eKTP 69

Directors’ Duties and Responsibilities
Part 4 of 5 

eKTP_Post_66.png

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 company

    • 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 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 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 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; 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 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.

  • Exceptions:

    • Foreign company

    • Exempt private company

    • Related company

    • Financial institutions and insurance companies

    • 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 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; or

      • Fine ≤ RM3 million; or

      • Both.