A company is an artificial person and it is managed by a director. The role of company directors is pivotal to corporate governance. This article explores the role and duties of company directors.
There are statutory duties under the Companies Act 2016:
- Duty to Act in Good Faith. Directors are agents or trustees of the Company and they have duty to act in good faith in the best interest of the Company. In other words, directors are required to prioritise the Company’s interests over their personal gains.
- Duty of Care, Skill and Diligence. Directors are expected to perform their duties with a reasonable degree of care, skill and diligence. They are expected to use their knowledge or experience in their role.
- Duty to Avoid Conflicts of Interest. Directors are required to disclose any personal interests in transactions involving the Company to ensure transparency. Directors should not engage in activities that compete with the Company’s business.
- Duty to Act for Proper Purpose. Any action taken by the directors must be within the scope of their authority. Directors are prohibited for misusing his/her power for ulterior motives.
- Duty to Ensure Compliance with the Law. The directors have obligation to ensure statutory compliance such as the filing of audited financial statements and annual returns.
The duties of directors in Malaysia are comprehensive and designed to ensure that they act in the best interests of the company and its stakeholders. Understanding and adhering to these duties is crucial for directors to avoid legal pitfalls and to promote good corporate governance. By fulfilling their obligations diligently and ethically, directors can contribute significantly to the success and sustainability of their companies.
At J. Lee & Co., we provide legal advice and assistance on matters related to directors’ duties and corporate governance. Contact us for further guidance on ensuring compliance and managing legal risks effectively.
