eKTP 70

Directors’ Duties and Responsibilities
Part 5 of 5 

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Restricted Dealings

The other restricted power of directors specified in CA2016 are as follows:

Acquires and disposes property of substantial value (Section 223 & 228)

  • Must obtain members’ approval before the company enters into effect any transaction of substantial value.

  • Substantial value property transactions not involving directors (Section 223)

    • Prior members approval is required if the value of transaction exceeds one of the following:

      • 25% of the company’s total assets;

      • 25% of the company’s issued capital;

      • The net profit from the property which is to be disposed contributes to more than 25% of the company’s total net profit.

    • Consequences:

      • Transaction shall be void.

      • Member may apply to court to restrain the company from entering into effect the void transaction.

      • Directors who authorised the void transaction guilty for an offence and liable to:

        • Imprisonment ≤ 5 years; or

        • Fine ≤ RM3 million; or

        • Both.

  • Substantial value property transactions involving directors (Section 228)

    • The following transactions require prior members’ approval by way of general meeting:

      • A transaction exceeding RM250,000.

      • A transaction value between RM50,000 to RM250,000 if the value exceeds 10% of the company’s net asset value as determined from the previous financial year’s audited accounts.

    • Exceptions:

      • Transaction by a company that is subject to a winding up;

      • Transaction is an arm’s length transaction, made in the company’s ordinary course of business;

      • Where the transaction has been approved by the court;

      • Where the transaction is in connection with a takeover offer.

    • Consequences :

      • Transaction shall be void.

      • Member or director may apply to court to restrain the company from entering into effect the void transaction.

      • Directors who authorised the void transaction guilty for an offence and liable to:

        • Imprisonment ≤ 5 years; or

        • Fine ≤ RM3 million; or

        • Both.