Section

4 CA65 - A director is dened as any person occupying the position of a director of a corporation by whatever name he is called.

Directors

Types of Directors
1. Executive Director - Full time directors who are also involved in the management of the co. i.e. performs a specic role in the management of the co. (usually also an employee of the co. under a service contract). 2.Non-executive Director - No involvement in the daily management i.e. no specic function to perform in the management. Acts as a member of the board and usual involvement is to attend board meetings only. Role has increased in recent years with the emphasis on corporate governance - especially for public co.s - Re Continental Assurance Co of London plc 3.Alternate Director - The alter ego of someone else, they turn up at meetings when the directors are unable to do so. - Section 122(1) CA65 - An alternate or substitute will not be considered in the statutory minimum number of directors. 4.Informal/De Facto Director - One who acts as a director though not appointed formally. 5.Shadow Director - Directors for legal purposes if the BOD are accustomed to act in accordance with their directions and instructions. - Subject to the same duties as executive directors. 6.Managing Director - One of the directors appointed to carry out overall day-to-day management functions

Section 122(1) CA65 There must be at least 2 directors, each of whom must have his principal or only place of residence in Malaysia. Section 122(2) CA65 Must be a natural person of full age.

Appointment of Directors

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Disqualication of Directors

Share Qualication
Although the Companies Act does not impose a share qualication on directors, the AA of the co. may so impose. Section 124 CA65 - Where the AA require directors to acquire and hold a certain minimum number of shares, the directors must obtain such shares within two months of appointment or such shorter period as is stated in the articles. - The director must vacate oce, if he has not obtained the share qualication within the stipulated period or if after so obtaining it he ceases at any time to hold his qualication. - If the director enters into a contract on behalf of the co. while he is so disqualied, the contract is nevertheless valid by virtue of Section 127 CA65, which states that the acts of a manager, director or secretary will be valid notwithstanding any defect that may afterwards be discovered in his appointment or qualication. - Dawson v African Consolidated Land and Trading Co
(J01 Q11a(i); J04 Q10a)

Undischarged Bankrupt
Section 125 CA65 - An undischarged bankrupt cannot take part in the management of the co. unless he has the leave of the court. - Leave will only be granted provide Notice of Intention to apply has been served on the Minister and the Ocial receiver and they may oppose the granting of the application. - Breach - Imprisonment 5 years or ne of RM100,000 or both. - Aim - to protect the public.

Person Unt to be Directors

(D04 Q11a)

Age Limit
Section 129(1) CA65 No person of or over the age of 70 may be appointed or act as a director of a public co. or a subsidiary of a public co. Section 129(2) CA65 The oce of a director of such a co. shall become vacant at the conclusion of the AGM next after he attains the age of 70 Section 129(3) CA65 Any act done by a person as director shall be void notwithstanding that it is afterwards discovered that there was a defect in his appointment or that his appointment had terminated by virtue of subsection (2) Section 129(6) CA65 - Special procedures for the appointment of such over aged directors. - May be reappointed by a resolution passed by a 3/4 majority at a GM of the co. of which 14 days notice has been given.
(J01 Q11b; D01 Q9b)

Section 130 CA65 - Where a person has been convicted of certain oences are disqualied from being director of co. ;OR - Whether directly or indirectly, taking part in the management of co.s. - The oences referred to are: (i) S130(1) - Oences in connection with the promotion, formation or management of a corporation. (ii)S130(2) - Oences involving fraud or dishonesty punishable on conviction with imprisonment for 3 months or more. (iii)S130(3) - Oences under S132 (duty and liability of ocers), S132A (dealings by ocers in securities) and S303 (liability where proper accounts are not kept) of CA65. A person convicted under these sections will be disqualied for a period of 5 years from the date of conviction, of if he has been sentenced to imprisonment, from date of release from prison, However, he may be a director or otherwise be involved in the management of co. if he obtains leave of the Court. Section 130A CA65 - A disqualication order may be made by the court against a person on the application of Registrar or Ocial Receiver, if it appears to the court that the person: (i) Is or has been, a director of a co. which has at any time gone into liquidation and was insolvent at that time; and (ii) Is or has been, a director of such other co. which has gone into liquidation within 5 years of the date on which the rst mentioned co. went into insolvent liquidation; and (iii)That his conduct as a director of any of those co. makes him unt to be concerned in the management of a co. - This disqualication order would disqualify that person from being a director of, or in any way, whether directly or indirectly, being concerned or taking part in the management of a co., except with leave of the court. - The order may be made for a max period of 5 years.

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Vacation of Oce

By Death of Director Resignation

(J03 Q9c)

Removal
Removal by Members Section 128(1) CA65 A director of a public co. may be removed from oce by an ordinary resolution before the expiry of his term of oce, notwithstanding anything in its MA or AA or in any agreement between it and him. Before such a director can be removed, 1. Special notice* must be given to the co. of any resolution to remove a director. 2. Upon receiving such a notice, the co. is required forthwith to send a copy of the said notice to the director concerned. 3.The director concern has the right to make written representations of a reasonable length and require that copies of them be forwarded to the members. 4.However, by Section 128(4) CA65, the representation must not contain defamatory matter intended to obtain needless publicity. The co. may apply to the court for permission not to distribute copies of it to the member. 5.If the co. does not comply either because it received the representations too late or due to its own default, the director may require the representations to be read out at the meeting - Section 128(3) CA65 6.He is also entitled to attend the meeting and to be heard orally before the vote is taken on the proposed resolution to remove him. 7.If the removal of a director results in a breach of contract btw the director and the co, the director will be entitled to damages. Southern Foundries Ltd v Shirlaw. - Section 128(7) CA65. For Private Co. - Procedure to remove director is dependent on its AA and as a general rule, restriction in S.128 do not apply. - Article may provide that a director may be appointed for life. However, - Private co. which have adopted Table A of Fourth Schedule of CA65, Article 69 will apply. - Article provides that a co. may, subject to S.128, remove a director by ordinary resolution. - Thus, they may be removed in accordance with S.128. *Special notice - Section 153 CA65 - is a notice of 28 days given to the co. by those proposed to remove the director. Removal by Other Directors - Not possible for a public co. - Only possible for private co. IF provided in the AA
(J03 Q9b)

- A director may be able to resign from oce at anytime he wishes. - Subject to Section 122(6) CA65 - notwithstanding anything contained in this Act or in the MA or AA of a co. or in any agreement with a co., a director of a co. shall not resign or vacate his oce if, by his resignation or vacation from oce, the no. of directors is reduced below 2 i.e. the min required under the CA. - Any purported resignation or vacation of oce in contravention of this section shall be deemed to be invalid. - However by Section 122(7) CA65 - this rule does not apply where a director is required to resign or vacate his oce by reason of not obtaining his share qualication or by reason of his disqualication under this Act or any other written law.

Disqualication Retirement
- AA usually provide for it on a rotation system. - Subject to Section 122(6) CA65.

Automatic Vacation
-Refer to Age Limit-

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Compensation for Loss of Oce

(ex-gratia payments)
(D99 Q10a)

General Rule - Section 137(1) CA65 - Not lawful for a co. to make to a director any payment by way of compensation for loss of oce as an ocer of that co. or subsidiary of that co. or as consideration for or in connection with his retirement from any such oce. - Unless there is a disclosure to the members and approval by the GM. - If there is a contravention of the section, director who receives the payment holds it in trust for the co.

Exceptions - Section 137(5) CA65 - Any bona de payment by way of damages for breach of contract. - Any bona de payment by way of pension or lump sum gratuity for past services but the sum in question must not exceed the total emoluments of the director in 3 years preceding his retirement or death. - If pursuant to any agreement, before he became a director as consideration for him agreeing to serve as a director. - Southern Foundries v Shirlaw

Issue of Shares
(J05 Q11)

Section 132D CA65 - Directors may not exercise their power to issue shares unless they obtain the approval of the co. in GM. - Howard Smith Ltd v Ampol Petroleum Section 132D(6) CA65 - Any issue of shares made by a co. in contravention of this section shall be void and consideration given for the shares shall be recoverable accordingly. Section 132D(7) CA65 - Any director who knowingly contravenes or authorizes the contravention of the section is liable to compensate the co. and the person to whom the shares were issued for the loss or damage sustained as a result of the contravention.

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Loans
(J99 Q9)

Loans to Directors
Section 133(1) CA65 General Rule - A co. (other than exempt private co.), may not make a loan to a director of the co. or a related co. or enter into any guarantee or provide any security in connection with a loan made to such a director. Exceptions (a) Co. may provide such a director with funds to enable him to meet expenditure incurred or to be incurred by him for the purpose of enabling him to properly perform his duties as an ocer of the co. (b) Co. may provide such a director who is in full-time employment with the co. or its holding co. with funds to meet expenditure incurred or to be incurred by him in purchasing or otherwise acquiring a home. (c) The co. may give a loan to a director who is in full- time employment with the co. or its holding co, where the co has, at a GM of the co, approved of a scheme for the making of loans to employees of the co, and the loan is in accordance with that scheme. Section 133(2) CA65 - First two exceptions may be exercised by co. either with prior approval of the co. in GM or, alternatively, on condition that if the approval of the co. is not given at or before the next AGM, - The loan shall be repaid or the liability under the security or guarantee shall be discharged, within 6 months of the conclusion of the meeting. Section 133(5) CA65 - The co. has the right to recover the amount of any loan or amount for which it becomes liable under any guarantee entered into or in respell of any security given contrary to this section.
- Co-operative Central Bank Ltd v Feyen Development Sdn Bhd where the Federal Court overruled Che Wan Development Sdn Bhd v Co-operative Central Bank, which had held that the guarantee or security granted in breach of S.133(1) was void.
(J09 Q9)

Loans to Persons Connected with Directors

Section 133A CA65 General Rule - Co.s (other than exempt private co.s) are prohibited, inter alia, from giving loans to persons connected with directors. Section 122A CA65 denes persons connected with director. Inter alia, it includes members of a directors family. Section 122A(2) CA65 further states that a member of a directors family includes his spouse, parent, child, brother, sister, and the spouse of his child, brother or sister. Exceptions (a) Loans between holding and subsidiary co.s. (b) Co.s whose ordinary business includes the lending of money. (c) Loans to full-time employees for the purpose of meeting expenditure incurred or to be incurred for purchasing or otherwise acquiring a home; OR in accordance with a scheme for the making of loans to employees approved by the co. in GM.
(J99 Q9)

*Non service director not qualify under 3rd exception.

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Substantial Property Transactions Involving Directors

Section 132E CA65 - Subject to subsection (2) and Section 132F, a co. shall not carry into eect any arrangement or transaction where a director or a substantial s/holder of the co. or its holding co, or a person connected with such a director or substantial shareholder - - (a) acquires or is to acquire shares or non-cash assets of the requisite value, from the co; or - (b) disposes of or is to dispose of shares or non-cash assets of the requisite value, to the co. Section 132E(2) CA65 - An arrangement or transaction which is carried into eect in contravention of subsection (1) shall be void, unless there is prior approval of the arrangement or transaction - (a) by a resolution of the co. at a GM - (b) by a resolution of the holding co. at a GM, if the arrangement or transaction is in favour of a director or substantial s/holder of its holding co. or person connected with such director or substantial s/holder. Breach will result in transaction being void. Section 132E(4) CA65 - where an arrangement or transaction is carried into eect by a co. in contravention of subsection (1) and (2) that director, substantial s/holder or person connected with such director or substantial s/ holder and any director who knowingly authorized the arrangement or transaction shall, in addition to any other liability be liable - (a) to account to the co for any gain which he had made directly or indirectly by the arrangement of transaction; AND - (b) jointly and severally with any person liable under this subsection, to indemnify the co. for any loss or damage resulting from the arrangement or transaction. Section 132E(7) CA65 (what amounts to requisite value) - co. other than those who shares are listed on a stock exchange. - i.e. Private co and Unlisted Public co. - means value above RM250,000 or if it does not exceed RM 250,000 but exceeds 10% of the cos asset value, provided not less than RM10,000.

Substantial Shareholding
Section 69D CA65 (2) A person has a substantial share holding in a co., being a co. the share capital of which is divided into 2 or more classes of the shares, if he has an interest or interests in one or more voting shares included in one of those classes and the nominal amount of that share, or the aggregate of the nominal amounts of those shares, is not less than 5% of the aggregate of the nominal amounts of all the voting shares included in that class. (3) A person who has a substantial shareholding in a co. is a substantial s/holder of that co.

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