The document discusses the duties and responsibilities of company directors under Malaysian law. It covers the following key points: 1) Directors must act in good faith and in the best interests of the company, not for their personal interests. Several cases are discussed that illustrate this fiduciary duty. 2) Directors must act within the scope of their powers and use company assets only for proper purposes. They cannot fetter their decision making and must avoid conflicts of interest. 3) Directors have a duty to avoid any conflicts between their personal interests and the interests of the company. They cannot profit personally from their position or use confidential company information for their own gain.

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Effectiveness of the Malaysian Laws
in relation to directors of which could safeguard the interest of the
company and its stakeholders.
Introduction
By law, company is considered is an artificial person that can only be funtioned and
operated through real humans being. The existence of the director is because of this reason.
According to Section 4 (1)is stated that, the directors includes any person occupying the
position of the 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 add and alternate or susbtitute director. The power to appoint the director may
be depended upon the members at the annual general meeting of the company. There is an
example of Article 68,Table A provide thats the directors of a company may appoint other
director.
Qualification of the directors
To become a directors of a company, the person must qualified for certain criteria that
are prescribed in the Company Act 1965. Firstly, the director must be a natural person of full
age (Sec 122 (2)). In Section 129 (1) stated that the directors age must not above the age of 70
years old of a public company or of subsidiary of a public company. However, if a person
who is already a director and reached the age of 70 may extend his term of office by a special
resolution of the company and the extension is only valid until the next annual general
meeting (Sec 129(6)). Secondly, the person must not be undischarged bankrupts (Sec 125).
Thirdly, a person who has been chosen to be a director must signify is consent in writing and
that writing consent must be lodged to the Registrar.
Disqualification of the directors
Someone is disqualified from being a director either by law or by articles of
association. By law, a person may be disqualified from being a director because of the reason
that firstly, he is an undischarged bankrupts unless he is already get a leave or permission

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from the court (Sec 125). Second, he is convicted within or without Malaysia of offences in
connection with the promotion, formation or management, fraud or dishonesty, failure to act
honestly and to exercise reasonable diligent in the discharged of duties as a director (Sec 132)
and failure to keep proper account (Sec 303). Thirdly, he is or has been a director of two
different companies and both gone into liquidation within five years of one another.
Meanwhile, disqulaification by the Articles of Association when firstly the directors failed to
obtained the shares qualification within two months from the date of the appoinment or
shorter as perscribed by the articles or ceased to hold it shall cause him to vacate his office
(Sec 124 (3)). Secondly, the office of the directors become vacant due to failure to comply
with the matters that specific in the Articles of Association.

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Director’s duties
Fiduciary duties
According to Section 132, stated that when a person has agreed to be a director, he has
specific duty that he must be responsible to. The duties that a director is involved are the
fiduciary duties, duty of skill, care and diligent and statutory duties. Firstly, is the fiduciary
duties that contain several several elements, which is acting in good faith in the interest of the
company, acting within the power given and use the assets for proper purpose and avoidance
of interest.
First of all, a director must acting in good faith in the best interest of the company. This
means that a director of a company,in making any decisions that affecting the company must
have in mind the interest of the company as a whole and not his personal interests or others in
the company. In this element also contained of “to act honestly”. This refers to acting bona
fide in the interest of the company in performance of the functions attaching to the office of
director. The case of Marchesi Vs Barnes further illustarated this matter where it is provided
that a person that have being a director of the company must think what is best for company
and he must at all times remember that he hold a important and big responsibility in relation
to the company’s business and its affairs.
Other case that can described this matter is the case of Re W & M Roith Ltd, where a director
of the company, Mr. Roith (the deceased) had entered into a contract with the company
without taking into consideration whether the contract was for the benefit of the company or
not . The contract providing his wife with a pension after his death. After Mr.Roith died, his
wife wanted to claim the pension but failed. She sued the company but the court held that the
object of the contract was for the benefit of Mrs. Roith and not for the best interest of the
company as a whole. Mr. Roith breached his duty to the company to act honestly in the
interest of the company and thus the contract was declared void. The court was right in
rejecting Mrs. Roith’s claim.
The same situation goes with the Australian Law, which can be illustrated in Whitehouse v
Carlton Hotels Ltd. The court held that, an allotment of shares by the governing director to his
son sholud be set aside on the basis that he was not acting in good faith. His mean aim in
making the allotment was to prevent his wife and daughters and also shareholders from

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gaining control of the company upon his death. Besides, in Advanced Bank v FAI Insurance,
the court held that the expenditure of company funds by its directors, with the aim of
preventing arrival pannel of candidate being ellected to the board, was not a proper use of
company funds although the court acknowledge the directors had acted honestly.
Many cases illustrate that dispite the fact that directors may act in a way they think is honest
in the ordinary everyday uses of the term in the circumstances, the court may not regarded this
as measuring up to the standard expected of a person who owes fiduciary duties to the
company.
Secondly,the director must act within the power given and use the assets for proper purpose.
This duty may arise when directors are delegating their power to a committee of the board or
to the management. A director must exercise any power conferred upon them by the Act or
the Articles of Association for a proper purpose. This means, a director also must act ‘bona
fide’ in what they consider that is in the interests of the company and not for any collateral
purpose. The obligation of the to act bona fide is subjective, so that, provided that a director
honestly believes he is acting properly in deciding how to operate the company in the
situation that he is not in breach of this duty. Since a director must make a decisions, on the
basis of his own honest belief in what is best for the company, it is a breach of fiduciary duty
for a director to fetter his freedom to exercise his powers.
Thirdly, directors also have a duty of avoidance any conflict of interest. There are some of the
circumstances that can be known as the avoidance any conflict of interest. First, where a
person is a party to a contract with a company where he is a director of the said company.
This happen when a director places himself in a position where his interest and the company’s
interest are in conflict. For examples in a situation where if a director has an undisclosed
interest in a contract entered into by the company. For this circumstances, the contract should
be avoided unless it has been disclosed to the shareholders as required under Section 131(1).
The case that can be refered is the case Aberdeen Railway Co vs. Blaikie Bros, a director of
the company failed to disclose to the shareholders that he was also a partner a Blaikie Bros,
where the said company is having a contract with. The court held that Aberdeen Railway Co
was entitled to ignore the contract with Blaikie Bros. It said that the issue was whether the
director of a railway company is precluded or is not precluded from dealing on behalf the
company with the firm which he is a partner. No one having such duties shall be allowed to
enter into engagements in which he has personal interests conflicting with the interests of

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whom he is bound to protect. This principles emphasises that no question is allowed to be
raised as to the fairness or unfairness of the contract entered into. A director could not benefit
directly or indirectly from a contract made by his company. This has been modified to provide
that a director cannot benefit from a contract between himself and his company or between his
company and a third party without making adequate disclosure of his own interest in that
contract.
Second, the director is under a duty not to use the company’s confidential information for his
own purposes and personal benefits. A director cannot makes a personal profit by using the
corporate information, property or assets. It is stated in Section 132(2) of Company Act 1965.
In Australia law,this can be illustrated through the case of Fitzsimmons v R,where the court
held that the director who failed to disclose to the second company was in breach of his duty
to honestly towards the second company.
Third, the director is under a fiduciary duty with the company upon which he must not
abuse the company’s corporate opportunity to gain personal benefits without disclosing it to
the company. Fourth, the director is also under a duty not to compete with the company. The
director will breach his fiduciary duty if he expropriates a contract which belongs to the
company. A director should not place himself in a position in which there does or might arise
a conflict between his duties to the company and the interests of either himself or a third
party. So that, a director who has a contract of employment with his company cannot act as a
director of another company because he must not compete with his company itself. This will
be excuse when there is where competition is not intended, and the presence of another
company’s director on the board as a nonexecutive director not under a contract of service
might be a beneficial influence, are multiple directorships justifiable.

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Statutory duties
A director must ensure that he performed all the duties imposed on him by the statute.
In the Malaysian Company Act there are many provisions that require the directors to do
specific duties and failure to do so may render them guilty which may be imprisonment or
fine for instance the duty of the disclosure as provided in Section 131 and Section 135 of the
Company Act 1965. For Section 131 (1), every director who has a direct or indirect interest in
a contract or propose contract with the company shall declare to the board of the directors the
nature of his interest as soon as is practiable after he has knowledge of the relevant fact. The
interest must be a material interest. For Section 131 (2) does not require the disclose of the
fact that the interst arose nearly because of the fact that the director is a member or creditor of
the coprporation which is interested in a contract or propose contract with the company in
which he is a director if yhe interst of the director may properly be regarded not being a
material interest. Meanwhile, Section 131(5) the director must disclose any other office he
hold or property he possesses which might create a conflict in his duty towards the company.
The disclosure must be made at the first meeting he attend as director or if he is already a
director at the next meeting after he hold the office or possesses the property which might
create the conflict. Under this section,the case that can be illustrate is Ngan Tuck Seng &
Anor v Ngan Yin Groundnut Factory Sdn Bhd. In this case, the director had an interest in
another company he take although there was no competition between these two companies,
the operation of the companies were similar in that both were oil plantation and had similar
needs in terms of financing, management, labour and operation. Futhermore the use of the
company’s employees by a company in which the director has an interest was against the best
interest of the first-mention company. It was held that, the duty to disclose is so strict that all
that is required is that there might a conflict of interest before the duty to disclose arose under
Section 131(5). Meanwhile, in case of Tan Bok Seng V Sin Bee & Co. (Port Weld) Sdn Bhd.,
Articles 96 of the company’s Articles of Association stated that a director is allowed to
contract with the company provided the nature of the interest is declared at the meetingof the
director as provided under Section 131 of the Companies Act 1965. The plaintif leased the
company’s properties and was also given the right to use the mangrove tree on the land. The
plaintif had previously been authorised to liaise with the government on matters arising out of
the use of the company’s land. However, after the plaintif had entered into the lease
agreement with the company,the second defendant was authorised to act on the company’s
behalf. The second defendant failed to obtain necessary license which affected the plaintif’s

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use of the leased property. The plaintif applied for specific performance of the agreement. In
its defense, the company claimed that the leased agreement is a transaction involving director
and disclosure should have been made of the exact nature of the plaintif’s interest in the
transaction. Since there was no disclosure,the transaction is voidable. The court held that from
the fact of the case, there was a de facto declaration of interest although there was no
directors’ meeting called at which a declaration could be made formally.
Duty of skill, care and diligence
A person a director is responsible for the day to day activities of the company and the
management of company business. As such they were required to have exercised the
reasonable skill, care and diligence in doing so. They are know profesional standard required
for a person to be a director of a company. It is enough if he can show that he is reasonably
skillful is exercising his duty as a director. The principal which provides that the director must
possesses a reasonable skill has been stated in the following case. The case is Daniels v Awa
Ltd. A director must acquired a basic understanding of the business of the company and must
be familiar with the fundamentals of the company business. Though there is no professional
standard required to be a director but with reference to the above case it shows that a director,
must equips himself with certain skills which can help him to understand the information and
status of the company’s business.
Besides, a director must also exercise his duties of reasonable care based on what a
person of his knowledge and experience would act. However he is under a continuing
obligation to keep inform about the company’s activities and he must monitor the business
affairs of the company. When there is no ground for suspicion, a director may delegate his
power to some other officers. This can be illustrated by the case of Huckerby v Elliot. The
appellant was a director of the company who ran a gaming club without the appropriate
licence contrary to the finance at 1966. Since, she was also a director of that company, she
was also charged with the offence. She played not guilty to a charged under the same act in
that the offence was attributed to neglect. It wasclear from the evidence that she knew little of
the conduct of the premises, nor did she has any knowledge of whether or not a licence had
been obtained. The court held that that appellant was entitle to live certain matters to a fellow

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director a company official and that the prosecution had failed to show any neglect on the
appellant’s part. The conviction was said aside.
Section 132 (1A) provides that a director of a company shall exercise reasonable care,
skill and diligence. A director must used reasonable diligence in the discharged of the duties
of his office. The standard of diligence required is what is reasonable for a person at his
position would act. Their duties are of an intermittent nature to be performed periodical board
meetings and at meetings of any committee of the board upon which they happen to be
placed. They are not, however, bound to attend a such meeting, though they ought to attend
whenever in the circumstances they are reasonably able to do so. However in the modern and
competitive business world, the directors are required to have exercised an amount of
diligence that would make him obtain a basic understanding of their company’s business. For
example, they must keep themselves informed about and monitor the company’s activities and
regulary attend board meetings and they must monitor the company’s financial position.

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Remedies that available for breach of the directors’ duties
Naturally, the director are required to be a person that must act in good faith for the
best of interest of the company. Eventhough there are some situations where the director is
tempted so as to make him breach his duty. When this happens, there are remedies available
for the company. The remedies are injuction, declaration of power as invalid or rescission of
contract, recovery of profits or suing for damages and return of specific property. First of all,
is the injuction. The company may be able to rescind contract entered into owing to his breach
of duty and its may be able to claim a declaration or an injuction to restrain breach. The
company also can restraint the ultra vires contract from being executed. Next, is the
declaration of power as invalid or recission of contract. If the contract was between the
company and the director, the contract is voidable at the option of the company. However,
since rescission is in equitable remedy, delay would defect it, as also if the parties could not
be restored to their original situation, for example if the property has been transferred to a
third party who is innoncent.
Then, the recovery of the profit or suing for damages. Under Section 132(3) (a), it is
said that a director who commit a breach shall be liable to the company for any profit made
him as a result of the said breach of duty. If the company want to obtain the secret profit that a
director is made because of a breach of duty, the company cannot rescind the contract. It can
be referred to the case law, which are Furs Ltd v Tomkies and Regal (Hastings) Ltd v
Gulliver. The company may also claim the damages. The company has two option which is
want to choose between claiming the damages or claming the secret profit obtain by the
director. It can be illustrated in the case of Mahesan V Malaysian Government Officers’ Co-
operative Housing Society. The fact is Mahesan entrusted Manickam to purchase a land for
housing development for government employees. At the point of that Mahesan was a director
and employee of Housing Society. Manickam then purchase a land at a lower price and sold it
to the housing society at a higher price. The different between the selling price with the
purchase price was divided among them. The court held that, Mahesan had breached his duty
as a director for the Housing Society. The court further stated that the Housing Society was
entitled to choose whether to claim for damages from Mahesan or to recover the secret profit.

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Last but not least, is the retain of specific property. For using the company’s property
for his own purposes in breach of his fiduciary duties, a director may also has to pay
compound interest on some he has to pay. The director must hold the property that he
acquired from breach of duty on the trust for the company must be declared by the court.

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Effectiveness
As a consequence of the nature of the company, being a articial person, human
intervention is required to direct its actions and therefore determine its identity. As a result,
the directors rose exists to manage the company. The directors are entrusted by the
shareholders of the company with the responsibility for the functioning of the company.
While some of day to day running of the company is generally delegated to some level of
management the responsibility for the act committed in the name of the company rest with the
directors. The directors have been viewed as trustees, agents, managers and caretakers of the
companies they serve.
All directors are bound by their fiduciary duty and the duty of care and skill. These
standards apply to all the directors of the company. Of course, it is a fact that not all directors
have they same skills and experience and not all directors have similar understanding of the
functioning of the company. This raises the question as to what is expected of different types
of directors when it comes to their duties. Besides, in coming to a decision directors are entitle
to relied on the opinion of an outside expert due to some skills that they did not possess.
However, the expert must be qualified enough to give the advice and upon receipt of the
advice, a director must still exercise his own independent judgement and not blindly follow
the advice of the expert. Therefore, the extent of directors duty of care and skill depends on
the nature of the company’s business.
Directors also have fiduciary duty to act in the best interest of the company as a whole.
Directors owe this duty to the company as a legal entity not to any individual or group of
shareholders and even if the majority shareholders appointed the directors. They are obliged
to act in good faith in the best interest of the company. They must act within the bounds of
their powers as prescribed by the law and always use this power for the benefit of the
company. Where a director violates his or her powers, the company might be bound by his or
her actions although he or she can be held personally liable for any loss suferred as a result.
So, the law that emphasise the directors to perform their duties in a good faith had
safeguarded the interest of the company and the shareholders.
Besides, it is also fundamental for the directors to avoid any conflict of interest with
the company. As a result of trust placed in the director, he or she is bound to put the interest
of the company before their own personal interest. The director is prohibited from making,

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participating in the making, influencing, or attempting to influence any division which can
cause the conflict of interest between the directors and company. However, when there is a
situation which may cause conflict of interest the director needs to disclose the fact to the
company and get approval from the company to get benefit from that particular situation. So,
by having the directors avoid any conflict of interest with the company, the interest of the
company can be safeguard and protected.
In addition, the powers granted to the directors can only be used for the purposes for
which they were ganted. They cannot exercised their powers for unauthorized or improper
purposes. This duty includes not undertaking an unauthorized business purposes. The
consequences of the breach of such a duty is that the transaction is voidable by the company.
If the company suffers loss as a result, it may claim from that director such damages, as were
caused by such breach.

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Conclusion
For the conclusion, Malaysian Law is quite similar with the Australian Law in term of
the provision of law regarding the directors duties. Directors, for being the person who is
responsible for the managing the business need to comply with the provision either the
general or statutory duties. Due to the existance of these law regarding the directors duties, the
directors can execute their duties effectively which can safeguard the interest of the company
and the stakeholders. There is also specification in the Malaysian Company’s Act regarding
the qualification for someone to be a director of a company. This can ensure that the director
is qualified enough to be in that position which in the future maybe can reduce the risk of
breach of duties by that particular director.
In our opinion,Malaysian Law is being effectives in safegurding the interest of
company and the stakeholders. The directors should carried out their duties in the best way to
accomplish their duties as the trustee of the company.