Directors: Qualification/Disqualification, Appointment, Duties an...

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

By | March 2013
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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...
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