CHAPTER 6: MANAGEMENT OF COMPANIES

(DIRECTOR, AUDITOR AND COMPANY SECRETARY) -

DIRECTORS
• S.2(1) CA2016 states the word director includes:
1. Any person occupying the position of director of a corporation by whatever
named called; and
2. Includes a person in according with whose directors or instructions the majority
of directors of corporation are accustomed to act; and
3. An alternate or substitute director.
• The term ‘director’ wherever appearing in the Act also includes the following:
1. de facto director, that is, a person who occupies the position of directors even
though he was not appointed or his appointment was defective;
2. A shadow director, that is, “in accordance with whose directions or instructions
the directors of a corporation are accustomed to act”; and
3. An alternate or substitute director, that is, a person nominated by another
director to attend meetings or perform duties on his behalf
Appointment Of Directors

• S.196(1): A company shall have a minimum number of directors as a following:

1. Private company – one director
2. Public company – two directors
• S.196 (2): “A director shall be a natural person who is at least 18 years of age”.
• S.196(4):The minimum number of directors:
1. Shall ordinarily resides in Malaysia by having a principal place of residence in Malaysia; and
2. Shall not include an alternate or substitute director.
• S.201: A person cannot be appointed as a director of the company unless he has consented in
writing to be a director and has made a declaration that he is not disqualified under CA2016 from
being appointed as a director or to hold office as a director.
• S.202: The first director(s) may be appointed by being named as a director in an application for
incorporation of the company.
Qualification Of Directors

1. Natural person
• S.192(2): A director of a company must be a natural person. It means that only human can be a
director. A corporation being an artificial person cannot be appointed as a director of a company.
2. Age
• S.192(2): A director must be off a minimum age of 18 years. There is no maximum age limit for a
person to be a director, for a public or private company.
3. Residency
• S.196(4): The minimum number of director must satisfy two criteria that he;
(a) Is ordinarily resident in Malaysia; and
(b) Has a principal place of residence in Malaysia.
4. Solvent person
• S.198(1): A person shall not hold office as a director of a company or whatever directly or
indirectly be concerned with or take part in the management of a company, if the person is
undischarged bankrupt.
Disqualification Of Director

(1) S.199 – Disqualification by courts order

• Upon application by the Registrar or by the Official Receiver, the court may
grant an order to disqualify the person from acting or holding office as a
director or promoter or to be concerned with or take part in the
management of the company whether directly or indirectly if;
(a) Within last five years, the person has been a director of two or more
company which went into liquidation resulting from the company being
insolvent due to his conduct as a director which contributed wholly or partly
to the liquidation;
(b) Due to his contravention of duties of a director;
(c) Due to his habitual contravention of CA2016.
(2) S.264 – Auditor of the company
• A person cannot be appointed is a director if he or his spouse is an auditor
of the company. He has first to resign as a company’s auditor if he wishes
to be appointed as a company’s director.
(3) S.208(1)(e) - Unsound mind
• The office of director must be vacated if the director becomes of unsound
mind. A person is of unsound mind or suffer mental disorder as prescribed
in the Mental Health Act 2001 is disqualified to be appointed as a director.
(4) Disqualification on amount of shares
• The director must hold a minimum number of shares. But it is up to the
constitution or the company itself to set up the period for the director to
comply with the share qualification requirement.
Vacation, Resignation Or Death Of A Director

S.208(1): the office of a director of a company shall be vacated if the person

holding that office;
1. Resigns by giving a written notice to the company at its registered office;
2. Has retired in accordance with CA2016 or the constitution and not re-
elected;
3. Is removed from office in accordance with CA2106 or the constitution;
4. Becomes disqualifies from being a director
5. Becomes unsound mind
6. Dies; or
7. Otherwise vacate his office in accordance with the constitution of the
company.
Removal Of Directors

(1) Private company

• S.206: a director may be removed before the expiry of the period of office,
by ordinary resolution. It should be passed at a physical meeting and
cannot be passed by way written resolution.
(2) Public Company
• S.206(2): company may by ordinary resolution remove a director from
office before the expiry of his term appoint another in his stead.
• This section gives an opportunity to the members of a public company to
remove a director if they are dissatisfied with his performance. The
provision allows the members of a public company to remove its director
by passing an ordinary resolution.
Duties Of Directors

1. Duty to exercise power for proper purpose and good faith for the interest of the
company
• S.213(1): “A director of a company shall at all times exercise his powers
in accordance with this Act for a proper purpose and in good faith in the
best interest of the company”.
• Proper purpose
• A director may be acting honestly in what he considers to be in the interests
of the company. However, he is still considered to have breached his fiduciary
duty if he uses his power or misapplies the company’s assets for wrong purpose,
not for the interest of the company.
Mills v Mills (1938)
Directors are considered to have breached their fiduciary duties if they use their
power for improper purpose even if they honestly believe that it would benefit the
company.
Howard Smith Ltd. V. Ampol Petroleum Ltd. (1974)
• If the directors use their power to increase the number of majority shareholders
at the expend of the minority even if they honestly believe that it would benefit
the company, the court would hold them to have breached their fiduciary duty.
Re Duomatic Ltd. (1969)
Held: directors were liable for misapplication of the company’s fund even though
they had acted honestly and were ignorant of the existing law.
• Duty to act in good faith for the interest of the company
• The court may not consider what the interests of the company are. It is the
directors’ duty in what they consider is the interest of the company.
Re Smith and Fawcett Ltd. (1942)
• The directors must exercise their discretion in they consider - not what the court
may consider to be in the interest of the company.
Re W & M Roith Ltd. (1967)
The director owned a substantial portion of shares in the company. He was terminally ill and wanted to provide
for his wife, thus he entered into a contract with the company to pay a pension to his widow.
Held: the contract was void as the board of directors did not act in the best interest of the company but for the
widow of the director. It was not made in good faith.
Greenhalgh v Ardene Cinemas Ltd. (1951)
The directors must act in the interests of the shareholders as a collective group.
Parke Daily v Daily News Ltd. (1988)
A director of an insolvent company must have regard to the interests of its creditors.
2. Duty of Care, Skill And Diligence
• S.213(2) : A director of a company shall exercise reasonable care, skill and diligence with –
a) The knowledge, skill and experience which may reasonably be expected of a director having the same
responsibilities; and
b) Any additional knowledge, skill and experience which the director in fact has.
Re City Equitable Fire Insurance Co (1925)
Court held that a director:
a) Did not have to exhibit in the performance of his duties a greater degree of skill than might reasonably be expected from a
person of his knowledge and experience;
b) Did not have to give continuous attention to the affairs of the company; and
c) Did not have to attend all meetings but he must attend in the circumstances he was reasonably able to do so.
Re National Bank of Wales (1899)
A director may delegate to the company’s officials to draw cheques. He will not be able to be personally liable if the persons
he trusted defrauded him.
Re Brazilian Rubber Plantations & Estate Ltd. (1911)
The directors did not have knowledge of the rubber industry and made losses from rubber speculation. The court held that
they were excused from liability. A director was not required to have any skill or qualification suitable for his office.
Re Forest of Dean Coal Mining Co (1879)
Directors must use fair and reasonable diligence and to act honestly.
3. Duty to avoid conflict of interests
• S.218 : A director or officer of a company shall not, without the consent or ratification of
a general meeting:
a) Use the property of the company;
b) Use the information acquired by virtue of his position as a director or officer of the
company;
c) Use his position as such director or officer;
d) Use any opportunity of the company;
e) Engage in business which is competition with the company
• To gain directly or indirectly, a benefit for himself or any other person, or cause
detriment to the company.
Lai Ah Kau v Public Prosecutor
Held: The directors must separate the company’s interests from their own and acts as trustees for
all company funds which come into their hands.
Mahesan v Malaysian Government Officers’ Co-operative Housing Society (1978)
Mahesan was the director of the society. The object of the society was to provide housing for
government workers. In the process of purchasing a piece of land for the society, Mahesan received
a bride amounted RM120, 000.
Privy Council HELD that Mahesan had breached his duty to the society.
Aberdeen Railway Co. v Blaikie (1854)
• A railway company entered into a contract to supply a large quantity of iron seats with a
partnership. At the time the contract was entered into, one of the partners was a director of the
company. Upon discovering this, the company sought to avoid the contract.
Held: The Company could avoid the contract because it is a duty of a director to avoid a conflict of
interest.
Corporate Opportunity Doctrine

• A director is not allowed to procure any property or business opportunity that properly belongs to
the company or has been negotiating for.
Cook v Deeks (1916)
The company had four directors. Three of them (the defendants) decided to break away from the
other one (the plaintiff). Two of the defendants negotiated a contract on behalf of the company.
When the contract was awarded, the defendants formed a new company of the company. The
Plaintiff sued on behalf of the company, claiming that defendants had breached their fiduciary duty.
Held: The court agreed with the plaintiff and ordered the defendants to return the profit to the
company.
Canadian Aero Service Ltd. V O’Malley (1973)
The directors of a company resigned in order to take up the contract which they had negotiated in
the first place for the company.
Held: The resignation was irrelevant because it was prompted to take up the contract that properly
belonged to the company.
IDC Ltd. V Cooley (1972)
Cooley was a managing director of a company, IDC. He negotiated a contract
with the Gas Board on behalf of the company. But the Gas Board wanted
Cooley to be the project manager himself. Cooley resigned and accepted the
post.
Held: Cooley was accountable and was held liable for the profit to IDC even
though IDC could not get the contract anyhow. The fact that Cooley put
himself in a conflicting position with the company’s interest rendered him
liable for breach of his duty as a director.
Peso Silver Mines Ltd. (NPL) v Cropper (1966)
The company has bona fide rejected an opportunity or a business advantage,
a director is allowed to take that opportunity himself without having to
disclose it to the company.
Remedies For Breach Of Duty
• As a director owes his duty to his company, in the event of a breach, the company may obtain remedies. There is more than one
remedy available to the company, and it may choose the remedy most suitable.
1. Sue for damages
• The company may sue for damages where it suffers a loss in the case of negligence or breach of fiduciary duty. The company ca n
take a common law action for tort of deceit and may recover damages where the director if fraudulent. Damages are meant to pu t
the company in a position it would have enjoyed had the director net breached his duty.
2. Seek return of property
• If there is misapplication of company’s property, the company may seek a declaration that a director holds property on trust for
the company. The company may seek the return of specific property, and the director is liable to return them. Normally the order
for the return of specific assets will be made if the assets are still under the director’s control.
3. Recover secret profit
• The company may claim any secret profit made by the director. Any breach of the directors’ duty to act honestly, the director is
liable to the company for any profit he has made or for any damage suffered by the company due to the breach.
4. Rescission of contract
• A contract entered into by a director in breach of his duty can be rescinded at the company’s option. Normally this would be done
where the contract is to the company’s detriment. The company would declare the power exercised by the director in breach of
his duty as null and void. This will mean that the transaction entered into by the director will have no effect. Any money pa id will
be returned.
AUDITORS
• Every company must have their accounts audited and thus must appoint at least
one auditor to audit its accounts. Auditors are watchdogs.
• Function: to carry out and present a reliable and independents report on the
accounts and financial position of the company.
• An auditors’ report contains a professional opinion, omission or fraud in the
accounts. An auditor’s job includes detecting any material error, omission or
fraud in the accounts.
• For this reason, the provisions of the Act dealing with appointment and removal
of auditors are designed to ensure that the auditors retain a measure of
independence.
• The Act is especially careful to provide that a change of auditors will be
accompanied with some publicity, thereby precluding the possibility of quietly
removing the auditors to cover up misdeeds.
Qualification Of Auditor
Who may be an auditor?
• S.264(1)(c)(i) - A person may act as an auditor only if he is approved
as a company auditor by the Minister charged with the
responsibilities for finance.
• He must also be a chartered accountant as defined under the
Accountants Act 1967.

• S.264(5)(a)
• He may not be appointed as the auditor of the company unless he
has given his written consent to the appointment.
Disqualification Of Auditor

• S.264
• To ensure the independence of the company auditor, the company cannot
appoint as its auditor a person who is connected to the company in any of the
manners given below.
• Thus, an approved company auditor shall not consent to be appointed as an
auditor of a company if:
i. He is indebted to the company or its related corporation for an amount exceeding
RM25, 000 (S.264(1)(c)(ii));
ii. He is an officer of the company (S.264(1)(c)(iii)(A));
iii. His spouse is an officer of the company (S.264(1)(c)(iii)(A));
iv. He is a partner, employer or employee of an officer of the company
(S.264(1)(c)(iii)(B));
v. He is a partner or employee of an employee of an officer of the company
(S.246(1)(c)(iii)(C));
vi. He is a shareholder of a corporation whose employee is an officer of the company
(S.264(1)(c)(iii)(D));.
vii. His spouse is a shareholder of a corporation whose employee is an officer of the
company (S.264(1)(c)(iii)(D));
viii. He is responsible for the keeping of the register of members or the register of
debenture holders of the company (S.264(1)(c)(iv));
ix. He is the partner, employer or employee of a person responsible for the keeping of the
register of members or the register of debenture holders of the company (S.264(1)(c)(iv));
x. He is an undischarged bankrupt within or outside Malaysia except with leave of the court
(S.264(1)(c)(v)); or
xi. He has been convicted of any offence involving fraud or dishonesty punishable with
imprisonment for three months or more (S.264(1) (c) (vi)).
Appointment Of Auditor

Private company
• S.267(3)
• The board directors shall appoint the first auditor at least 30 days after the company’s
audited financial statements are circulated to its members.
Public company
• S.271(2): The Board shall appoint the first auditor at any time before the company’s first
annual general meeting (“AGM”) and he shall hold office until then conclusion of the first
AGM.
• S.271(4)(a)
• For subsequent auditors of a public company, the members may appoint an auditor at
the AGM, and the auditor shall hold office until the conclusion of the next AGM.
• Thus, there is no provision for the automatic re-appointment of an auditor. The
appointment is on a yearly basis.
Vacation Of Office

Removal and Resignation of Auditors

• S.276 - An auditor may be removed from the office by an ordinary resolution of
the members at a general meeting of which special notice has been given (S.277).
• Members who want to remove the auditor are required to serve a special notice
or notice of intention on the company at least 28 days before the scheduled
members’ meeting. The company shall send a copy of the notice to the auditor.
At the members; meeting, the editor shall be entitled to have his representation
read out as well as speak to the members. Then, the resolution to remove the
auditor will be put to vote. After an auditor is removed, the company must notify
the ROC.

• S.281(1) - An auditor can resign from his office by giving notice to the company at
its registered office. The auditor’s resignation will be effective at the end of 21
days after the notice is given or from the date stated in the notice.
Rights Or Powers Of Auditors

• The CA 2016 gives wide rights or powers to an auditor of a company to enable him to conduct his duties. The
following are the statutory rights or powers of auditors:
l. An auditor has the rights of access at all reasonable times to the accounting such as books and vouchers and
other records, including registers of the company and its subsidiaries.(S.266(4)&(5))
2.An auditor is entitled to require from any officer of the company and any auditor of a related company or of
any subsidiaries, for information and explanation as he desires for the purpose of carrying out his duties or for
the purpose of reporting on the consolidated financial statements. (S.266(4)&(5))
3. An auditor is entitled to attend any general meeting of the company and also has the right to speak on any
part of the business of the meeting that concerns him in his capacity as auditor.(S.266(7))
4. An auditor has the rights to receive all notices of, and any other communication relating to any general
meeting which a member is entitled to receive.
• S.266(12) provides that an officer who refuses or fails without lawful excuse to allow an auditor to access
any accounting and other records of the corporation in his custody or control or refuses or fails to give any
information or explanation as and when required or otherwise hinders, obstructs or delays an auditor in the
performance of his duties shall be guilty of an offence against this Act. On conviction, the officer shall liable
to imprisonment for a term not exceeding three years or to a fine not exceeding RM500,000 or to both.
Duties Of An Auditor

(1) Statutory duties

(i) Duty to report to members
• S.266(1)
• The auditor is required to report to the members of the company’s annual accounts. Where the company is
a public company, the audited accounts must be laid before the company in its AGM, and where the
company is a private company; the accounts will either be circulated to its members or laid before the
company at its members’ meeting.
(ii) Duty to attend meeting
• S.285(1)
• The auditor of a public company is required to attend every AGM. This is because the company’s audited
financial statements are tabled at the AGM. The auditor could then respond to the members’ queries on the
audit of the financial statements.
• A private company is not required to hold an AGM. However, the company may, if it so wishes holds a
members meeting where its financial statements are laid. An auditor who is given due notice is required to
attend the meeting to respond to the members’ queries which are relevant to the audit to the financial
statements.
(2) Common Law Duties
(i) Duty to carry out an audit
• Before an auditor can form an opinion whether the company’s accounts provide a true and fair view of its
position, an audit must be carried out. In carrying out an audit, particularly where the company’s account is
complex, an auditor is required to devise procedures in assist in the detection of errors or fraud.
Pacific Acceptance Corp Ltd v Forsyth (1970)
Moffit J: “An auditor pays due regard to the possibility of fraud or error by framing and carrying out his
procedures…”
(ii) Duties to report to members
• An auditor is appointed to safeguard the interest of members. He must provide a report which is circulated
among the members. If fraud is uncovered or suspected, an auditor is under a duty to report promptly the
matters to the directors or appropriate management rather than wait until the AGM.
WA Chip & Pulp Co. Ltd v Arthur Young & Co. (1987)
An auditor will breach his duty if, having detected a possible irregular not amounting to a suspicion of fraud,
fails to investigate further and report the matter.
(iii) Duty to be independent
• The purpose is to ensure that the shareholder receive an unbiased opinion of the true and fair view of the
company’s position.
Re Transplanters (Holding Co) Ltd (1958)
Wynn Parry J: “Once a man takes upon himself a position of auditor… he must stand aloof and divorce from the
aims, objects and activities of the company”.
• This doesn’t mean that an auditor must server all other connections with the company. Auditors are entitled
to seek assistance from the company’s director, accountants and other employees in carrying out their
functions. However, auditors will be breach of their duty if they rely on them for information on which they
are required to form their own independent judgement or opinion.
Dominion Freeholders Ltd v Aird (1966)
An auditor prepared to an erroneous report. The company brought an action against him for breach of his
contractual duty of care and he sought to join the company’s accountant as company defendant on the basis
that the accountant had supplied him with incorrect information and was in breach of duty owed to him.
HELD: The application by the auditor was rejected. Auditors must not rely or depend on company’s officers for
information or representation in respect of matters upon which they do so rely; they cannot shed their
responsibility by casting the liability on the company’s officer.
(iv) Duty to use reasonable care and skill
• An auditor must use reasonable care and skill in carrying out the audit and in forming an opinion on the
company’s account. Failure to do this renders an auditor liable to the company in damages for breach of
contract.
• An auditor may also be liable in negligence. An auditor who uses less than the required degree of care and
skill is liable to the company for any loss suffered as a result.
Re Kingston Mill & Co (No2) (1896)
The auditors failed to detect fraud done by the managing director. They relied on false certificates supplied by
him as to the value of stock. The audited accounts indicated that profits had been made and consequently
dividends were paid. Had the value of stock been properly determined, there would have been no profit from
which dividends could be paid. An action was brought against the auditors seeking to recover the loss caused
by the wrongful payment of dividends.
Held: The auditors were not in breach of duty because standard of care did not require them to take stock.
They were entitled to rely on the manager’s certificates as they were no grounds for suspicion and the
manager was widely regarded as a man of good character and trustworthy.
• These days, the standard of care and skill expected from auditor is more exacting. The standard of
reasonableness depends on the circumstances and is affected by changed expectations. Higher standard of
care is now applied.
Re Thomas Gerrard & Sons Ltd. (1968)
The managing director had over the period of years been making obvious alterations to invoices
receives from suppliers. Whilst some of these invoices had come to attention of the auditors, they
nevertheless relied on the stocktaking procedures set up by the managing director without
investigating the matter any further. Soon, after discovery of the true situation, the company went
into liquidation. The liquidator brought an action against the auditors.
Held: The auditors were liable to the company because one altered invoices had been discovered,
the auditors were put on inquiry and it was insufficient that they merely sought assurances from the
managing director and they should have informed the board. The auditors had therefore failed to
exercise reasonable care and skill.
Pacific Acceptance Corp. Ltd v Forsyth (1970)
The auditors left the audit with several clerks. Irregularities were detected on several occasions by
different audit clerks. These matters were not followed up.
Held: The auditors were held to be negligent in employing inexperienced staffs who were not
properly supervised.
Liabilities Of Auditors To Third Party
• Under common law, an auditor may be liable to third parties for loss incurred due to reliance on misleading financial stateme nt.
Third parties include actual and potential shareholders, vendors, bankers and other creditors, employees and customer. A reme dy
is available to such persons, where auditors fail to exercise the appropriate standard of care.
Ultramares Corporation v Touche (1932)
• Ordinary negligence is insufficient for liability to third parties because lack of privity of contract between the third part ies and
auditors unless the third parties are primary beneficiaries (a person about whom the auditors were informed prior to conducti ng
the audit). However, if there is proof of fraud or gross negligence on the part of the auditor, he would always be liable to the
aggrieved party irrespective of whether there is privity of contract or not.
Hedley Byrne v Heller (1964)
Lord Denning LJ: An auditor being a professional is a subject to extra-contractual responsibilities to those parties who can
demonstrate that they were owed a duty of care by the auditor.
• This case introduced a concept of proximity in that liability could arise where a special relationship exist between the part y making
the negligent statement and the party to whom he was made. Such a relationship would exist if the party giving the advice had
known or to have known that the inquirer was relying on them.
Jeb Fastener Ltd v Mark Bloom & Co (1983)
Jeb enquire the entire share capital of BG Fastener Ltd. audited by Mark Bloom. The plaintiff claimed that they made the acquisition
relying on the negligently prepared financial statement. It was established that at the same time the accounts were audited, the
auditors did not know of the plaintiff or his purpose or that a takeover of the company was contemplated.
Held: The auditor owed a duty of care to the plaintiff who relied on the report.
Caparo Industries PLC v Dickman (1990)
Caparo, a shareholder of Fidelity PLC, who received an audited account purchased more shares and
later made a successful takeover bid. After the takeover, Caparo brought an action against the
auditors of the company on the grounds that the profits were overstated. In fact, the company mad
a loss.
Held: auditors owed no duty to potential investors who seek to base their investment decision on
the audited accounts whether they are existing shareholders or not.
Al Saudi Banque v Clarke Pixley (1990)
Held: mere foreseeability in terms of reliance on the auditors’ report was inadequate to establish a
duty of care.
• Therefore, to make an auditor liable to third party, he must prove;
1. Foreseeability
2. Proximity
3. Justice for each case
Pacific Acceptance Corporation Ltd v Forsyth (1970)
• An auditor may trust the company’s own internal provided:
1. He must ascertain the creditability of the company’s system
2. He must appraise the system to determine to what extend he may rely on the system
3. He must test the system
Scott Group Ltd v McFarlane (1978)
• The reason why auditors should be made liable to person who rely on their reports:
1. Auditors are professional who provide expert advice
2. Auditors should reasonably expect their report would be used by other persons apart from the company
3. It is reasonable for an outsider to rely on the reports as they might not have the time or knowledge to examine the compan y’s accounts themselves
4. Auditors reports are publicly available

Lloyd Cheyham & Co Ltd v Littlejohn & Co (1987)

• Auditors can escape from liability of negligence by showing that they have acted in accordance with a practice accepted as pr oper by a body of
responsible and skilled professional opinion.
Causation And Damage

• In order to render an auditor liable in damages, it is not sufficient to

establish merely that he was negligent in carrying out the audit. It
must further be proved that the damage caused was a result of
negligence. The general legal principle of causation is also relevant
professional negligence cases involving auditors.
Cambridge Credit Corp Ltd v Hutcheson (1985)
Held: although the audit was carried out negligently, this was not the
cause of the loss to the company. The court found that the real cause
of the loss was the dramatic downturn in the economy at the time.
COMPANY SECRETARY
• Company directors require an approved Company Secretary to certify or verify company documents to
enable the process of incorporation at the Companies Commission Malaysia (CCM) to take place and the
certification of the company documents will be prepared to enable business transaction and dealing to
commence.
• A professional whose role in a corporate set up in that of an advisor for legal matters.
• He or she is a very important member of the Company’s Management to handle all paperwork’s, statutory
documents and procedural matters thatClick running of the
to add textcompany involves.
• Recognized by corporate law as one of the officers of the Company.
• The knowledge that he or she acquires during training makes them versatile enough to carry out functions in
various areas like Finance, Accounts, Legal Administrations and Personnel Division.
• In large and medium size business organizations, a company secretary role includes incorporation of the
Company, processing applications for management appointments, remunerations, inter-corporate
investment and loans, handling public issues including listing of shares and debentures, conducting both
board and general meeting, maintenance of records, registers and minutes of the meetings.
• In short, it would suffice to say that all legal and procedural matters as per the Companies Act and all other
applicable laws fall under the duties of a Company Secretary.
Requirement and Qualification – S.235
• Every company shall have one secretary who shall be a natural person, 18 years of age
and a citizen or PR of Malaysia.
• Who shall ordinarily reside in Malaysia by having principal place of residence in Malaysia.
• CS shall be:
(i) He is a member of a professional body, in the Fourth Schedule
(ii) He is licensed by the Companies Commission of Malaysia (CCM) previously known as
Registrar of Companies ROC).
• Any person who contravenes the above requirement shall be guilty of an offence against
the Companies Act, shall be liable to a penalty not exceeding Five Thousand Ringgit.
• A person who intends to do business in Malaysia must first register a business or
incorporate a company with Companies Commission of Malaysia;
• and to enable the CCM to incorporate the company in Malaysia a qualified individual
having license as Company Secretary is compulsory as provided by the Companies Acts
2016 to be appointed to perform the duties.
Appointment
• The Board shall appoint a secretary and determine the terms and
conditions of such appointment – S.236(1).
• The appointment shall be made within 30 days from the date of
incorporation of a company – S.236(2).
• The office of company secretary shall not be vacant for more than one
month – S.240.
• A secretary must be registered with the CCM.
• The particulars of the first secretary shall be entered into the register book.
• Prohibition to act in dual capacity- a person is prohibited to act in a dual
capacity as both director and a secretary in a situation that requires or
authorised anything to be done by a director and secretary – S.242.
Resignation and Removal
• A company Secretary may resign by giving resignation letter to the
board – S.237.
• The position of the vacant secretary must not be left unfilled for more
than one month.
• A secretary can also be removed by the Board in accordance to the
terms of appointment – S.239.