A company is a separate legal entity, separate and distinct from its individual members/shareholders. Members of the company will appoint directors who will be entrusted with the power and authority to make decisions for the running of the company and manage the company's affairs.
For many small businesses, members of the company who have come up with their own capital to fund their businesses are often involved in the day-to-day management of the company. These members usually appoint themselves to be the directors of the company.
For larger businesses such as public listed companies, it is practically impossible for the shareholders to manage the company's affairs and therefore directors are empowered to operate the company.
There must be at least 2 directors who each have his/her principal or only place of residence within Malaysia.
To qualify to become a director of a company, he must be:
Directors are not required by law to have special knowledge, or experience to act in that capacity.
For a newly incorporated company, the shareholders of the company have before or upon incorporation of the company decided who they want to be the directors of the company to manage the affairs of the company.
The first directors are named in the Memorandum of Association or Articles of Association (the incorporation documents) and they will hold office until the first annual general meeting where they will retire. A first director must lodge with the Companies Commissioner of Malaysia a Form 48A, which is a statutory declaration the director is not an undischarged bankrupt and has not been convicted of an offence.
Rules governing the subsequent appointment of directors are stated in the Articles of Association of a company. The Table A of the Companies Act provides that directors may appoint directors to fill casual vacancies as well as to appoint additional directors, as long as the number of directors does not exceed the number fixed by members and as stated in the Articles of Association of the company. For any changes in directors, the company must submit a Form 49 to the Companies Commission of Malaysia.
The removal of directors is also governed by the Articles of Association of a company. Usually, the removal of directors requires only an ordinary resolution. If there is no such provision, a director can be 'removed' by not re-electing him at the Annual General Meeting when he retires by rotation, provided that the articles require directors to retire by rotation.
An executive director is a salaried director who is full-time working and delegated with managerial or executive powers by the board to carry out day-to day management of the company's business.
Non-executive director is a director who does not work for the company on a full time capacity and receive a relatively smaller director's fees. The function of a non-executive director is to determine the overall policy of the company.
The managing director is the chief executive officer of the company. He is appointed by the board and is an executive director.
Directors who act as agents of a company have fiduciary duties towards the company. Their fiduciary duties include:
The statutory duties of the directors include:
The directors are also responsible to ensure the following requirements are complied with: