DIRECTORS

DEFINITION OF DIRECTOR

• “Director” is defined by section 4(1) as including:

1. any person occupying the position of director of a corporation by whatever name called;

2. any person in accordance with whose directions or instructions the directors of a

corporation are accustomed to act: and 3. an alternate or substitute director.

• Table A, Art 73 confer on the directors the power to manage the business of the

company.

Types of Director1) By nature of task Executive Non-executive2) By type Chairman Nominee Alternate3) By nature De facto Shadow

Types of DirectorExecutive: running the day to day businessNon-executive :Cadbury Report defined-’person

apart from directors’ fees and shareholding are independent of the management and free from any business or other relationships which could materially interfere with the exercise of independent judgment’.

To bear issue of strategy, performances, resources and standard of conduct.

They owe the same duties as the executive director Lembaga KWSP v Rubfil sdn bhd [2005] 7 MLJ 175

Types of Director• Chairman: chair the meetings and sign the minutes of

the meetings. • Alternate director: a temporary substitute

Types of DirectorShadow director:person who is not validly appointed as a director but the

directors of the company are accustomed to act in accordance with the person’s instructions or directions.

It is not necessary to characterises the person as ‘lurking in the shadows’. A person can be a shadow director quite openly.

• De facto director: Section 4: • is appointed to the position of a director but is not described

as a director; and• acts in the position of a director but who is not validly

appointed as a director.

Types of Director• Nominee director:

represents the interest of employees, a particular group of shareholders or a creditor.

• Must avoid conflicts of interest (Scottish cooperative wholesale society v Meyer. The interest of the company prevail over interest of the nominator)

• Where nominee director has allowed his duty to conflict, he breached his fiduciary duty to the company (industrial concrete products bhd v concrete engineering bhd); kumagai Gumi ltd v Zenecon Pte ltd (S’pore)

Boulting v Association of Cinematograph [1963] 2 QB 606 OCBC ltd v Justlogin pte ltd [2004] 2 SLR 675 ICP v CEPCO [2001] 8 CLJ 262

HOW ARE DIRECTORS APPOINTED AND REMOVED?122(1): every company must have at least 2

directors who each has his principal or only place of residence within Malaysia.

How are directors appointed?In a newly formed company, the first 2 directors of

the company must be named in the memorandum and the Articles

In an existing company, directors are appointed by members of the company. The position ex for retired director, can be filled by a person elected by an ordinary resolution at a general meeting. Article 66; Table A & 67

Who may a director?An individual (not a company) s 122(2)18 years old s 122(2) at least. Any age limit? For private company-no. for public

company or its subsidiary is 70.but under s 129 the company at general meeting may extend his term of office until the next general meeting (must be approved by special resolution).

must not be an undischarged bankruptmust not have been convicted of criminal offence

involving fraud or dishonestymust consent to act as director (s 123)

What is the effect of defective appointment?S 127: the acts of the director shall be valid

notwithstanding any defect that may afterwards be discovered in his appointment or qualification.

 S 124(1) every director, who is required by the

articles to hold a specified share qualification and who is not already qualified, must obtain his qualification within 2 months after his appointment (or a shorter period as is fixed by the articles).

S 124(3): a director shall vacate his office if he has not obtained his qualification within the period required or after obtaining it he ceases to hold the qualification.

resignation

Article 72(e) resigning by giving notice in writing to the company

A 63 at the first AGM, all directors shall retire from office, and in the following subsequent years (every year) one-third of directors for the time being, or, if their number is not 3, then the nearest one-third shall retire from office.

Khoo Choon Yam v Gan Miew Chee [2003] AMR 3074

Removal of director In a public company, it is not possible for directors

to remove another director-s 128(8).In a public company, s 128(1) provides that the

members may remove a director by ordinary resolution before the expiration of his office

In a private company, its constitution may allow directors to remove another director.

S 128(7): if a director has a contract of employment as an executive director, he can claim damages for breach of contract.

128: a director cannot be removed if it will cause the number of directors to fall below 2