Topic 5

DIRECTOR, AUDITOR & SECRETARY

 Learning Outcomes

At the end of this lecture,

students should able to:

• Explain company’s director and its duties.

• Describe qualification and powers of
company’s auditor.
• Discuss qualification and functions of
company’s secretary.
Topic Outline
Director

Definition

Appointment

Qualification

Termination

Duties
DIRECTOR
 Definition
Sec. 4 (1) – Officer – Director
Occupying the position of director of a corporation by whatever name called

Directions or instructions are accustomed to act

An alternate or substitute director

 Appointment
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Number of Directors – Section 122 (1)

At least 2 No max.
directors number

AoA prescribed
the max number

May be Ordinary
increased or
reduced resolution
Grant & Ors v. John Grant & Sons Pty Ltd &
Ors
• Art. 71 of AoA – the
number of directors: 2-5.

• Art. 86 of AoA – the

company could from time
to time in general meeting
increase or reduce the
number of directors.

• Held: Art. 86 could only

operate within the limit of
Art. 71.
 Qualification

Natural Share
person qualification
 Termination
•Complies with requirements.
Resignation •Subject to sec. 122 (6).

Retirement •Provided under the AoA.

Automatic •As specified in the AoA.
vacation

Removal
•Sec. 128(1) – Ordinary resolution.
•Sec. 128(2) – Special notice.
 Glossop v Glossop
• Notice of resignation effective
on the date it was tendered.

• No formality to accept by
company before it becomes
operative.

• Once submitted, cannot

withdraw, unless by the
consent of the company.

• AoA – writing or verbal?

Khoo Choon Yam v. Gan Miew Chee & Ors.

• The Pf had to give

undated letter of
resignation upon his
appointment as director.

• Held: Requiring a letter of

resignation in advance
was that the letter was
made under duress. The
letter would be void and
of no effect.
Tien Ik Sdn Bhd & Ors v. Peter Kuok Khoon
Hwong
• Art. 85(f) – notice by ¾
holders of issued shares.

• Argued that the removal

is invalid – sec. 182(2)
requires special notice.

• Held: Sec. 128 does not

apply – ordinary
resolution.
 Fiduciary Positions
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 •Duty to act in good faith for the
Company benefit of the company.

Individual •Must not exercise their power in contrary with the

company interest even with the instruction from the
shareholder shareholder.

•Must have regard the interest of the creditors especially

Creditors in situation where the company is insolvent or nearing

solvency.

•No expressed regard to the interest

Employees of the company’s employees’.
 Scope of Directors’ Fiduciary Duties

Act Contract with

honestly own company

Not to make Directorship in

secret profit rival company
 Duty to act honestly

• Sec. 132(1) – at all times act honestly and use reasonable diligence.
• Conflict of interest and improper use.
• Deceitful and fraudulent.

Contract with own company

• Sec. 131 – not prevented from entering into a contract.

• Requirements: disclose to a meeting of the directors any interest, direct or indirect.
• Art. 81 Table A – prohibited from voting.
 Duty not to make secret profit

• Directors cannot take to their own use.

• Cook v Deeds – Held: Directors were not entitled to make a present of it to themselves.

Directorship in rival company

• Sec. 131(5) - The liberty of a director to hold office in a rival company does not apply where there is a
prohibition in the articles restricting a director from holding offices in conflict with his duties as a director.

Duty to act bona fide and for a proper purpose

• Re Smith & Fawcett – Held: bona fide in what directors consider-not what a court
may consider-is in the interest of the company.
Duties of Skill, Care and Diligence
Act honestly and
Sec. 132(1) use reasonable
diligence

Nature of the
company Consider
business

Manner in which
the work Discharge
distributed

Act within
Knowledge and
powers with
experience such care

Benefit of a
AUDITOR
 Appointment

1st auditor – within 3 months

Sec. 172 (1) – in general meeting

Sec. Must
Hold report on
172(2)
office account
In every to
1st AGM AGM members
 Qualification

Approved by the Registered as a

Minister of Finance public accountant
Sec. 8(1) with the MIA

At least 21 Fit and

years old proper person
 Disqualification

Owes more Not a

than RM2,500 partner

Not an Not an
employer employee
 Functions

Caparo Industries v Dickman & Ors

To protect the To provide To exercise their

company from shareholders collective
undetected with reliable
errors intelligence powers
 Scope of Duties – Sec. 174(3)
Obtained all Proper accounting
required and other records
information and have been kept by
explanations the company

The returns received The procedures and methods

used by a holding company or a
from branch offices subsidiary in arriving at the
of the company are amount taken into consolidated
adequate accounts were appropriate
 Powers

Power to •Access to the accounting and

access other records.

Power to •Report promptly the matters (fraud) to

directors or other management.
report
Attend •Attend any general meeting and to receive all
notices and other communications relating
meeting to any general meeting.
SECRETARY
 Section 139 (1)

1 or more
Natural person Of full age Reside in Malaysia
 Qualification – Section 139A
Member of a Licensed by
professional
body Registrar
 Disqualification

Convicted of
Bankrupt an offence

Ceases to be Ceases to be
member of a holder of valid
body license
 Duties
Present at all
Record minutes
company
of meetings
meetings

Keep and maintain

Ensure all statutory books
proper filing and records

Issue notices Process share

of meetings transfers

Ensure safe Countersign

custody of essential company
company seal documents
 Summary
• Director, auditor and secretary are the THREE
(3) important personnel of a company.

• Their presence is to ensure the running of

company is in accordance to the objectives
and complying with law.