1

THE DIRECTORS
2
COMPANY AND MANAGEMENT
A company is a separate legal entity with no physical existence
It has a legal existence an independent legal person
separate and distinct from its individual members or
directors
The mind and will of a company lies with the management
of the company
Its day-to-day operation and decision is performed by
persons who act for and behalf of the company:
OFFICERS- directors, secretary, employees, receiver and
liquidator
3
TYPES OF DIRECTORS
Executive
Director
Non-executive
Director
Independent
Director
Alternate
Director
Associate
Director
Managing
Director
4
DIRECTORS
A group of individuals who have been entrusted with the
power and authority to make decisions for the running of the
company or the management of the company
Section 122 of CA:
a) every company must have at least 2 directors & named
in the M&A
b) Each must have principal / residence within Malaysia
c) Natural person of full age (18 years old)
d) Sound mind
Appointed by the shareholders


Shadow director persons who are not named as directors
of the company but who act behind
the scenes to exercise a certain degree
of control over the company
de facto
director
Executive & non-executive director
Executive director
1) Full time employee
2) Draw salaries from the
company
3) Performing managerial
function
4) Members of BOD with
specific executive
responsibilities

E.g. Financial Director
Non-executive director
1) Not employees of the
company
2) Receive fees (determined by
the members at general
meeting)
3) To protect & act in the best
interest of his employer as
shareholders in the
company.
4) Member of BOD without
specific executive
responsibilities


6
CAHAYA SUCI
BERHAD
Public
40%
Intan Sdn Bhd
30%
Delima Bhd
30%
Board of Directors
Non-executive
Director
(Full-time employee
of Intan Sdn Bhd)
Executive directors

Non-executive
Director
(Full-time employee
of Delima Bhd)
Relationship between Executive & non-executive directors
Alternate/Substitute director
appointed by a member of the board
Purpose: to act & speak during periods of absence/
incapacity of the director
A director cannot appoint an alternate to act UNLESS it is
authorised by the Articles
Must give his consent to act in the FORM 48A before his
appointment
Not required to hold qualification shares
Alternate director shall automatically be vacated if
substantive director vacates office
Alternate director entitle to receive:
a) notice of board meeting
b) to attend & vote
c) to exercise all powers of the substantive director in his
place
Managing Director (MD)
a) Usually the AOA permits the BOD to appoint MD
b) Otherwise, need to alter the AOA for BOD to appoint
MD
BOD decides terms and conditions
MD to sign a contract of service
c) Not subject to retirement by Rotation while in service
d) Appointment terminated if cease to be director (from any
cause)
e) Co can terminate even if term of service not yet expired

Associate/Special Directors (AD)
Not directors within meaning in Act.
Senior exec salaried employees:
No right to attend or vote any board meeting
except by invitation & consent of directors
The purpose:
a) Provide training BOD appointment in
future
b) Improve status ; deal with customers or
suppliers


Nominee directors (ND)
A person who has been designed to act for
another in his place
Nominee/representative of major shareholder
may apply to Bursa Malaysia to be considered as
an independent director in the following
condition:
a) if the major shareholders aggregate
shareholding in the listed corporation, directly
@ indirectly, is more than 15% of issued &
paid-up capital
b) If the major shareholder is not deemed to be a
promoter of the listed corporation
11
INDEPENDENT DIRECTORS (ID)
An ID is a director who is independent of management and free from any
business or other relationship which could interfere with the exercise of
independent judgement
Is deemed independent if he meets the following qualification:
1. Not an executive director
2. Not an officer
3. Not a relative of any executive director, officer or major
shareholder
4. Not acting as a nominee or representative of any executive
director or major shareholder
5. Not engaged as a professional adviser
6. Not engaged in any transaction which exceed RM250,000
Bursa Malaysia requirements: at least two directors or one-
third of the board of directors, whichever is higher, are IDs
12
he is not a bankrupt
he has not been convicted
he has not been imprisonment of any offence within the
period of 5 years immediately preceding the date
of the declaration
he consent to act as a director of the company
Natural person of full age (18 years old)
Lodge Statutory Declaration (Form 48A) within 1 month from
the date of appointment together with Form 49
1
st
director named in M&A
1
st
director will hold office until the 1
st
AGM where they will
retire
Subsequent appointment: by the director themselves



QUALIFICATION OF DIRECTORS
Vacation of office
A director office shall become vacant in the following
circumstances:
1. death - If only 1 director, any shareholder can request to
appoint new director
2. provisions in the AOA - Disqualified to act as director in
the following circumstances ( resignation, lunatic &
absent from the board meeting)
3. statutory provision contained in the Act - Share
qualification, undischarged bankrupt, age limit,
disqualification by Court Order(e.g fraud)
4. Restriction by Listing Requirements of the Bursa
Malaysia - Max 25 directorship
14
Maximum 25
Max 10
in
listed companies
Max 15
in
non-listed
companies
With effect from 1 April 1999, Bursa Malaysia restricts the
number of directorship held by a person who is a director of a
company listed with KLSE
DIRECTORSHIP OF PUBLIC LISTED COMPANIES
A person above the age of 70 is not qualified to be
appointed as a director of a public listed company
15
DISQUALIFICATION OF DIRECTORS
If a director is convicted of the following offences, both
within or outside Malaysia, he shall be disqualified from
acting as a director within 5 years from the date of his
conviction, or from the date of his release from prison:
1. Offences in connection with the promotion, formation or
management of a company;
2. Offences involving fraud and dishonesty punishable with
imprisonment for 3 months or more;
3. Failure to act honestly and to exercise reasonable
diligence in the discharge of statutory duties as a director
4. Making improper dealings in securities to gain directly
or indirectly an advantage for himself, or for any other
person of specific confidential information of the
company
16
RETIREMENT BY ROTATION
DISQUALIFICATION OF DIRECTORS
REMOVAL OF DIRECTORS
A public company may remove a director by ordinary resolution
before the expiry of his term of office
i. Article 63 of Table A provides that for the first AGM all directors shall
retire from office except the MD
ii. Article 66 of Table A provides that if the retiring director is eligible for re-
election and offers himself for re-election, he will be deemed re-elected
iii. A director appointed to fill casual vacancy or as additional director shall
hold office until the next following AGM
17
REMOVAL OF DIRECTOR
(Section 128)
Shareholder(s)
Special
Notice
( not less 28 days)
COMPANY
Director
CCM
Shareholders Make
representation
Board
meeting
General
Meeting
Section 128(6) states a person appointed director in place of a person removed
shall be treated, for the purpose of determining the time at which he or any other
director is to retire, as if he had become a director on the day on which the person
in whose place he is appointed was last appointed
1
2
3
3
F11
F49
18
MANAGEMENT POWERS
The general power of management and control
vested in the Board
Specific powers vested in general meetings
Powers of the directors on certain matters can only
be exercised upon approval by the shareholders
at a general meeting
Where the director exceeds their authority as given
to them by the Articles, it is open to the general
meeting to ratify the unauthorized transaction.
19
Powers vested in the Board of Directors
Powers conferred on directors are conferred to them as a board
with such powers being exercised through collective decisions
and not in their respective individual capacity, with the
exception of the Managing Director. For example decisions
relating to,
-Transfer of shares
-Convene EGM
-Appointment of directors to fill casual vacancy
-Borrowing of money and creating securities for any debt or
liability
-Use of common seal of the company
-Appointment of attorneys
-Appointment of alternate directors
-Fixing of quorum
-Formation of committees
-Appointment of Managing Director
-Recommendation on quantum of dividends
-Recommendation for capitalization of profits
20
SPECIFIC POWERS IN GENERAL MEETINGS
election of directors in place of those retiring
removal of directors
determination of directors remuneration
fixing of shareholding qualification for directors
declaration of dividend
capitalization of profit
Apparent authority
A company will be bound by a director who has acted ultra
vires in his powers as conferred by the articles based on the
doctrine of apparent authority.
Apparent authority arises where the director does not have actual
authority to bind the company in some particular transaction but has
been represented as having authority to enter into the transaction
21
DISCLOSURE OF INTERESTS IN
CONTRACTS, PROPERTIES, OFFICES
Section 131 of the CA provides:
that a director who is in any way interested in a contract
or proposed contract with the company (whether directly
or indirectly), is required to declare the nature of his
interest at the meeting of directors as soon as practicable,
after the relevant facts have come to his knowledge
A director must also declare his interests in any property
or office held where there might be a conflict of interest
22
DISCLOSURE OF A DIRECTORS
SUBSTANTIAL SHAREHOLDING
A director who has an interest(s) in:
i) One of more voting shares in the company; and
ii) The nominal amount of that shares is more
than 5% of the nominal amount of all the
voting shares in the company
Interest in shares includes:
i) As holder of the shares
ii) As beneficiary under a trust
iii) As a joint holder
iv) Interest arising from execution of a contract

23
TRANSACTIONS INVOLVING DIRECTORS
tax-free payments to directors
Compensation for loss of office
loan to directors
loans to persons deemed connected with directors
disposal by directors of companys undertaking of property
substantial property transactions
common directors with substantial shareholdings
issue of shares by directors
Securities Commission guidelines on dealings by directors
related party transactions in a listed company
24
LOAN TO DIRECTORS
Section 133 of CA prohibits a company from making a loan to
a director of the company, or from entering into any
guarantee, or providing any security, in connection with a
loan made to such director by other person
Exception to the Rule
i) Loan to a director to meet expenses incurred by him in the
performance of his duties as a director of the company
ii) Loans to a full-time director of the company, or its holding
company, to enable him to acquire a home
iii) Loans to full-time director under an approved loan scheme for
employees
The above exceptions to the restriction are effective only if
the company has given prior approval in general meeting
25
LOAN TO PERSONS CONNECTED WITH DIRECTORS
Restrictions of loans to directors are extended to persons
deemed connected to the directors
Spouse
Parent
Child (+adopted & step)
Brother
Sister
Son/daughter-in-law
Brother/sister-in-law
A trustee
of a trust
under
which a
director or
member
of his
family is a
beneficiary

A partner
of a director
or a partner
of a person
connected with
that director
A body
corporate
which is
associated
with a
director
-Controlling
interest
-voting
rights
- chairman
26
DUTIES OF DIRECTORS
Common Law duties:
1. Duty to act bona fide
in the interests of the
company as a whole
2. Duty to exercise
powers for proper
purposes
3. Avoid conflict of
interest
4. Exercise care,
diligence and skill
Statutory duties:
1. General duty to make disclosure
2. Duty to act honestly using
reasonable diligence
3. Duty to keep accounts
4. Directors Report
5. Conflict of interest
6. Fraudulent trading by directors
7. Penalty for falsification of books
by directors
8. Insider trading by directors
9. Directors Code of Ethics
27
RELATED PARTY TRANSACTIONS
A related party is:
a substantial shareholder
a director
an associate of the substantial shareholder
an associate of the director
An associate of a substantial shareholder/ director:
family (spouse and children)
trustees of any trust beneficiary
controlling interest of 30% or more
28
RELATED PARTY TRANSACTIONS
Securities Commissions requirements:
a circular must be sent to all shareholders
an independent adviser must be appointed
must abstain from board deliberation and voting on the
relevant resolution
an independent valuation
a statement by the directors transaction is fair and
reasonable
in a meeting to obtain shareholders approval
- abstain from voting on the resolution
29
RELATED PARTY TRANSACTIONS
Transactions NOT regarded as RPT:
payment of dividend; bonus issue
Transaction between PLC or any of its subsidiaries and
an investee company
Transaction between PLC or any of its subsidiaries and
another person
an acquisition or disposal by PLC or any of its
subsidiaries from or to a third party
the provision of financial assistance in the
ordinary course of business
directors fees and remuneration
To discuss in the tutorial
Code of ethics for company directors Pg 197

Corporate directors training programme (CDTP)
Pg. 200