Duties of Director in Malaysia

Duties of a director in Malaysia

• Act honestly in the interest of the company

Section 132 (1)

Directors must act honestly and use reasonable diligence in the discharge of the duties of his duties.

Director must act honestly. Act honestly must covers three aspects of the duty of acting in good faith in the interests of the company and not the interests of the other party, does not put himself in a situation where there is a conflict between the obligations of the company with the interests of itself and the use of power and assets that have been entrusted to him for the purposes specified not for other purposes.

Re Smith v Fawcett ltd

Lord Greene M.R the principles to be applied in cases where the articles of a company confer a discretion on directors with regard to the acceptance of transfers of shares are, for the present purposes, free from doubt. They must exercise their discretion bona fide in what they consider - not what a court may consider - is in the interests of the company, and not for any collateral purpose. They must have regard to those considerations, and those considerations only, which the articles on their true construction permit them to take into consideration, and in construing the relevant provisions in the articles it is to be borne in mind that one of the normal rights of a shareholder is the right to deal freely with his property and to transfer it to whomsoever he pleases. Another consideration which must be borne in mind is that this type of article is one which is for the most part confined to private companies. Private companies are in law separate entities just as much as are public companies, but from the business and personal point of view they are much more analogous to partnerships than to public corporations. Accordingly, it is to be expected that in the articles of such a company the control of the directors over the membership may be very strict indeed. There are, or may be, very good business reasons why those who bring such companies into existence should give them a constitution which confers on the directors powers of the widest description.

Re W v M Roith ltd.

Roith controlling holding company with a majority share and he is one of the three directors. He then entered into a contract of employment with a company that provides a pension to his wife when he died. Roith died and his wife claim the pension. The court ruled that the contract is not binding on the company. The court found that the contract was made not in the interests of the company but for his wife.

• The director does not put himself in a situation where there is a conflict between his duty to the company and personal.

Directors are prohibited from placing himself in a situation where there is a conflict between the duties of the company and personal interests. This duties is to prevent directors from receiving benefits for themselves wrong in any transaction in which he requested to act on behalf of the company. In addition, it also aims to prevent the director put himself in a situation where directors act in the interests of himself. If the director of the secret profit, advantage must be granted to the companies.