Directors’ Duties and Responsibilities Part 4 of 5 

01eKTP 69

Restricted Dealings

Besides the issuance of shares, purchase of own shares and provide financial assistance, the following are also restricted power of directors as specified in CA2016:

Give loans and securities for loans to directors (Section 224)

• Prohibits company from giving loans or securities for loans to its directors and the directors of its related companies.
  
• Exceptions:Exempt private companyExpenses loanMay give a loan to director to enable him to meet expenditures incurred by him for the purpose of the company or to perform his duties as an officer of the company.Must first approved by the members and members be informed of the purpose of the expenditure and amount of the financing.If loan was given without approval, the loan must be ratified within 6 months of the transaction.If fails to ratify, the loan shall be repaid or the liability under the security shall be discharged after 12 months from the giving of the loan or the securityHome loanCompany may give loan to director or the director of its holding company who is a full-time employee for the purpose of purchasing a home.Must first approved by the members and members be informed of the purpose of the expenditure and amount of the financing.If fails to ratify, the loan shall be repaid or the liability under the security shall be discharged after 12 months from the giving of the loan or the security.Staff loanMay give a loan in accordance with a scheme which has been approved by the members.If loan was given without approval, the loan must be ratified within 6 months of the transaction.Financial institutionA financial institution by its ordinary course of business may make a loan or give security for a loan to its directors.
  

Exceptions:

• Exempt private company
• Expenses loanMay give a loan to director to enable him to meet expenditures incurred by him for the purpose of the company or to perform his duties as an officer of the company.Must first approved by the members and members be informed of the purpose of the expenditure and amount of the financing.If loan was given without approval, the loan must be ratified within 6 months of the transaction.If fails to ratify, the loan shall be repaid or the liability under the security shall be discharged after 12 months from the giving of the loan or the security

Expenses loan

• May give a loan to director to enable him to meet expenditures incurred by him for the purpose of the company or to perform his duties as an officer of the company.
• Must first approved by the members and members be informed of the purpose of the expenditure and amount of the financing.
• If loan was given without approval, the loan must be ratified within 6 months of the transaction.
• If fails to ratify, the loan shall be repaid or the liability under the security shall be discharged after 12 months from the giving of the loan or the security

• Home loanCompany may give loan to director or the director of its holding company who is a full-time employee for the purpose of purchasing a home.Must first approved by the members and members be informed of the purpose of the expenditure and amount of the financing.If fails to ratify, the loan shall be repaid or the liability under the security shall be discharged after 12 months from the giving of the loan or the security.

Home loan

• Company may give loan to director or the director of its holding company who is a full-time employee for the purpose of purchasing a home.
• Must first approved by the members and members be informed of the purpose of the expenditure and amount of the financing.
• If fails to ratify, the loan shall be repaid or the liability under the security shall be discharged after 12 months from the giving of the loan or the security.

• Staff loanMay give a loan in accordance with a scheme which has been approved by the members.If loan was given without approval, the loan must be ratified within 6 months of the transaction.

Staff loan

• May give a loan in accordance with a scheme which has been approved by the members.
• If loan was given without approval, the loan must be ratified within 6 months of the transaction.

• Financial institutionA financial institution by its ordinary course of business may make a loan or give security for a loan to its directors.
  

Financial institution

• A financial institution by its ordinary course of business may make a loan or give security for a loan to its directors.
  

• Consequences:Company may recover the loan or obtain indemnification for its liability under the security given.Directors will be guilty for an offence and liable to:Imprisonment ≤ 5 years; orFine ≤ RM3 million; orBoth.

Consequences:

• Company may recover the loan or obtain indemnification for its liability under the security given.
• Directors will be guilty for an offence and liable to:Imprisonment ≤ 5 years; orFine ≤ RM3 million; orBoth.

Directors will be guilty for an offence and liable to:

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

Give loans and securities for loans to person connected with directors (Section 225)

• A company is prohibited to provide loan or security for a loan to a person connected to directors.
  
• A person connected with director is:His spouse, child, parent, brother or sister, spouse of his child, brother or sisterA body corporate where:The body corporate or majority of its directors are act in accordance with the directions and instructions of that directors;The directors has a controlling interest;The director and / or persons connected with him are entitled to control 20% or more of its voting rights.
  

A person connected with director is:

• His spouse, child, parent, brother or sister, spouse of his child, brother or sister
• A body corporate where:The body corporate or majority of its directors are act in accordance with the directions and instructions of that directors;The directors has a controlling interest;The director and / or persons connected with him are entitled to control 20% or more of its voting rights.
  

A body corporate where:

• The body corporate or majority of its directors are act in accordance with the directions and instructions of that directors;
• The directors has a controlling interest;
• The director and / or persons connected with him are entitled to control 20% or more of its voting rights.
  

• Exceptions:Foreign companyExempt private companyRelated companyFinancial institutions and insurance companiesHome loanMay give a loan to a person connected with director if he is a full-time employee of the company or its related company for the purpose of purchasing a home.No need to get members’ approval.Staff loanMay give a loan to a person connected with director if he is a full-time employee of the company or its related company pursuant to a staff benefit scheme.Must approve by the member.
  

Exceptions:

• Foreign company
• Exempt private company
• Related company
• Financial institutions and insurance companies
• Home loanMay give a loan to a person connected with director if he is a full-time employee of the company or its related company for the purpose of purchasing a home.No need to get members’ approval.

Home loan

• May give a loan to a person connected with director if he is a full-time employee of the company or its related company for the purpose of purchasing a home.
• No need to get members’ approval.

• Staff loanMay give a loan to a person connected with director if he is a full-time employee of the company or its related company pursuant to a staff benefit scheme.Must approve by the member.
  

Staff loan

• May give a loan to a person connected with director if he is a full-time employee of the company or its related company pursuant to a staff benefit scheme.
• Must approve by the member.
  

• Consequences:Company may recover the loan or obtain indemnification for its liability under the security given.Directors will be guilty for an offence and liable to:Imprisonment ≤ 5 years; orFine ≤ RM3 million; orBoth.

Consequences:

• Company may recover the loan or obtain indemnification for its liability under the security given.
• Directors will be guilty for an offence and liable to:Imprisonment ≤ 5 years; orFine ≤ RM3 million; orBoth.

Directors will be guilty for an offence and liable to:

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