Directors: Qualification/Disqualification, Appointment, Duties and Liabilities of Directors. Also, Explain ‘Independent Directors’ and Their Responsibilities.

Topics: Board of directors, Non-executive director, Fiduciary Pages: 8 (2930 words) Published: March 2, 2013
Directors: Qualification/disqualification, appointment, duties and liabilities of directors. Also, explain ‘independent directors’ and their responsibilities.

Company law in Malaysia is governed by Companies Act 1965. This Act is modelled on English Companies Act 1948 and Australian Uniform Companies Act 1961. Therefore, references will be made to English and Australian cases for interpretation of the law on certain areas.

In every company there are directors to manage and direct the company. A company’s directors and officers are responsible for managing the company’s business and affairs. In small companies, particularly small family companies, some or all of the shareholders will typically be involved in the management of the company. Section 4(1) of Companies Act 1965 state that a director is a person who occupies the position of a director and the definition includes a shadow director and de facto director. However, larger companies will have specialised managers conducting the business of the company. These managers may own only a small proportion of the company’s shares. Furthermore, the term director includes Chief Executive Officer (CEO), Chief Operating Officer (COO) and Chief Financial Officer (CFO) is stated in Section 132(6) of Companies Act.

A shadow is a person who is formally appointed as a director but the Board of Director is accustomed to act in accordance with such person’s instruction and directions. Thus, a de facto director is a person who acts as a director although he is not formally appointed as a director. The actions of a shadow director and a de facto director will bind the company. This is because the board of director has accepted and carried out the instructions and directions as regard to the shadow director and has allowed the de facto director to act as a director of the company.

There are many types of directors in company. First is governing director which is usually found in a small private company. They are the major decision maker in the company. Second is a managing director who is full-time director and actively involved in the management of the company. They also considered as an employee and an officer of the company. Third type of director is someone who is most the time will chair the general meeting of the shareholder. The director called as chairman and he/she will sign the minutes of the meeting. Forth, an alternate director or substitute director is a person who will replace a director for certain period of time. He has the powers, rights, duties and responsibilities of a director and therefore he is an officer of the company. Fifth is a nominee director that appointed to represent the interest of certain persons for example is shareholder, employees or creditors.

The Companies Act 1965 under Section 122(1) required all company to have at least two (2) directors, who are natural persons (normal person). The directors are collectively referred to as the board of directors .The directors are selected in the manner agreed between the members and reflected in the company’s articles of association. Upon incorporation, the name of these two directors must be specified in the memorandum or articles of association. The articles of association of the company contain the rules governing the internal regulation and operation of the company, and include rules dealing with the power of the relationship between management and the shareholders, the appointment of directors, the conduct of general meetings, and the right and obligations of shareholders. The directors are usually responsible for managing the business of the company. The precise scope of the director’s powers, and the division of decision making power between members and directors, depend on the law and the company’s articles of association. These directors cannot be alternate or substitute directors.

There are many factor that can be disqualified a director of company. The factors that will be...
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