This article is based on Sections under companies act 2016. We hope our knowledge sharing will give benefit to all reader.

 

DIFFERENCES BETWEEN DIRECTORS AND MEMBERS OF THE COMPANY

Directors

Members

A key person having a direct control in the Company

Investors who have interest in the capitalization of the Company

Individuals

Can be Individuals or Body Corporate
(Example Company Sdn Bhd, Enterprise cannot be shareholders)

Hold direct control of the Company, because director involve direct business in the company

Hold indirect control of the Company because shareholder only put money in the company

Do not hold any shares of the Company and not eligible to receive any dividend from the profit of the Company

Hold a sum amount of shares and eligible to receive dividend from the profit of the Company

An individual can be appointed as Director of the Company with the approval from all/majority of the existing Directors

An individual/entity can be a Member of the Company via subscription of Shares or entering into agreement (i.e. transfer/transmission of Shares)

Don’t have any rights to vote during the General Meeting

Have the rights to vote during the General Meeting

Involve and have direct relationship with the Management of the Company

Not involve in the Management of the Company

DIRECTORS’ DUTIES AND RESPONSIBILITIES

In lieu with the adherence regulatory embarked in relation to incorporate a Company, Companies Act, 2016 do emphasize briefly on the duties and responsibilities of the Directors as follows:

 

Section 213(1)

·        Requires directors at all times to exercise his powers for a proper purpose and in good faith in the best interests of the company.

 

Section 213(2)

·        Requires directors to exercise reasonable care, skill and diligence with the knowledge, skill and experience expected of a director having the same duty and responsibilities.

·        The actual skill and experience of the particular director will be used as a yardstick to determine the higher standard of care, skill and diligence.

 

 Section 214

Deems a director to have met the requirements under sub. S 213(2) if the director:

·        Makes the business judgment in good faith for a proper purpose;
Does not have material personal interest in the subject matter;  Is informed about the subject matter to the extent he reasonably believes to be appropriate under the circumstances; and Reasonably believes that the business judgment is in the best interest of the company.

 

Section 215

·        Allowance director to rely on specific persons for information, advice, opinions, reports or statements prepared, presented or made by the persons.

 

Section 219

·        Interest in contracts, property, offices etc. (“non-conflict rule”) must disclose as soon as aware

·  Interest in shares, debentures, rights, options etc – disclose within 14 days of acquisition or change of interest (for Public Listed  Company directors are within 5 days)

 

Section 221

·        Contract is VOIDABLE in failure for disclosure of interests in contracts, property etc.

 

Section 224

Prohibits the a company from:

·        Providing loans to its directors; and

·        Stand as guarantor or provide security for loans to director by any third party,

 

Exemptions

·        An exempt private company.
Funds provided to enable performance of duties as a director / officer of the company.
To acquire a home (full time directors only).
Employees Share Option Scheme (full time directors only)

APPOINTMENT & RESIGNATION OF DIRECTORS

 

Appointment of Directors

Directors can be defined as a person named as director in Super Form or in Notice Section 58, shall hold office as director.Subsequent directors may be appointed by ordinary resolutions.Subject to Constitution, the Board may, at any time, appoint a director in addition to existing directors:

  1. Private company, duration of holding office is based on terms of appointment; and
  2. Public company, duration of office is until the next AGM.

 

Section 201

Before any appointment, the person must provide to the company his/her consent to act and make a declaration that he/she is not disqualified to act.

 

Resignation of Directors

Directors can be resigned by way of issuing his/her resignation letter to the Company Secretary and by way of Circular Resolution approved by all Directors, the resignation will take immediate effect on the date from the resignation letter itself.

 

However, where there are only 2 directors, a director can’t resign as the resignation will breach Section 196(3) of the Companies Act, 2016.* Any purported resignation against Section 196 shall be ineffective.

 

Despite from resignation, retirement of Directors will be another option to cease his/her position from existing Director of the Company. This retirement is known as Retirement by Rotation.

 

For private Company, unless it was stipulated from the Company’s Constitution, the Retirement by Rotation is not compulsory. However, pursuant to Section 205 (3) until (6), it is mandatory for Public Company to imply the retirement. The Retirement by Rotation can only be approved by Members of the Company by way of General Meeting.

 

At the 1st AGM of the Company, all directors must retire and be eligible for reappointment by the Members of the company. At subsequent AGM, 1/3 are obliged to retire. Whereby the longest Director hold the position eligible for retirement.

 

As according to Section 205 (6) of the CA 2016, new directors appointed to fill casual vacancy shall hold office until next AGM, and eligible for re-election.

 

*Only applicable to Public Companies and those Companies which stipulated in its constitution to have more than one Directors to incorporate Company.