from the board of directors; or

• (v) He retires by rotation.

PROCEDURES TO REMOVE A DIRECTOR

• (A) Private Company Section 206(1)(a): In a case of a private company, subject to the Constitution a director MAY BE REMOVED by
ordinary resolution.

• Section 297 (2)(a): The passing of such resolution must be done at physical general meeting and cannot be passed by way of written
resolution. To pass an ordinary resolution, a special notice is required before a director can be removed UNDER THIS SECTION.

• Solaiappan & Ors v Lim Yoke Fan [1968] 2 MLJ 21, FC

• (B) Public Company

• Section 206 would still be applicable.

• Notwithstanding anything in the constitution or any agreement between a public company and a director, the company may by
ordinary resolution at a meeting remove the director before the expiration of his tenure. After the special notice has been served to
the members, the director who is being removed has the right to have written representations to be sent to all members together
with the notice of meeting failing which, the director has the right to require the representation to be read out at the meeting (to
remove him) – Sec 207 (3).
DIVISION OF POWERS BETWEEN BOARD AND GENERAL MEETING

• Section 211 – the business and affairs of a company shall be managed by the Board.

• The Board = the directors of the company not less than the required quorum acting as a

• board of directors or if the company has one 1 director, that director.

• The proceedings of the board shall be governed by the Third Schedule of the CA 2016.

• Sec 192 - The member, on the other hand shall not be liable for an obligation of a

• company by reason only being a member of the company.

• To balance the Board’s power – there is new addition on Management Review. See

• Section 195.
• Members’ rights for management review

• 195. (1) The chairperson of a meeting of members of a company shall allow a reasonable opportunity for members at the meeting

• to question, discuss, comment or make recommendation on the management of the company.

• (2) A meeting of members may pass a resolution under this section which makes recommendations to the Board on matters

• affecting the management of the company.

• (3) Any recommendation made under subsection (2) shall not be binding on the Board, unless the recommendation is in the

• best interest of the company, provided that—

• (a) the rights to make recommendations is provided for in the constitution; or

• (b) passed as a special resolution.

Auditors- Internet
Source from internet