Responsibility of a nominee director

Section 217 CA 2016

(1) A director who was appointed by virtue of his position as an employee of a company, or
who was appointed by or as a representative of a member, employer or debenture holder,
shall act in the best interest of the company and in the event of any conflict between his
duty to act in the best interest of the company and his duty to his nominator, he shall not
subordinate his duty to act in the best interest of the company to his nominator.
(2) A director who contravenes this section commits an offence and shall, on conviction, be
liable to imprisonment for a term not exceeding five years or a fine not exceeding three
million ringgit or to both.

Case/Corum Brief Facts Held

Bhullar and others v Bhullar Bros Ltd was owned by two [41] Whether the company could or would
Bhullar and another brothers. Each side owned 50% of have taken that opportunity, had it been
[2003] 2 BCLC 241 ordinary shares. The directors were Mr made aware of it, is not to the point: the
Mohan Bhullar, his son Tim, Mr Sohan existence of the opportunity was
Bhullar and his sons Inderjit and information which it was relevant for the
Jatinderjit. The company had a grocery. It company to know, and it follows that the
also owned an investment property which appellants were under a duty to
was leased to a bowling alley business. In communicate it to the company.
1998 the families began to fall out.
Mohan and Tim told the board they The anxiety which the appellants plainly
wished for the company to buy no further felt as to the propriety of purchasing the
investment properties. Negotiations property through Silvercrest without first
began to split up the company, but they disclosing their intentions to their co-
were unsuccessful. In 1999, Inderjit set directors – anxiety which led Inderjit to
up a company called Silvercrest Ltd seek.
(owned by him and Jatinderjit) and
bought, but did not tell Bhullar Bros Ltd.
But Mohan and Tim found out and
brought an unfair prejudice claim (now s
994 Companies Act 2006) on the basis
that Inderjit and Jatinderjit had breached
 their fiduciary duty of loyalty to the
company.
Taz Logistics Sdn Taz Logistics was incorporated with an Tunku Jawahir and Dato’ Ridzuan were at
Bhd v Taz Metals
85% shareholding Dato’ Ridzuan. The all material times duty bound to provide all
Sdn Bhd & Ors
[2019] 3 MLJ 510 balance 15% shareholding was held by information to Taz Logistics as was
Tunku Jawahir. Asdion Bhd, a public relevant for its progress and commercial
listed entity, entered into a share sale needs. Such disclosure would have
agreement with Dato’ Ridzuan for the exposed the fact that the key directors of
purchase of 51% of Taz Logistics’ Taz Logistics were inextricably
shareholding. Asdion paid Dato’ Ridzuan intertwined with the setting up and
a sum of RM6m for this 51% operation of its competitor. Tunku Jawahir
shareholding.. However, the profitability and Dato’ Ridzuan did not see fit at any
and operational ability of Taz Logistics time to provide disclosure and seek
was destroyed by the defendants vide a consent or ratification at general meeting
series of events. Essentially these events for the setting up of Taz Metals. By failing
involved conflict of interest situations to do so and proceeding with the foregoing
between some of the defendants, who acts, they were clearly in breach of their
were directors of Taz Logistics. Even the directors’ duties. Tunku Jawahir and Dato’
office space occupied by Taz Logistics Ridzuan also acted in clear contravention
was taken over by Taz Metals, Taz of cl 4.4(b) of the shareholders’ agreement
Logistics had to downsize to a smaller
space as it had lost virtually every
employee. The claim by Taz Logistics
was that the entirety of its business was
diverted and acquired by Taz Metals
through acts and omissions amounting to
breaches of fiduciary duty by Dato’
Ridzuan and Tunku Jawahir and knowing
assistance on the part of Tengku Azlan
and Tengku Aslahuddin.