Brief notes on the management of the company according to Companies Act 2016 in Malaysia. It divided into 3 parts, which are, directors, company secretary and auditors. Each part discussed on their powers and duties.

1. MANAGEMENT
OF COMPANYNUR HIDAYAHTUL NABIHAH BINTI MANAS
OCT 2018-FEB 2019
TUNKU ABDUL RAHMAN UNIVERSITY COLLEGE
PAHANG BRANCH CAMPUS

2. Every incorporated
company is manages by:
1) Board of Directors
2) Meeting of members

3. In this topic, we will focus
on:
Directors
Company
Secretary
Auditor

4. DIRECTORS

5. DEFINTION OF DIRECTORS
Section 2(1) Companies Act 2016:
Any person occupying the position of director of a corporation by
whatever name called
Includes a person in accordance with whose direction or instruction
the majority of directors
And alternate or substitute director
Section 210 Companies Act 2016: CEO, CFO, COO

6. TYPES OF DIRECTORS
• Both director and a full-time paid employee
• Also known as Managing Director (CEO)
• Appointed among the directors
EXECUTIVE DIRECTOR
• Appointed to chair the BOD meetings
• Exercise procedural controls over director’s meetingsCHAIRMAN DIRECTOR
• A person who being appointed when the original director is unable to
attend BOD meetings due to illness or other commitments
• Temporary basis.
ALTERNATE/SUBSTITUTE
DIRECTOR
• A person appointed to represent the interest of a particular group or
another personNOMINEE DIRECTOR
• Also known as Non-executive Director, not involve in full-time
management of company
• Represent the interest of shareholders
• Free from any relationship that would interfere with the exercise of
independent judgment
INDEPENDENT DIRECTOR

7. APPOINTMENT OF
DIRECTORSNumber of director
•Section 196(1) CA 2016:
•Public company = 2 and above
•Private company = 1 and above
Requirements
•Section 201 CA 2016:
•Consent in writing
•Declaration not disqualified to be a director
Time of appointment
•Section 202(1) & (2) CA 2016:
•1st director: During company's incorporation
•Subsequent director: After company's incorporation by ordinary resolution
Duration of appointment
•Section 202(3) CA 2016:
•Public company = until next AGM
•Private company = according to the terms of appointment

8. QUALIFICATIONS OF
DIRECTORS
Section 196(4)
CA 2016:
Ordinarily reside
in Malaysia by
having a
principal place of
residence in
Malaysia
Section 196(2) CA
2016:
At least 18 years old
Section 196(2)
CA 2016:
Natural person

9. DISQUALIFICATIONS OF
DIRECTORS
Section
198 CA
2016
Undischarged
bankrupt
Convicted with an
offence
(promotion,
formation or
management of
company)
Convicted with an
offence (Fraud,
bribery or
dishonesty)
Disqualified by the
Court
(Section 199)
Previous 2
companies going
liquidation within
5 years/
Contravention of
director’s duties
or CA

10. POWERS OF DIRECTORS
Section 75 CA
2016:
Issue of shares
Section 106 CA
2016:
Transfer of shares
Section 82 & 83 CA
2016:
Call for unpaid
shares
Section 211 CA
2016:
Manage company
business and affairs

11. RESTRICTIONS FOR
DIRECTORSLOAN
•Section 224(1) & 225 CA
2016:
•Prohibited to give loan to
director and any person
connected to him
•Exceptions:
•Exempt private company
•To enable director to
properly perform his duties
•Full time director to
purchase a home
•Company’s scheme
•Lend business is a part of
company business
•Holding & subsidiary
relationship
REMUNERATION
•Section 226 CA 2016:
•Prohibited for any tax-
free payments to director.
•Exceptions:
•Section 230 CA 2016
•-Public Company:
approval at general
meeting and must keep
copies of director’s
services contract (Section
232)
•-Private Company: BOD
subject to constitution may
approve but shareholder
may object. If sole
director, enter into a
contract in
writing/recorded in
meeting (Section 234)
COMPENSATION
•Section 227 CA 2016:
•Prohibited to make any
compensation for loss of
office
•Exceptions:
•Agreed under an
agreement before CA
2016
•Approved by the company
through resolution
•Bona fide payment by way
of damages of breach of
contract/pension
•Agreement made before
he became a director

12. DUTIES OF DIRECTORS
Fiduciary Duties
• Common law
• Percival v Wright : Duties owed by the director to the company solely,
not to the shareholders
Statutory Duties
• Companies Act 2016
• Duties provided under the statute

13. FIDUCIARY DUTIES
Act bona fide in the best
interest of the company
Re Smith & Fawcett Ltd
(Interests of shareholders,
directors, group companies,
employees)
Test: Honest and intelligent man
Exercise power for a proper
purpose
Howard Smith Ltd v Ampol
Petroleum Ltd
(Power to issue shares only to raise
capital, not for any other reason)
Retain their discretionary power
However, at certain point, he is
allowed to delegate his power. Eg:
need expert knowledge
Avoid conflict of interest
Regal (Hashtings) Ltd v Gulliver
(Make disclosure of interest, cannot
make any personal profit from his
fiduciary position)
Care, skill and diligence
Daniels v AWA Ltd
(Basic understanding of the
business, general monitoring the
business, familiar with the financial
status of the company etc)

14. STATUTORY DUTIES
14
Section 231 CA 2016:
Proper purpose and in
good faith
Section 213 CA 2016:
Care, skill and diligence
Section 214 CA 2016:
Business judgement
Section 215 CA 2016:
Reliance of professional or
expert opinion
(in good faith and
independence
assessment)
Section 216 CA 2016:
Delegate any power
(still responsible for the
exercise of the power by
the delegate)
Section 217 CA 2016:
Nominee director to act in
the best interest of
company to his nominator

15. STATUTORY DUTIES
15
Section 218 CA 2016:
Avoid conflict interest
Eg; Use the property of the
company or his position to
gain personal profit
Section 219 CA 2016:
Make disclosure
Eg: any interests in shares
etc
Section 223 CA 2016:
Disposal or acquisition of
property or assets
(Contract between company
and anybody, at substantial
value, must get approval of
general meeting)
Section 228 CA 2016:
Disposal or acquisition of
shares and non cash assets
(Contract between company
and director or anybody,
requisite value, must get
approval of general meeting)
Section 252 CA 2016:
Prepare financial year report to
be attached together with
financial statement
(Must be approved by the BOD,
signed by 1 or 1 directors,
present in AGM)

16. REMEDIES FOR BREACH OF
DUTIES
Rescission of
contract
Damages
Recovery of
profit
Injunction
Restoration of
property
(Constructive
trust)

17. DEFENCES
Section 581 CA 2016
Acted honestly
Acted
reasonably
Bona fide
Consider all the
circumstances of the
case
Yeng Hing Enterprise Sdn Bhd
v Datuk Dr Ong Poh Kah

18. VACATION OF OFFICE
Section 208 CA 2016:
Resignation
(Written notice to company)
Section 205 CA 2016:
Retirement
(Public Co-AGM )
(Private Co- expiration of the
term of office)
Section 206 CA 2016:
Removal
(Public Co-Ordinary resolution,
special notice 28 days, right to be
heard)
(Private Co- subject to
constitution/ordinary resolution)
Section 208 CA 2016:
Death
Section 208 CA 2016:
Unsound mind
Section 198 CA 2016:
Disqualified

19. COMPANY
SECRETARY

20. DEFINITION OF COMPANY
SECRETARY
20
Section 2(1) Companies Act 2016: an officer of the company
Panorama Developments Ltd v Fidelis Furnishing Fabrics Ltd:
Holds a pivotal role in the administration of a company (CAO)
Eg tasks done by company secretary:
-ensures company has done everything according to the law
-keep the registers
-sends out notices
-organized meetings
-record minutes of meetings
-files necessary forms with CCM

21. APPOINTMENT OF COMPANY
SECRETARY
21
Number of secretary
• Section 235 (1) CA 2016: at least 1 company secretary
Requirements
• Section 236 (1) CA 2016: terms and conditions of appointment
• Section 236(3) CA 2016:
• -Consent in writing
• -Qualified under Section 235
• Not disqualified under Section 238
Time of appointment
• Section 236(2) CA 2016: within 30 days from the date of incorporation of a
company

22. QUALIFICATIONS OF COMPANY
SECRETARY
22
Natural person
At least 18 years old and
above
Citizen or permanent resident
of Malaysia
Member of a body under 4th
Schedule or person licensed
by the Commission under
Section 20G of CCMA 2001
Section 235 CA
2016
4TH Schedule:
MIA, MICPA,
MAICSA, Malaysian
Bar, MACS, Sabah
Law Association,
AAS
Section 241 CA
2016:
Must register
with Registrar

23. DISQUALIFICATIONS OF COMPANY
SECRETARY
23
Section
238 CA
2016
Undischarged
bankrupt
Convicted any
offence under
Section 198
Ceases to be a
holder of a
practicing
certificate
Registrar opinion
that person has
failed to act
honestly or use
reasonable
diligence

24. AUTHORITY OF COMPANY
SECRETARY
24
Panorama Developments Ltd v Fidelis Furnishing Fabrics Ltd:
Holds a pivotal role in the administration of a company (CAO)
Therefore, he has authority to bind the company into contracts
within the scope of his administrative duties

25. DUTIES OF COMPANY
SECRETARY
25
Administrative
• Re Maidstone Provisions Ltd
• Handle all paperwork, statutory documents
and procedural matters
• Follow instructions of the board
• Section 66: Enter into contracts and
execute documents
• Section 316: Send out notices-meeting
• Section 209: Organize meetings-
resignation, vacation or death of sole
director
• Section 341: Take down minutes of
meetings and Implement decisions of the
meetings
• Section 68: File statutory returns
• Section 47:Keep and maintain the various
registers at the registered office
• Section 102: Enter issuance and transfer of
shares
Advisory
• Ensure good corporate governance
• Ensure the board procedures are followed
and reviewed
• Advisor for the chairman and the board
• Ensure effective functioning of the board

26. VACATION OF COMPANY SECRETARY’S
OFFICE
26
Section 240 CA 2016
Shall not left vacant more than 30 days
Section 239 CA 2016: Removal
• The BOD
• According to terms and conditions of appointment or constitution
Section 237 CA 2016: Resignation
• Serve notice to directors or if unable to contact any director, to
Registrar
• Notice expired in 30 days

27. AUDITOR

28. DEFINITION OF AUDITOR
An auditor is a person who conducts the audit of company’s
annual reports and accounts.
According to Section 2 CA 2016 refers auditor as ‘approved
company auditor’ which means:
a person who has been approved under Section 263
of Companies Act 2016 as an auditor and whose
approval has not been revoked
Section 264(3) CA 2016: not an officer

29. APPOINTMENT OF
AUDITOR
Private Company
• Section 267 CA
• Shall appoint an auditor for each financial year of the company
• However, Registrar have power to exempt any private company
from appointing an auditor
• The BOD should appoint an auditor at least 30 days before the end
for submission of financial statement / to fill a casual vacancy
• If failed to do so, the members shall appoint an auditor by ordinary
resolution
• Section 268 CA 2016
• Power of Registrar to appoint auditor if company failed to do so upon
application from any member of the company

30. APPOINTMENT OF
AUDITOR
Public Company
• Section 271 CA
• Shall appoint an auditor for each financial year
of the company
• The BOD should appoint an auditor at any time
before the first AGM / to fill a casual vacancy
• Failed to so, members shall appoint an auditor by
ordinary resolution

31. QUALIFICATIONS OF AN
AUDITOR
Section
263
Approved by
the Minister
in charge of
Finance
Good
character
and
competent
A member of
MIA
At least 21
years old
Fit and
proper
person
Must pass
the final
examination
in
accounting

32. DISQUALIFICATIONS OF AN
AUDITOR
Section
264 CA
2016
Knowingly consent to be appointed as an
auditor
Knowingly act as an auditor for any
company
Not an approved company auditor
Indebted to the company
(More than RM25K)
Related to the company Officer/ Employee
Partner/Spouse
Shareholders
Undischarged bankrupt
Convicted of any offence punishable with
3 months or more imprisonment
Fraud
Dishonesty

33. FIXING THE AUDITOR’S
REMUNERATION
Section 274
CA 2016
Appointed by
BOD
BOD/
Company
Members
Members by
ordinary
resolution
Registrar
Registrar/
BOD/
Company

34. POWERS OF AN
AUDITOR
Section 266 CA
2016
Right of access to
accounting
records
Right to obtain
information and
explanation from
officers of the
company
Right to have the
auditor’s report
attached or
endorsed on the
financial statement
Right to attend the
general meeting
Right to report any
serious offence to
the Registrar
Section 266(12): Punishment for officer who refuses to allow auditor to have access
and information will be maximum imprisonment 3 years or fine RM500K.

35. COMMON LAW DUTIES OF AN
AUDITOR
Pacific Acceptance
Corp Ltd v Forsyth:
Duty to carry out
audit
Re Transplanters
(Holding Co) Ltd:
Independent and
give true and fair
view
Segenhoe Ltd
Atkins:
To use reasonable
care and skill
Duty of
confidentiality
Duty not to make
secret profit
Caparo Industries
Plc v Dickman &
Ors:
Duty to third party

36. STATUTORY DUTIES OF AN
AUDITOR
Section 266(1) CA 2016:
To report to the
members
Section 266(2) CA 2016:
To form opinion
Section 266(8) CA 2016:
To report to Registrar
any contravention of
CA 2016
Section 266(9) CA 2016:
To report to the
Registrar any serious
offence committed by
the officers
Section 287 CA 2016:
To report to trustees for
debenture holders

37. LIABILITY OF AN AUDITOR
Contractual liability
• Auditor has contract with the company
• Breach the contract, remedies
available is damages
Tort liability
• Auditor and shareholders/members
• Professional negligence
• Hedley Byrne & Co Ltd v Heller &
Partners Ltd:
• -Special relationship
• advice given in the ordinary course
of business
• information given because it was
asked for
• no contractual or fiduciary
relationship
• auditor know that person is relying
on him
• no disclaimer to exclude liability

38. VACATION OF AUDITOR’S
OFFICERemoval
• Section 276 CA 2016:
•  Members of company may remove the auditor at any time by ordinary resolution
• Section 277 CA 2016:
• Special notice which is made less than 28 days before general meeting
• Company send a copy of the notice to auditor and Registrar
• Auditor may make a representation in writing within 7 days from the receipt of the
notice
Resignation
• Section 281 CA 2016:
• By giving notice in writing to the company at its registered office
• Notice effective after 21 days
• Company send a notice to Registrar within 7 days after receiving the notice of
resignation