Directors’ Duties and Responsibilities Part 2 of 5 

01eKTP 67

Prohibition against improper use of property, position, etc

Section 218 of the CA2016 specified that a director or officer of a company shall not do the following to gain any benefit for himself or cause disadvantage to the company without the consent or ratification by way of a general meeting:

• Misusing the company’s property;
• Misusing the company’s information;
• Misusing the company’s opportunity;
• Misusing his power as a director; or
• Engage in business which is in competition with the company.

Any person who contravenes the above shall commits an offence and be liable to:

• Imprisonment ≤ 5 years; or
• Fine ≤ RM3 million; or
• Both.

Disclosure of interest

Sections 221 and 222 of the CA2016 provides that:

• If a director has interest whether directly or indirectly in a contract or proposed contract, he is to declare the nature of his interest at the board of directors’ meeting as soon as practicable.
  
• A director is deemed to have an interest in a contract if his spouse, natural child, adopted child or step child has interest in the shares of the other contracting party.
  
• A general disclosure of interest notice shall be given to the board of directorsAt the board of directors meeting; orAt the next board of directors meeting after the notice is given.
  

A general disclosure of interest notice shall be given to the board of directors

• At the board of directors meeting; or
• At the next board of directors meeting after the notice is given.
  

• The secretary shall record every declaration in the minutes of the meeting.
  
• A director is not deemed to be interested in the contract based on the
  following:The director is a member or creditor of the other contracting party and the director interest in not material;The contract is related to a loan given to the company and guaranteed by the director;The other contracting party is a related company.
  

A director is not deemed to be interested in the contract based on the
following:

• The director is a member or creditor of the other contracting party and the director interest in not material;
• The contract is related to a loan given to the company and guaranteed by the director;
• The other contracting party is a related company.
  

• The interested director may attend the meeting but cannot deliberate and vote unless:The company is a private company which is not a subsidiary of a public company;The company is a private company and the contracting party is a related company;The director is also a director of the other contracting party and the number of shares held by him is not more than the number of qualifying shares;The director has interest in not more than 5% of the other contracting party’s paid up capital.
  

The interested director may attend the meeting but cannot deliberate and vote unless:

• The company is a private company which is not a subsidiary of a public company;
• The company is a private company and the contracting party is a related company;
• The director is also a director of the other contracting party and the number of shares held by him is not more than the number of qualifying shares;
• The director has interest in not more than 5% of the other contracting party’s paid up capital.
  

• Consequences:Any contract entered into in contravention of this section shall be voidable.Every officer who contravenes commits of an offence and be liable to:Imprisonment ≤ 5 years; orFine ≤ RM3 million; orBoth.

Consequences:

• Any contract entered into in contravention of this section shall be voidable.
• Every officer who contravenes commits of an offence and be liable to:Imprisonment ≤ 5 years; orFine ≤ RM3 million; orBoth.

Every officer who contravenes commits of an offence and be liable to:

• Imprisonment ≤ 5 years; or
• Fine ≤ RM3 million; or
• Both.