eKTP 68

Directors’ Duties and Responsibilities
Part 3 of 5 

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Restricted Dealings

The power of directors is restricted by the CA2016 as follow:

Issues of shares (Section 75)

  • Director is not allow to allot shares, grant rights to subscribe in shares, convert any security into shares and allot shares under an agreement or option or offer without the members’ approval.

  • Consequences:

    • To compensate the company and the person to whom the shares were issued for any loss, damages or cost which the company or that person may have sustained or incurred.

 

Purchase of own shares or holding company’s shares [Section 22(1) & Section 123(1)]

  • A company is prohibited from purchasing its own shares and of its holding company.

  • Consequences:

    • Transaction void.

 

Give financial assistance for the purchase of own shares or holding company’s shares [Section 123(1) & (2)]

  • A company is prohibited from financing the purchase of its own shares and of its holding company.

  • Exceptions:

    • Foreign company;

    • Ordinary course of business;

    • Trust funds for the benefit of employees;

    • Share options scheme for employees;

    • Bank, insurance or takaful company;

    • Non-public listed company may give financial assistance if:

      • Obtain members’ approval by special resolution.

      • Directors approval that the company may give financial assistance which is in the best interest of the company and the terms and conditions are reasonable to the company.

      • Provide solvency statement made by the majority of directors.

      • The aggregate amount of the proposed assistance and other financial assistance which are still outstanding does not exceed 10% of the shareholders’ fund.

      • The financial assistance is given not more than 12 months after the date of the solvency statement.

  • Consequences:

    • The company and any person to recover the amount of the loan or any amount for which it becomes liable.

    • Any officer contravenes commit an offence and be liable for:

      • Imprisonment ≤ 5 years; or

      • Fine ≤ RM3 million; or

      • Both.