The Roles of Directors and Shareholders in a Sdn. Bhd. Company

Shareholders and directors have two completely different roles in a company. The shareholders (also called members) own the company by owning its shares and the directors manage it. 


The separation in law between directors and shareholders can cause confusion in private companies. If two or three people set up a company together they often see themselves as ‘partners’ in the business. That relationship is often represented in a company by them all being both directors and shareholders. The problem with this is that company law requires some decisions to be made by the directors in board meetings and others to be made by the shareholders by written resolutions or by resolutions passed at general meetings. 


Directors, also known as the board of directors, are people who are actively active in the company’s decision-making and operations. In Malaysia, all Sdn Bhd companies must have at least one director who is a Malaysian citizen. To become a director of a company, an individual must be at least 18 years old and not be disqualified under Section 198 of the Companies Act 2016. A company’s management does not have to be a shareholder. In the company registration procedure, directors are often referred to as promoters.

Responsibilities of Directors
When it comes to running the company, directors are required to use their expertise and experience to make well-informed decisions that are in the best interests of the company. Because of their role as the company’s executives, they should prevent any conflicts of interest, such as participating in companies that compete with the company, and they should
not use the company for personal gain. Breaching their position as a company director carries a penalty of up to 5 years in prison, a fine of up to RM3,000,000, or both.

Right of Directors
Directors are required to request assistance from experts such as attorneys, accountants, and business consultants in collecting information to make decisions or prepare reports for the organization due to the high level of responsibility they possess. Directors, like employees of a corporation, can be charged a director fee if the board of directors and shareholders agree. However, unless approved by the shareholders, the company cannot offer a loan or become a guarantor of a loan to its director or anyone related to the director.


The company’s owners are the shareholders, also known as representatives. Individuals or corporate bodies, such as a Sdn Bhd, who subscribe for shares and own a portion of the business (buy shares). There can be up to 50 shareholders in a private limited company (sdn bhd). They have indirect influence over the company’s operations because they financially support it. If a company has only one shareholder, that individual is the sole owner of the company, owning 100 percent of the stock.

Responsibilities of Shareholders
Despite the fact that shareholders do not personally control the company, as owners of the company, they are liable for any sum of unpaid shares.

Right of Shareholders
Shareholders have the right to suggest that directors hold shareholder meetings to discuss business matters. They have the ability to pose doubts and questions about the company’s decisions taken by directors. Unlike directors, shareholders earn a portion of the company’s annual earnings as dividends. The roles of director and shareholder may be filled by the same or different people. They play a variety of roles in the organisation to ensure that it runs smoothly and profitably. You may have obtained an invitation to become a director or shareholder for a corporation if you are not starting your own business. As a result, it is important that you recognise the duties and responsibilities of these positions in order to acknowledge the company’s obligation and liability