INTRODUCTION 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. After this, we are able to know more about directors, the recommendations, the qualifications and also the duties as directors.

A company as an artificial legal entity must exercise its powers through the medium of human agencies. These human agencies are authorized to act on the companys behalf. These persons are called directors. Discuss the following: a) Requirement for director. A company must have a minimum of two directors, being natural persons of full age and having their principal or only place of residence in Malaysia and not under bankruptcy .Directors need not be shareholders of the company. A director has onerous duties under the Companies Act as in common law. The duties of directors stipulated in the Companies Act are not exhaustive and generally directors are imposed with statutory duties, duty of care and fiduciary duties. In addition, directors are also governed by a Code of Ethics. Directors also as trustee and agent for the company to deal with external parties. Directors are also required to think, consult, speak and take action for the company. Section 4 company law say: Director includes any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with whose directions or instructions the directors of a corporation are accustomed to act and an alternate or substitute director.1 Many types calling about director alternate director, alternate director or shadow director. Shadow director is a person who does not sit on the board of directors of a company, but the instructions or commands followed by the directors. Appointment of the director Section 122 act company law 1965 say: 122 (1) every company shall have at least two directors who each has his principal or only place of residence within Malaysia. 2 (1A) in subsection (1), director shall not include an alternate or substitute director.

1 2

. companies act and companies regulations. July 1994 companies act and companies regulations. July 1994

Section 122 (3) act company law 1965 say: 122 (3) The first director of a company shall be named in the memorandum or articles of the company. This section states that the memorandum submitted for the purpose of registration of a company shall contain a statement of the names and details related to the individual to be appointed as a director. Qualification of director Section 122 (2) act company law 1965 say: 122 (2) No person other than a natural person of 18 old above hall be a director of a company.3 In the Section 122 (1) act company law 1965 say director appointed in company have to stay in Malaysia. Section 122 (1) act company law 1965 say: 122 (1) every company shall have at least two directors who each has his principal or only place of residence within Malaysia.

In section 124 Act company law 1965 say memorandum or articles of association require the person taking the qualifying share ownership, and the account after he qualified to become the director.4 Section 129 (1) act company law 1965 say: 129 (1) subject to this section but not withstanding anything in the memorandum or articles of the company no person of or over the age of seventy years shall be appointed or act as a director of a public company or of a subsidiary of a public company.

3 4

undang-undang syarikat Aspalella a.rahman,marina hashim.. 2000 undang-undang syarikat Aspalella a.rahman,marina hashim.. 2000

Generally, to qualify to become a director of a company, he must be: 1. A natural person 2. Of full age ( 18 years old and above) 3. Of sound mind 4. Not disqualified under the Companies Act 1965 Directors are not required by law to have special knowledge, or experience to act in that capacity. Every Malaysia-incorporated company must have at least two directors, one of whom shall be ordinarily resident in Malaysia.5 The phrase ordinarily resident is not defined in the Act. Presumably, it connotes residence in Malaysia with some degree of continuity and apart from accidental or temporary absences. It should be noted that there is no nationality requirement, nor is a director required to be domiciled in Malaysia in the conflict of laws sense. Section 122 (1) under companies act stated that every company shall have at least two directors who each has his principal or only place of residence within Malaysia. Every Malaysia-incorporated company must also have one or more company secretaries, who must be resident in Malaysia.6 If there is no secretary the directors may authorize any officer to discharge his functions.7 However the office of secretary may not be left vacant for more than six months. Although the act prescribes that companies must have a minimum number of directors and secretaries, no specific penalty is imposed for the contravention of section 139(1). Under section 139.(1) every company shall have one or more secretaries each of whom shall be a natural person of full age who has his principal or only place of residences in Malaysia. (1A) the first secretary of a company shall be named in the memorandum or articles of the company (1B) the office of secretary of a company shall not be left vacant for more than one month at any one time.

5 6

Section 122 (1) Section 139(1) 7 Section 139(4)

A company as an artificial legal entity must exercise its powers through the medium of human agencies. These human agencies are authorized to act on the companys behalf. These persons are called directors.

b) Person disqualified to be a director: 1. UNDISCHARGED BANKRUPTS A person who is an discharged bankrupt may not be a director of a corporation or take part in the management of corporations whether directly or indirectly.8 An undischarged bankrupt who acts in contravention of this section is guilty of an offence, unless he has the leave of the court to be a director or to participate in the management of companies, as the case may be ( see 8.10 below ). The term corporation includes foreign company,9 and so the prohibition extends to being a director or participating in the management of foreign companies. However, as the criminal jurisdiction of the Singapore courts only extends to offences committed in Singapore,10 an undischarged bankrupt who is a director of a company or who manages companies outside Singapore could not tried here. The disqualification applies even if the person was adjudicated bankrupt in a foreign court, provided that foreign court had jurisdiction in bankruptcy. The question whether a foreign court has jurisdiction in bankruptcy over a particular person is a question of conflict of laws. There is little authority on the question, but it is possible that according to our conflict laws rules a foreign court will be recognized as having jurisdiction to make a person bankrupt only if it had territorial competence11 over him. Foreign courts would be recognized as having territorial competence if the person in question was domiciled in the foreign country12 or possibly if he was carrying on business in that country.13 On principle, if the debtor submitted to the foreign courts jurisdiction our court should recognize the decree of bankruptcy as being effective. However, an appearance merely to contest the jurisdiction of the foreign court is not to be taken as submission.14 A foreign court would not be recognized as having jurisdiction over a person who is not resident or domiciled there.15 The fact that there are assets belonging to the debtor in a foreign country would probably not be sufficient to found a foreign courts jurisdiction according to our conflict rules.16
8 9

Section 148(1) [ Malaysia: section 125(1); note the substantial differences in wording]. See the definition in section 4 [Malaysia; section 4]. 10 Supreme court of Judicature Act (Cap 322), section 15(1)(a). 11 Ralli vs Angullia(1917) 15 SSLR 33, 65(Court of Appeal, straits Settlements);this was a case on an ordinary civil judgment, but it suggested that the principles would be analogous in regard to recognition of foreign bankruptcies. 12 Re Blithman(1866) LR 2 Eq 23 (Master of the Rolls Court, England) 13 Homes Trustee v Homes trustees *1926+ SLT 214 (Court Session. Scotland ) 14 Re Maria Menado[1964] MLJ 266, 268 per Winslow J ( High Court, Singapore ) 15 Sirdar Guardyal Singh v Rajah of Faridkote[1894] AC 670 ( Privy Council on appeal India ); again this is not a bankruptcy case, but the principal are analogous. 16 Re Artola Hermonois (1890 ) 24 QBD 640, 649 ( Court of Appeal, England ).

This section is designed to protect the public on the basis that aperson who is an undischarged bankrupt is prima facie not a fit a person to be entrusted with the management or direction of a company, especially as section 304 [ now section 340 ], by directors as distinct from incompetents directors who are unfit to mange their companies. This section is aimed at the latter category The formulation adopted in this section is designed to ensure that it would be more difficult for those with poor commercial track records to recommence trading under cover of limited liability. . . The evil that the aim at is. . .unpaid and dissatisfied creditors due to the unfitness of the directors to manage these companies effectively.( emphasis needed ) When the section was repealed and re-enacted, Dr. Richard Hu, the Minister of Finance, had this to say regarding the policy underlying the new section14917 It will be seen from the statements of the Ministers that the section is aimed not to so much at much at dastards as at fools.18 It is designed to protect creditors from losing the money to incompetents masquerading of business company. The mischief that the section designed to cure should be kept in mind when attempting to decide whether or not a person is unfit19 within the meaning of the section.20 The unfitness of director of a company in insolvent liquidation is thrown upon the liquidator.21 In practice, one suspects that a disqualification order will not be made except in extreme cases or where there is a public scandal should be reported to the authorities. Section 149(5)(a) defines when a company is deemed to have gone into liquidation for the purposes of the section. Secondly, the section does not apply to a judicial manager or to a receiver or receiver and manager who has become a director in the discharge of his duties.22 The disqualification takes effect from the date specified in the order and may last up to five years.23 The five period stipulated is a maximum. The court can tailor the qualification to fit blameworthiness of the director. Generally, the maximum disqualification would only be appropriate in the most serious of cases.24 Although it is not specifically stated, it may be that the court could order a partial disqualification, eg, allowing a person to mange or direct certain companies. This however would be rare.

17 18

Report of the Select Committee on the Companies ( Amendment ) Bill 1986, at ppD19-D20. The statements of Dr Hu seen to contemplate that the section is to be used against the unscrupulous; this is mistaken, as a scrupulous director could be better dealt with others under the section 339(3), 340(1) and 340(2). 19 unfit is the situation when the managers not capable enough to manage the company. 20 Concerning the use of reports as an aid to the interpretation of statues, see Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG[ 1975] 1 ALL ER 810 ( House Of Lords ). Ministerial stements have been used in Singapore to explain in the mischief at which a particular provision is aimed; see eg Jayasundram Annathurai v A-G, Suit No. 817 of 1983 (unreported) (High Court, Singapore); noted in 1987 BLD [Oct] 710. 21 Section 149(3) 22 See section 255 and 291(6) 23 Section 149(11) 24 Section 149(1)

2. DISQUALIFICATION ON CONVICTION OF CERTAIN OFFENCES.

Where a person is convicted (whether in Singapore or elsewhere) of an offence involving fraud or dishonesty punishable with imprisonment for 3 months or more, he is disqualified under section 154 of the Companies Act from acting as a director of a company or from taking part in the management of the company. This is an automatic disqualification for 5 years as there is no requirement for a disqualification order to be made by the court.

It is noted that section 154 provides for two types of disqualification where a director is convicted of an offence: automatic disqualification and disqualification by court order. A distinction is drawn between a conviction of offences involving fraud or dishonesty on the one hand and a conviction of offences involving the formation or management of a company on the other hand. 25 The former attracts automatic disqualification while the latter is subject to disqualification by court order (disqualification order).26

It is further noted that section 154(6), which allows a director to apply to the High Court for leave to act as a director or take part in the management of the company, applies only to a director against whom a disqualification order has been made. Thus, a director who is automatically disqualified is not able to apply to the High Court for leave.

The Steering Committee considered whether the disqualification regime for conviction of offences involving fraud or dishonesty should be an automatic disqualification regime or a disqualification order regime. In a disqualification order regime, the court will have to consciously impose disqualification and this will not only be for the offences under the Companies Act, but also for appropriate offences under the Penal Code and other written laws. In contrast, in an automatic disqualification regime, it would be for the director concerned to determine whether or not the offence which he is convicted of is one that involves fraud or dishonesty. 27 A disqualification order regime has the advantage of providing certainty to directors and to companies. However, a difficulty with such a regime is that offences involving fraud or dishonesty are not confined to the offences under the Companies Act, and the onus is on the court to disqualify the offender from acting as a company director. The court may not make the disqualification order as the sentencing judge may not have in mind the relevance of the offence to the role of a company director or may not know that the offender is a company director. If the court did not address its mind to the issue of disqualification or if the issue of disqualification was not raised to the court, resulting in the court not making the disqualification order against the director, it would be too late to raise the issue of disqualification thereafter.

18Prior to 1993, section 154 had made no distinction between convictions for offences involving fraud or dishonesty and those involving the formation or management of a company. Both types of conviction had attracted automatic disqualification for a period of 5 years. With the amendments to section 154 in 1993 (Act 22 of 1993), a distinction is now drawn between the two types of conviction.

19 However, for the listed companies, if the SGX decides that an age limit is necessary, an age limit for directors can be imposed in the Listing Manual.

Such difficulty would not arise in an automatic disqualification regime as no court order is necessary. A further advantage of an automatic disqualification regime is that offences of fraud or dishonesty committed outside Singapore would also attract automatic disqualification. In such cases, the Singapore court does not need to make a disqualification order.28 However, there appears to be uncertainty as to what offences would amount to offences involving fraud or dishonesty. The concept of fraud or dishonesty is wide and not connected with the management or formation of a company. There is nothing in the statutory provisions that defines dishonesty in relation to companies. There have been cases where directors are not sure whether the offence which they are convicted of is one involving fraud or dishonesty, and thus are not certain as to whether they become automatically disqualified from acting as a director or from taking part in the management of the company. This uncertainty was highlighted by the District Court in PP v Foo Jong Kan18, where the sentencing judge concluded that as he did not have the appropriate power or jurisdiction to determine whether the automatic disqualification in section 154(1) of the Companies Act applied, he could not determine the meaning of fraud or dishonesty in section 154(1). The learned judge stated: 42. As s 154(1) is triggered when the offence is one of fraud or dishonesty, it would seem appropriate that a determination whether such an offence is committed should be made by the sentencing court. Certainly aside from clear cases particularly those in the Penal Code which require dishonesty as an element of the offence, there may be other offences, including possibly the present one19, in which the situation is less clear, and the matter may call for determination one way or another. The Steering Committee noted that notwithstanding that legislation such as the Companies Act, Securities and Futures Act and Prevention of Corruption Act are silent on what offences amount to offences involving fraud or dishonesty, the director concerned can always apply to the court for a declaration if there is uncertainty as to whether the offence he is convicted of attracts disqualification. Such an application may be made by originating summons. However, until the declaration is made by the court, the director would potentially be in contravention of section 154(1) during the intervening period between his conviction and the court declaration.

28

In a disqualification order regime on the other hand, where directors are convicted of offences overseas, the court may have to review overseas findings of fraud or dishonesty. Other jurisdictions may have different criteria on what constitutes fraud or dishonesty.

The Steering Committee had extensive discussions on the issue and was divided on whether to retain the automatic disqualification regime or move to a disqualification order regime. The Steering Committee considered two options in relation to convictions for offences involving fraud or dishonesty: (a) Retain the automatic disqualification regime, but allow a disqualified director to apply to the High Court under section 154(6) for leave to act as a director or take part in the management of the company; or (b) Move to a disqualification order regime. In the UK and Hong Kong29, directors convicted of offences involving dishonesty are not disqualified automatically, but by way of a court order. Australia provides for automatic disqualification of directors convicted of offences involving dishonesty, but the Australian court may grant leave to a disqualified person who is automatically disqualified.30 In New Zealand, disqualification can be automatic or by court order.31

29

In the Hong Kong Companies Ordinance, the court may make a disqualification order under section 168E against a person convicted of an indictable offence which necessarily involves a finding that he acted fraudulently or dishonestly. The effect of the disqualification order is that the person shall not be a director of a company or take part in the promotion, formation or management of a company without leave of the court (section 168D). The Hong Kong provisions are based on the UK Company Directors Disqualification Act 1986. 30 In Australia, conviction of an offence involving dishonesty and punishable with imprisonment for at least 3 months attracts automatic disqualification under section 206B of the Corporations Act 2001. Under section 206G, the court may grant leave to a disqualified person who is automatically disqualified under section 206B 31 In the New Zealand Companies Act 1993, if a person has been convicted of any crime involving dishonesty, he can be disqualified automatically for 5 years unless he first obtains the leave of the court (section 382),

3.0 VACATION OF OFFICE AND REMOVAL A director may vacate office in several ways. He may resign as a director. He may retire in accordance with articles. His office might fall vacant automatically on the happening of a specified contingency. He may be removed from office in accordance with the articles or the Act. Finally, he may die; as far as can be determined, the Act does not prohibit a director dying in office, nor is any period of notice prescribed before this can be done. 3.1 RESIGNATION The manner in which a director can resign from his office will be provided for in the articles.32 Acceptance of the resignation by the company is not required unless the articles so provide.33 It appears that even if the articles call for written notice of resignation, oral notice may suffice.34 If the articles provide that a resolution ( either of the company or of the board) should be passed before a directors resignation will be effective then the resignation will not be effective until the resolution is passed, however, the director may not withdraw his notice of resignation without the approval of the board or general meeting, as the case may be. Where a director is an employee as well, his resignation must be in accordance with the terms of his employment. Otherwise he may be liable to the company for breach of contract. The company must notify the Registrar of the resignation of a director.35 A problem that sometimes arises is that the company refuses to give notice to the registrar so that the directors name remains on the records of the Registry of Companies notwithstanding his resignation. It is suggested that this does not affect the validity of the resignation. The requirement to inform the Registrar is purely procedural requirement. Failure to comply with it lays the company and officers in default open to prosecution. It is inconceivable that the companys failure to comply with this procedural requirement would force a person to remain as director without his consent. Not with standing anything in the articles, a director may not resign if the effect of his resignation would be to leave the company with fewer than two directors, or with no directors ordinarily resident in Singapore.36 This means is that the last two directors of a
32

Example Table A art 72(e), which provides that the office of director shall become vacant if he resign his office by notice in writing to the company. 33 See the dicta of Windeyer J in Marks v Commonwealth of Australia [1965] ALR 25, 37 (High Court, England). 34 Latchford premier cinema Ltd v Ennion [1931] Ch 409 ( High court, England). 35 Section 173(6) (b) [Malaysia: section 141 (6) (b)]. 36 Section 145(6) [No Malaysian equivalent].

company may not resign. A person who is the only director of a company ordinarily resident in Singapore also may not resign, no matter how many other directors there may be. However, a person who is disqualified from being a director by the provisions of the Act or of certain other statutes, or who has not obtained his qualification shares, may resign notwithstanding that he is one of the last two directors or is the last resident director. Since continuing in office under such circumstances would be an offence, the director must resign from his office. 3.2 RETIREMENT A companys articles of association usually provide for the retirement of directors in rotation.37 This is not mandated by law, however it is possible to omit such provisions from a companys articles. Alternatively it may be provided that a director holds office for a specified period only, in this event he must retire at the expiry of the stipulated period.

3.3 AUTOMATIC VACATION OFFICE The articles of association may provide that the office of a director shall become vacant on the happening of certain specified contingencies.38 In such a case (depending on the wording of the article in question), vacation of office is automatic and there is no necessity for the director to resign.

The Act provides for automatic vacation of office in only one instance, in the case of a director of a public company (or of subsidiary of a public company) who attains the age of 70 years.39 However, event in this case section 145(6) would prevent the automatic vacation of office if the conditions of that subsection were not satisfied. Directors would lose their office automatically if the company is put into liquidation: the liquidator would then take over from the board.

3.4 REMOVAL OF DIRECTORS The mode of removing directors before the expiration of their term of office will be provided for in the articles. For instance, Table A article 69 provides that the company may by ordinary resolution remove any director before the expiration of his period of office. This is not mandated by law, however it is possible to omit such an article from a companys

37 38

See table A, arts 63 66. See eg Table A art 72. 39 Section 153 (2) [Malaysia: section 129(2)].

articles of association. In that case the director will be irremovable unless the articles are suitably amended. It may be in addition to being a director, a person may also have a contract of service with the company. If such a contract of service exists, the removal of the person in question before his term expires will be a breach of contract for which damages may be obtained. It is not possible to obtain an injunction to prevent the removal, as the courts will not specifically enforce a contract of service. Southern Foundries (1926) Ltd v Shirlaw [1940] 2 ALL ER 445 ( House of Lords) Shirlaw was appointed as managing director of Southern Foundries (1926) Ltd (Southern) by contract. Three years after the appointment of Shirlaw, the entire share capital of southern was acquire by Federated Foundries Ltd (Federated). New articles were then adopted by Southern, including one that gave Federated the power to remove Shirlaw at any time. Federated then removed Shirlaw as director under the new articles. Shirlaw sued for damages for breach of contract. In many cases, however directors do not serve under a contract of service. If this is so they may therefore be removed in accordance with the articles without the necessity of paying them damages. Since the mode of removing directors is left to the articles, it is possible to entrench directors by including suitably-drafted articles. For instance, it may be provided that a director may not be removed without a special resolution or that on a resolution for removal a directors shares shall carry more votes,40 or that a particular director will hold office for life.41 However, in the case of a public company, it is not possible to have irremovable directors. Section 152(1)42 provides that a public company may always remove a director by ordinary resolution, notwithstanding anything contained in the companys memorandum or articles or in any agreement that may exist with the director. Special notice must be given of such a resolution.43 This means that the persons proposing the resolution must give the company notice of their intention to move the resolution at least 28 days before meeting.44 The director who is to be removed is entitled to make representations in writing to the company,

40

See eg Bushell v Faith[1970] AC 1099 (House of Lords). Weighed voting of this sort is only possible in a private company that is not a subsidiary of a public company because of section 64(1) [Malaysia: section 55(1), note the significant differences in wording]. 41 See eg Khoo Chiang Poh v Cosmic Insurance Corp Ltd (No2), suit No 203 of 1974 (unreported) (High Court, Singapore.
42 43

Malaysia: section 128(1) Section 152(2) [Malaysia: section 128(2)] 44 Section185 [Malaysia: section 153]

which is bound to circulate them.45 At the meeting, the director has a right to heard in his defence. If the director in question was appointed to represent the interests of any particular class of shareholders or debenture holders, the resolution to remove him will not take effect until his successor is appointed.46

Section 152 coexists with any other powers to remove directors which might exist apart from the section.47 Therefore, if the articles of a company allow the removal of a director, he may be removed in accordance with the articles rather than under section 152. However, the proper procedure must be followed whether a director is removed in accordance with the articles or under section 152.

Solippan v Lim Yoke Fan [1968] 2 MJL 21 (Federal Court, Malaysia). The companys articles provided that a director might be removed. The articles also provided that seven clear days notice had be given of any general meeting.48 The plaintiffs wanted to remove all the directors of the company. Three days before the meeting, the first plaintiff sent notice to the company of a resolution to remove the directors. At the meeting, the plaintiffs were purportedly elected as a directors after a defendants had been removed. The defendants refused to relinquish office, and the

plaintiffs brought an action. The trial judge held that the plaintiffs were not properly appointed, as the 28 days notice required before the old directors could be removed under section 128 [equivalent to section 152] had not been given. In the Federal Court it was held that section 128 was not mandatory. The power to remove directors under that section coexisted with any power contained in the articles. Therefore it was not necessary to give 28 days notice before removing a director, the removal could be effected in accordance with articles, which provided for shorter notice. However, on the fact, the proper notice required under the articles had not been given either, so the Federal Court held that the defendants had not been properly removed as directors and consequently the plaintiffs were not properly appointed as directors of the company.

45 46

Section 152(3) [Malaysia: section 128(3)] Section 152(1)[Malaysia: section 128(1)] 47 Section 152 (7) [Malaysia: section 128(7)] 48 This is no longer possible in view of section 177 (2) [Malaysia: section 145 (2)], which provides that the minimum period of notice of a general meeting is 14 days.

A person removed under section 152 retains his right to obtain compensation or damages in accordance with any contract that he might have with the company.49 Thus, if a director who is also an employee is removed from office in breach of his contract employment, he is entitled to be paid damages for wrongful dismissal. However, if an employee breach a condition of his contract of service he may be dismissed without compensation on normal contractual principles. Even where there is a contract that a director should hold office for life, it is an implied term that he shall only continue in office as long as he performs his duties satisfactorily and in the interest of the company and its members. Khoo Chiang Poh v Cosmic Insurance Corporation Ltd (No2), Suit No 203 of 1974 (unreported) (High Court, Singapore). Khoo was appointed as managing director for life under a pre-incorporation contract. The company purported to remove him under section 128 [now section 152]. The sole question was whether Khoo had been removed wrongfully from his appointment. Kulasekaram J held that Khoo had been motivated by self interest in the discharge of his duties and that he had breached his fiduciary duty to the company. He had not run the company on sound principles He did not consult the other directors in running the company and had ignore the resolution of the board of directors. It was held that his suspension and removal were justified and his action for damages was dismissed.

It might also be provided in the articles of association that the board of directors may remove a fellow director. Such a power is a fiduciary power in the sense that it must be exercised in the best interests of the company. However, the fact that some of the directors may be actuated by ulterior motives in expelling a fellow director from the board does not ipso facto render the expulsion invalid. Such an article is ineffective in the case of a public company.50

3.5 COMPENSATION FOR LOSS OF OFFICE A company may not make any payment to a directors as compensation for loss of office of the company or of its subsidiaries or as consideration for his retirement as an officer of the company or its subsidiaries.51 The term director includes any person who has at any time
49 50

Section 152(7) [Malaysia: section 128(7)]. Section 152(8)[Malaysia: section 128(8)]. 51 Section 168 (1) [Malaysia: section 137(1)].

been a director of the company or its related corporations.52 It should be noted that the section speaks of compensation for loss of office as an officer, not as an director. Thus, the company could not compensate a director for loss of office as say, secretary of the company. Such a payment may only be made in the following situations: a) If the particulars of the payment (including the amount in question) have been disclosed to the members of the company and the payment is approved by the general meeting.53 Where no meeting is called, the unanimous approval of all the members (including members who do not have voting rights) is necessary to validate such a payment.54 b) If the payment is made under an agreement entered into before 1 January 1967.55 c) If the payment is made under an agreement which has been disclosed to and approved by a special resolution of the company.56 This differ from (a) above in that actual payment is to be made has been previously approved by a special resolution of the company. d) If it is a bona fide payment by way of pension or lump sum gratuity for past services, provided that the sum in question does not exceed the total emoluments of the director in the three years preceding his retirement or death.57 The term emolument is defined in section 458 to include any payment to a directors.

52 53

Section 168 (7) [Malaysia: section 137 (7)]. Section 168 (1) [Malaysia: section137(1)]. 54 Re Duomatic Ltd [1969] 2 Ch 365 (high Court, England) 55 Section 168 (5)(a) [Malaysia: section 137(5)(a): note the differences in wording]. 56 Section 168 (5)(b) [Malaysia: section 137 (5)(b)]. 57 Section 168 (5)(d) [Malaysia: section 137 (5)(d)]. 58 Malaysia: section 4.

3.6 VACATION OF OFFICE IN ACCORDANCE COMPANIES ACT

Section 124(1) (4) Companies Act allocate:

a) Section 124 (1) each of director, shall obtain the qualification within two months after his appointment or in a shorter period of time.

b) Section 124 (2) the director of the company shall be held by himself.

c) Section 124 (3) the director shall vacate his office if they are not in the eligibility or if after getting stopped at any - time to hold qualifications.

d) Section 124 (4) someone who is the vacated office shall be ineligible for election as directors until they obtain the qualification. If the directors fail to meet eligibility requirements to own shares within the prescribed period, shall vacate his office. 3.7 VACATION AND REMOVAL OF OFFICE ACCORDANCE ARTICLE

Articles 72 table 4 stated directors must vacate office if: a) b) c) d) e) f) Stop being a director with any laws Being a bankrupt Do not be a director by the act No sane or insane Placing the office by written notice to the company Non-attendance in board meetings for six months or more without permission

g) Serving others without the permission of h) Interested in any proposed contract with the company and failed to declare his interest as required by the Act.