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DUTIESOFDIRECTORSFORPRIVATE
LIMITEDCOMPANIES
Acompanyisaseparatelegalentity,separateanddistinctfromitsindividual

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members/shareholders.Membersofthecompanywillappointdirectorswhowillbeentrustedwith

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thepowerandauthoritytomakedecisionsfortherunningofthecompanyandmanagethe

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company'saffairs.
Formanysmallbusinesses,membersofthecompanywhohavecomeupwiththeirowncapitalto

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fundtheirbusinessesareofteninvolvedinthedaytodaymanagementofthecompany.These
membersusuallyappointthemselvestobethedirectorsofthecompany.
Forlargerbusinessessuchaspubliclistedcompanies,itispracticallyimpossibleforthe
shareholderstomanagethecompany'saffairsandthereforedirectorsareempoweredtooperate
thecompany.

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Whataretherequirementsofdirectorsofacompany?

CompanyIncorporation

Theremustbeatleast2directorswhoeachhavehis/herprincipaloronlyplaceofresidence

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withinMalaysia.
Toqualifytobecomeadirectorofacompany,hemustbe:

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1.Anaturalperson
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2.Offullage(18yearsoldandabove)
3.Ofsoundmind

(GST)

4.NotdisqualifiedundertheCompaniesAct1965
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Directorsarenotrequiredbylawtohavespecialknowledge,orexperiencetoactinthatcapacity.
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Howtoappointdirectors?

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Foranewlyincorporatedcompany,theshareholdersofthecompanyhavebeforeorupon

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incorporationofthecompanydecidedwhotheywanttobethedirectorsofthecompanytomanage

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theaffairsofthecompany.

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ThefirstdirectorsarenamedintheMemorandumofAssociationorArticlesofAssociation(the

BusinessCapitalWhereis

incorporationdocuments)andtheywillholdofficeuntilthefirstannualgeneralmeetingwherethey

theMONEYcomefrom?

willretire.AfirstdirectormustlodgewiththeCompaniesCommissionerofMalaysiaaForm48A,
whichisastatutorydeclarationthedirectorisnotanundischargedbankruptandhasnotbeen

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convictedofanoffence.

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RulesgoverningthesubsequentappointmentofdirectorsarestatedintheArticlesofAssociation

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ofacompany.TheTableAoftheCompaniesActprovidesthatdirectorsmayappointdirectorsto
fillcasualvacanciesaswellastoappointadditionaldirectors,aslongasthenumberofdirectors
doesnotexceedthenumberfixedbymembersandasstatedintheArticlesofAssociationofthe

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company.Foranychangesindirectors,thecompanymustsubmitaForm49totheCompanies
CommissionofMalaysia.

Whohasthepowertoremovedirectors?
TheremovalofdirectorsisalsogovernedbytheArticlesofAssociationofacompany.Usually,the

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removalofdirectorsrequiresonlyanordinaryresolution.Ifthereisnosuchprovision,adirector

(TAX)

canbe'removed'bynotreelectinghimattheAnnualGeneralMeetingwhenheretiresbyrotation,

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providedthatthearticlesrequiredirectorstoretirebyrotation.

Whatisthedifferencebetweenexecutiveandnonexecutivedirector?
Anexecutivedirectorisasalarieddirectorwhoisfulltimeworkinganddelegatedwithmanagerial
orexecutivepowersbytheboardtocarryoutdaytodaymanagementofthecompany'sbusiness.

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Nonexecutivedirectorisadirectorwhodoesnotworkforthecompanyonafulltimecapacityand
receivearelativelysmallerdirector'sfees.Thefunctionofanonexecutivedirectoristodetermine
theoverallpolicyofthecompany.

Whatisamanagingdirector?
Themanagingdirectoristhechiefexecutiveofficerofthecompany.Heisappointedbytheboard
andisanexecutivedirector.

Whatarethedutiesandresponsibilitiesofdirectors?
Directorswhoactasagentsofacompanyhavefiduciarydutiestowardsthecompany.Their
fiduciarydutiesinclude:
1.Actbonafineintheinterestforthecompany.
2.Nottoplacehimself/herselfinapositionwherethereisaconflictbetweentheirdutytothe
companyandhispersonalinterestordutiesofothers.
3.Nottomakeanysecretprofitoutofthepositionasdirector.
Thestatutorydutiesofthedirectorsinclude:
1.Acthonestlyatalltimesandusereasonablediligenceinthedischargeofduties.
2.Nottomakeimproperuseofinformationobtainedbyvirtueofofficetogainadvantage
personallyortocausedetrimenttocompany.
3.Nottomakeimproperuseofunpublishedpricesensitiveinformationtogainpersonalbenefit.
4.Seekapprovalofthecompanyingeneralmeetingbeforedisposeoforexecuteany
transactionforthedisposalofasubstantialportionofthecompany'sundertakingorproperty.
5.Disclose/givenoticetothecompanydisclosinghisshareholdingsandanychangesthereof.
6.Discloseinterestinanycontractorproposedcontractmadebythecompany.
7.Makesureregistersandstatutorybooksarekeptupdated.
Thedirectorsarealsoresponsibletoensurethefollowingrequirementsarecompliedwith:
1.HoldingofCorporateMeetings
2.Registrationofcertainresolutionsandagreements

3.Recordingminutesofallmeetings
4.MakingtheannualreturnandlodgementwiththeCompaniesCommissionerofMalaysia
5.Keepingproperaccountingrecords
6.Tablingaccounts,balancesheetanddirectors'reportatAGM
7.Circulationofaccounts,balancesheet,directorsreportetctomembers
8.Appointmentoffirstauditors
9.Complywithrestriction,limitationorprohibitionofprivatecompany
10.Appointmentofqualifiedpersonsassecretaries
11.Maintainingregisteredoffice
12.Registrationoftransferofshares
13.Makingdeclarationofsolvencyinthecaseofvoluntarywindingupbymember
14.Ensuringthatpaymentofdividendsisfromprofitsonly
15.Registrationofcharges

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