LAW 485

DIRECTOR
WHO IS A DIRECTOR?

S196(1) S 4(1)
Resident in Msia By whatever name called
Must have >1 Director for a private co & Occupying the position of director
>2 Directors for public co Any person
WHO IS A DIRECTOR?
De facto director
Shadow director not
occupies the position
named as director but
of director although
customarily act like a
not appointed/
director (in giving
defective
instruction)
appointment

Alternate/ substitute
director is nominated
In position as director by another director to
of corporation attend meetings/
S2(1) perform duties on his
behalf
‘Director’
include
 WHO IS A
A Director DIRECTOR?

Not an employee
An officer of the unless has
2 types
co separate contract
of employment

Non-Executive Managing/
Director Executive Director

Takes part in the collective Takes part at board & works

decision of the board of full-time in the management
director of the co as an employee
APPOINTMENT OF DIRECTOR
s202(1), s202(2), s203 & s202(3)

• Named in the Constitution s202(1)

1ST Director • Appointed by promoters & lodged with the
Registrar

• By ordinary resolution s202(2) & s291

Subsequent • By separate resolution for each director for a
Director public co s203
• By the board of directors s 202(3)

Vacancy / • Board of Dir has power to appoint

Additional • Additional – subject to maximum permitted
number
Director
APPOINTMENT OF DIRECTOR

Duration/ • 1st director hold office in accordance with CA2016

• Until co’s 1st AGM for a public co s202
Term of office • Retires / eligible for re-election s205(6)

• At each AGM – 1/3 of the Directors retire by rotation

s205(3)(b)/ may exclude/ modify
Retirement • Eligible for re-election s205(6)
• Those longest in office since their last election should
retire 1st s205(4)

• No requirement to retire under CA2016 unless

Private Co disqualified, resigns, removed/ a written resolution
passed by members s205(2)
QUALIFICATION OF DIRECTOR
Natural person of full age (18 yrs)

Sound mind (s208(1))

Not bankrupt/ not convicted for any offence/

not disqualified by the Constitution

Must signifies his consent in writing & lodge to

Registrar & confirmed he is not disqualified
SHARE QUALIFICATION OF DIRECTOR

No rule director must own share

A co may in its constitution require directors to hold a minimum

number of shares
No grace period – terms apply without any exception

Holmes v Keyes (1959) (old regime)

Failure – shall vacate his office

Incapable of reappointed until obtained his qualification
AGE QUALIFICATION OF DIRECTOR

18 yrs age – age of majority

In line with the Contract Act – an underage

person is not liable as an agent to his principal

No age limit of a person to be appointed as a

director
DISQUALIFICATION OF DIRECTOR
Convicted
• Article 72 Table A • 1. Offence related to
promotion/management
s198(4)
• 2. Bribery/ fraud/ dishonesty
punishment
• 3. Convicted under S213,
217, 218, 228 / 539
• Duties of directors s213
Undischarged • Confidential information
Bankrupt
s217
• Keeping proper books of
account s539
• 1. Insolvent co
• Has been a director of TWO
companies within 5 years
from the date the co were
wound up due to insolvency
contributed wholly/partly by
the director s199(1)(a)
• >5yrs may apply to court to
grant a leave
• 2. Contravened his duties as a
director s199(1)(b)
• 3. Habitually contravened the
CA2016 s199(1)(c)
Restrained by
the Court
REMOVAL OF DIRECTOR
Disqualification / Terms of
Constitution/ s206(1)
removed by an ordinary
resolution
S206(3) – 28 days notice
Director has a right to make
defense in writing / orally
before a vote is taken s207
A successor is required before
No clear remedies under the
vacancy if a director is
CA2016. May seek under law
appointed to represent a
of contract
class/ debenture
Public co via general meeting
by ordinary resolution –S206
Vacant upon passing of
resolution ->half of the votes
cast s291
Director entitled to speak to
the members/ request
written response to be read
out at the meeting s207
DIRECTORS’ DUTIES
 Directors are those who are entrusted to
MANAGE a company.
They are given BROAD POWER in the
management of a company, law imposes
certain duties upon them, in the interest of
DIRECTORS' the public good and for the protection of
those who invest money in the company.
DUTIES BREACH of these duties or negligence in
performing them on the part of a director
ENTITLES the company to SUE HIM FOR ANY
DAMAGE which has been suffered by the
company as a result of the breach or negligence.
 S31(2) the rights, powers, duties & obligations
are provided under CA2016 unless modified by
the Constitution.
S213 applies to :
o a director,
o a de factor director,
DIRECTORS' o a shadow director,
o an alternate director,
DUTIES o the CEO (executive),
o the CFO (financial),
o the COO (operating) &
o any person primarily responsible for the
management of the co
Director has 3 broad categories of duties

B. DUTIES OF
SKILLS, CARE
& DILLIGENCE

A. FIDUCIARY C. STATUTORY
DUTIES DUTIES

DUTIES
A. FIDUCIARY DIRECTOR s213(1)
1. Exercise power
3. Duty to act for
in good faith & in 2. To not have
the proper
the interest of the conflict of interest
purpose
company
(a) use of money or
assets of company to
make profit for himself

(b) use of information

acquired by virtue of
his position to make
profit for himself

(c) use of position to

obtain profit for
himself
 ii. The
duty of
care
i. The iii. The
duty to be duty to be
skillful diligent
B. DUTIES OF
SKILL, CARE
& DILIGENCE
s213(2)
 A. FIDUCIARY DUTIES
1. exercise power in good faith and in the
interest of the company
2. duty to act for the proper purpose
a. use of property of company to make profit for
himself
b. use any information acquired by virtue of his
position to make profit for himself
Director has c. use of position to obtain profit for himself
d. use any opportunity of the co which he
3 broad become aware of in performance of his
function
categories of e. engage in business which is in competition
with the co
duties
B. DUTIES OF SKILL, CARE & DILIGENCE
(i) the duty to be skillful
(ii) the duty of care
(iii) the duty to be diligent
C. STATUTORY DUTIES
Fiduciary Duties

1. GOOD FAITH
The directors occupy a fiduciary position and must therefore exercise their
power in good faith and in the interest of the Company as a whole.

S 213 CA2016
"A director shall at all times exercise his powers in accordance with
this Act for a proper purpose & in good faith in the best interest of the
company"
COMMON LAW – ‘GOOD FAITH’
Marchesi v Barnes & Keogh
"To 'act honestly' refers to ACTING BONA FIDE in the interest of the
company in the performance of the functions attaching to the office
of director".

Re Smith & Fawcett Ltd

"They must EXERCISE THEIR DISCRETION BONA FIDE in what they
consider and not what the court may consider to be in the interest of
the company, and not for any collateral purpose“.
Re W & M Roith Ltd
Roith was the controlling spirit of what is
commonly referred to as a 'one-man company'.
He owned the majority of the company's shares
and ran the company's business.
He was one of the 3 directors. Roith wanted to
make provision for his wife after his death.
He therefore entered into a contract with the
company, under which HIS WIFE WOULD BE PAID
A PENSION IF HE DIED. Of course, there was no
problem in having this agreement adopted by the
company, as he controlled it.
Roith died. His executors put in a claim for the
widow's pension. The liquidator of the company
rejected the claim.

Held: Liquidator was right to do so. When the

directors of the company agreed to make the
contract they were NOT CONSIDERING THE
INTEREST OF THE COMPANY ie Roth considered
the interest of his wife.
 $
Walker v Wimborne

The directors of Asiatics, had administered that company and

several others of which they were directors as a group.
They had caused ASIATIC TO PAY MONEY TO AUSTRALIAN
SOUND (another company within a group), for the sole reason
that Australian Sound needed the money.
There was NO SECURITY and NO PROMISE TO PAY INTEREST.
Nor was there any consideration for the payment. The directors
had also used Asiatic's fund to pay the employees of the group
companies.

The majority in the High Court of Australia held that the

payments were made in BREACH of the directors' duties.
It was the duty of the directors of Asiatic to consult its interests and its
interest alone in deciding whether payment should be made to the other
companies.
In adapting the general policy that they had governing the movement of
funds between the companies, the directors completely disregarded the
interests of the individual companies.
There was an irresistible inference that there had been a misapplication of
the company's funds, a misapplication which occurred because the
directors disregard and were blind to their duty to act in the best interest of
Asiatic.
Accordingly, they were held to be LIABLE TO PAY TO THE COMPANY THE
AMOUNT THAT HAD BEEN LOST.
 (a) use of property of company
2. Duty to act to make profit for himself
for the (b) use any information
acquired by virtue of his
PROPER position to make profit for
himself
PURPOSE (c) use of position to obtain
profit for himself
S218(1). (d) use any opportunity of the
Director can co which he become aware
of in performance of his
not engage in function
(e) engage in business which is
the: in competition with the co
 Mills v Mills
2. Duty to Dixon J said: "Directors of a
act for the company are fiduciary
agents, and a power
PROPER conferred upon them cannot
be exercised in order to
PURPOSE obtain some private
advantage or for any
S218(1) purpose foreign to the
power"
2. Duty to (a) use of property of company
to make profit for himself
act for the
A director cannot use money or
PROPER asset of the company to make profit
for himself. All the money or assets
PURPOSE must be used to make profit for the
company only.

S218(1)
 (b) use any information acquired by virtue of his
position to make profit for himself
S281(1) a director should obtain the prior consent of the members at a
general meeting before acting on the information
Director cannot make a secret profit by reason of opportunities acquired
as a result of his position. Where a director makes profits by the use of
confidential information he is not entitled to retain it unless these profits
are disclosed to and approved by the company.
Electro Cad Australia Pty Ltd. & 2 Ors v Mejati RCS Sdn. Bhd. & 3 Ors [
1998] 3 AMR 2555 third
party
• Amongst the issues in this case are whether the first and 2nd Ds owed
duties to the 2nd P in relation on the confidential information they
received from the 2nd P;
• and whether the first and 2nd Ds had breached that duties;
• Another issue was, whether, by disclosing the 2nd P's secrets to others,
the 2nd D was in breach of his fiduciary duties vis-a-vis his position as a
director of the 2nd P.
The court held:

1. It is TOTALLY IMPROPER FOR A DIRECTOR TO OBTAIN AN ADVANTAGE

BELONGING TO THE COMPANY FOR HIS OWN USE, especially when it is
detrimental to the company; for this purpose, information is an
advantage. In addition, a director is precluded, when he resigns, from
using confidential information (or any other advantage) obtained by
virtue of his position as a director, especially when the resignation is
seen to have been motivated by a desire to obtain for himself the
advantage actually sought by the company.

2. In the present case, as a director of the second P, the 2ND D OWED A

FIDUCIARY DUTY TO THE 2ND P. From the evidence, the 2nd D's conduct
upon the resignation showed that he was motivated by a desire to
acquire an advantage from his former position as a director of the 2nd
P, the 2nd D, therefore was in BREACH HIS FIDUCIARY DUTIES toward
the 2nd P.
 • A director may not make use of his
position to obtain a profit for himself.
• If a director uses the fact that he is a
(c) use of director to acquire a profit, he will be
accountable to the company for it.
position to • So if a director accepts in consideration
obtain profit for acting in a certain way in relation to
the company's affairs, he will clearly be
for himself in breach of his fiduciary duty.
 Furs Ltd v Tomkies

• Tomkies was a director of Furs Ltd.(Furs). He was authorised by

the board to negotiate for the sale of part of the company's
business to a New Zealand company (buyer). As this was the
part of the business that he was in charge of, it was envisaged
that he would go over to the buyer on completion of the sale.

• During the negotiations Tomkies got the buyer to pay him a

sum of money in consideration of him transferring to them his
service. Since they had to pay the amount to Tomkies, the
buyer offered a lower sum of the business to Furs. Furs
accepted this lower sum as they were very keen to sell, without
any knowledge of the money paid to Tomkies.
• The High Court of Australia held that his fiduciary character
was the occasion and the means of securing the profit for
himself.
• By so doing he greatly diminished the price obtainable by the
company.
• However, this was not the determining factor.
• He had a plain duty with which he brought his private interest
in conflict. That was enough.
• Accordingly, he was held liable to account.
Mahesan v Govt of Malaysia
Mahesan was a director and employee of the society. Its object was to
provide housing for government employees.
In connection with a transaction involving the purchase of land, Mahesan
received a bribe from one Manickam. Manickam had purchased the land
for M$456,000. He sold it to the society for M$944,000. One quarter of the
profit (i.e. $122,000) was paid to Mahesan as a bribe.
Lord Diplock held that Mahesan had breached his duty to the society. The
society could have acquired the land for $456,000; instead they had paid
$944,000. The society was accordingly entitled to recover the amount of
the bribe or alternatively damages for Mahesan's breach of duty, but not
both.
In the event, since the loss to the society was greater than the amount of
the bribe, Mahesan was ordered to pay damages to the society.
Mahesan v Govt of Malaysia

Mahesan
(d) use any opportunity of the co which he become
aware of in performance of his function
S221(1) every director…interested in a contract /proposed contract with the
co. shall as soon as practicable ..declare the nature of the interest at a
meeting of the BoD.
A director set up a new company/ firm as to take advantage
over a contract
Cook v Deeks
The directors of a company carrying on the business of railway
construction contractor OBTAINED A CONTRACT in their OWN
NAME.
The directors also procured a resolution of the company
RATIFYING THEIR CONDUCT.
On an action brought by shareholders to the Privacy Council it
was held that it was a BREACH OF TRUST on the part of the
director and that the benefit of the contract belonged to the
company and they were bound to account to the company for
it.
Re Duomatic Ltd.

A payment was made to an ex-director

as compensation for loss of office. This
payment was not disclosed to the
shareholders as required by S 137 of
our CA. Therefore, it was a payment
that the company could not lawfully
make.
Buckley J held that the directors
responsible for making the payment
were liable in respect of it on the
grounds of misapplication of the
company's funds. This was so even
though he found that the directors
concerned had acted honestly, out of
ignorance of law.
Similarly, a director must employ the power & assets
that he is entrusted with for the purpose for which
they were given & not for any collateral purpose.

Dixon J said: "Directors of a company

are fiduciary agents, and a power
conferred upon them cannot be
Mills v Mills exercised in order to obtain some
private advantage or for any purpose
foreign to the power"
This case concerned the The directors of Millers However, Howard Accordingly, the
issue of shares by the considered that it Smith's take over bid directors of Millers
directors of a company would be in the best could not succeed as issued new shares to
(Miller). The A (Howard interest of the company Ampol controlled Howard Smith which
Smith) and the R to be taken over by sufficient shares in diluted Ampol's holding
(Ampol) were both Howard Smith. Miller’s to block the to the point where it
trying to take control of bid. could no longer block
Millers. the take over. The
directors of Millers had
the power to issue
shares if Millers needs
money.

Howard Smith Ltd v Ampol Petroleum Ltd

Howard Smith Ltd v Ampol Petroleum Ltd

Miller co Take over co

Issue share
However it transpired that the reason for the issue of the shares was not to raise money,
but to assist Howard Smith and stymie Ampol.
In acting as they did, the directors of Millers were trying to advance the interest of the
company.
They honestly thought that it would be in the interest of the company for the Howard
Smith bid to succeed.

Nevertheless, the Privy Council held that they had misused their powers, and nullified
the issue of the shares.
According to Lord Wilberforce, the directors' power was a fiduciary one. The exercise of
such a power, though formally valid, could be attacked on the ground that it was not
exercised for the purpose for which it was granted.
The power to issue shares was for the purpose of raising money for the company. It has
been used to forestall a takeover bid. This was an abuse of the power even though the
directors had not acted to further their self-interest.
(e) engage in business which is in competition with
the co
PERUNDING AJZ

Avel Consultant Sdn Bhd v Mohd Zain Yusof & Ors

(e) engage in business which is in competition with
the co

Avel Consultant Sdn Bhd v Mohd Zain Yusof & Ors

Avel Consultant Sdn Bhd (Avel) is a subsidiary of Elmex

Consultant Sdn Bhd (Elmex).
The 1st & 2nd R were directors of both Elmex and Avel whilst
the 3rd R was a director of Elmex only.
Both Avel and Elmex were appointed as consultant of Sistem
Televisyen Malaysia Bhd, a subsidiary of the Fleet Group, in
respect of an engineering project known as Channel 3 TV3.
A TERM of the said appointment was that in the event of the
RESIGNATION of any key personnel involved in the Channel 3
project, the A were REQUIRED TO INFORM the Fleet Group
of such fact, so that it could decide what to do next.
 • Subsequently the 3 Rs formed a firm - PERUNDING AJZ with
the object of carrying on business of consultant engineers.
• It began to canvass for work and even approached
established clients of Avel and Elmex for the purpose of
obtaining work.
• Even before Perunding AJZ was registered, the 1st R as
managing Director of Avel INFORMED STMB that the 3 of
the key personnel of Avel on the Channel 3 project were
Avel RESIGNING. However, at that time, none of the said 3
personnel had given any resignation letter.
Consultant • Then AVEL'S APPOINTMENT as consultant engineer was
TERMINATED and PERUNDING AJZ WAS APPOINTED instead
Sdn Bhd v to carry on with the Channel 3 Project.
• Avel and Elmex then sued the R for breach of fiduciary
Mohd Zain duties. The learned judge dismiss the application, hence
this appeal.
Yusof & Ors
• Held - a director of a company is in a fiduciary relationship
with his company and as such he is precluded from acting in
a manner which will bring his personal interest into conflict
with that of his company. The R had carefully planned the
formation of Perunding AJZ which later on obtained the
very job which was Avel's job. It is therefore clear that there
can be no defence to the issue of fiduciary duties.
Company need not to prove their loss as to show that
there is a breach of duty of director
Green v Bestobell Industries

The duties continue even after the director has

resigned
Canadian Aero Service

Director cannot defense that the company per se fail

to obtain benefit
IDC v Cooley

If director has bona fide rejected the co’s benefit, he is

allowed to take that opportunity for himself without
the necessity to disclose to the co
Peso Silver v Cropper
The fiduciary duty is owed to the company as a whole and not
to any individual member of it

Percival v Wright
Directors bought shares from a shareholder while they were
negotiating for the sale of the company at a very high price.
The directors did not disclose the fact to the shareholders.

Held: that the directors do not owe fiduciary duties to any

individual shareholder. Accordingly they were not under the
duty to inform the shareholder of the negotiations
 Remedies for breach of fiduciary duties
3.The exercise of the
2. The company may
power which in breach
claim any SECRET
of directors’ duties may
PROFIT that the director
be declared to be
made
INVALID.

1. The company may sue

for DAMAGES or for the
S218(1) may be liable for
return of specific
a term of <5 years/ a
property s541 court may
fine <RM3million/ both.
order director to
compensate the co
REMEDIES
 S213(2) of CA2016

B. DUTY OF A director of a co shall exercise

reasonable care, skill & diligence with:
SKILL, CARE
AND (a) The knowledge, skill and
experience which may reasonably
REASONABLE be expected of a director having
the same responsibilities, and
DILIGENCE (b) Any additional knowledge, skill and
experience which the director in
fact has.
B. DUTY OF SKILL, CARE AND REASONABLE
DILIGENCE

Duty to be skillful
The rule is that a director does not have to possess any skill for the job and
the fact that he is unskillful is not a breach of his duty to the company.

Re City Equitable Fire Insurance Co Ltd

the court held that a non-executive director:
- Did not exhibit in the performance of his duties a greater degree of skill
than may be reasonably be expected from a person of his knowledge and
experience
- Did not have to give continuous attention to the affairs of the co
- Did not have to attend all meetings but he must attend in the
circumstances he was reasonably able to do so.
B. DUTY OF SKILL, CARE AND
REASONABLE DILIGENCE

Re Brazilian Rubber Plantations & Estate Ltd

Director has no knowledge of rubber industry and

made losses from rubber speculation. The judge
said:

” A director’s duty has been laid down as requiring

him to act with such care as is reasonably to be
expected from him, having regard to his knowledge
and experience. He is I think, NOT BOUND to bring
any special qualifications to his office.”
B. DUTY OF SKILL, CARE AND REASONABLE
DILIGENCE

Re Forest of Dean Coal Mining Co

“Director are bound to use reasonable diligence

having regard to their position, though probably an
ordinary director, who ONLY ATTENDS at the board
meeting OCCASIONALLY, CANNOT BE EXPECTED TO
DEVOTE as MUCH TIME AND ATTENTION to the
business as the sole managing partner of an ordinary
partnership, but they are BOUND TO USE FAIR AND
REASONABLE DILIGENCE in the management of
company’s affairs and to act honestly.”
B. DUTY OF SKILL, CARE
AND REASONABLE
DILIGENCE

The principles under s213(2) CA

2016

• A director is deemed to have the

knowledge, skill and experience
• which he actually has, and
• which a person carrying his
functions should be expected to
have
• These principles extended to the
CEO, CFO, COO and any other
person primarily responsible for
the management of the co.
B. DUTY OF SKILL, CARE AND REASONABLE
DILIGENCE

Business Judgment
• Are the directors liable for the wrong decisions which caused losses
to the company?

• S214 – a director who makes a business judgment is deemed to have

met the requirements of duty under s213(2) & equivalent duties
under the common law and equity.
• He is then DEEMED TO HAVE EXERCISED HIS DUTY with reasonable
care, skill & diligence & thus cannot be sued for breach of duty.
B. DUTY OF SKILL, CARE AND REASONABLE
DILIGENCE
Business Judgment S214(2)
A business judgment means any decision on whether / not to take
action in respect of a matter relevant to the co’s business.
A director is deemed to have made a business judgment under four
conditions - if he:
1. Makes the decision for a proper purpose & in good faith
2. Does not have a material personal interest in the subject matter
3. Makes the decision based on information given which the director
reasonably believes to be appropriate under the circumstances, &
4. Reasonably believes the decision is in the best interest of the
company
All 4 conditions must be fulfilled. If not, he is sued.
 B. DUTY OF SKILL, CARE
AND REASONABLE
DILIGENCE
Reliance on Information
S215(1)
Reliance on information provided by 3rd parties:
• An officer whom the director believes to be
reliable & competent
• A professional / expert retained by the co
• Another director, or
• A committee to the board of directors, on which
the directors is not a member
• S215(2) a director when relying on the
information provided by others, must still act in
good faith & make independent assessment of
information based on the director’s knowledge.
 B. DUTY OF SKILL, CARE
AND REASONABLE
DILIGENCE
Delegation
s210 & s216
A director, CEO, CFO, COO & any person
primarily responsible for the management
of the co
may delegate any power of the board to a
committee, director, officer, employee,
expert, unless such delegation is prohibited
by the CA2016
-the co’s constitution, the board resolution
/ member’s resolution

The BOARD of directors which has delegated

its powers is still RESPONSIBLE for the
delegate’s action as if such power had been
exercised by the directors themselves.
 B. DUTY OF SKILL, CARE AND
REASONABLE DILIGENCE

Delegation s210 & s216

The DIRECTORS are NOT responsible only if
the directors believe that
-the delegate would exercise the power in
conformity with the duties imposed on
the directors &
- the delegate was reliable & competent

Re Railway – Marzetti’s case

Director may delegate their power & trust
to agent
he is not negligent if he had been
defrauded by a rogue agent
 B. DUTY OF SKILL, CARE AND REASONABLE
DILIGENCE
Delegation
Huckerby v Elliot
• The company ran a gaming club without licence. This was an
offence under the Custom and Excise Act 1952.
• Huckerby was a director of the company and she was charged
with the offence on the basis that offence committed by the
company was attributable to her neglect.
• The evidence showed that although she was a director, she
knew little of the business and the running of the business
was left to her co-director and the manager of the company.
• The Magistrate convicted Huckerby on the principle that as
director, she should have exercised some control over the co-
director and the manager.
• The High Court however quashed the conviction and stated
that there was no general principle that each director has to
exercise some degree of control over the company’s business.
• It was proper for the director to leave the matters to another
director or to an official of the company.
• As long as there was no reason to distrust the delegates, a
director was entitled to believed what they said.
• However, once there is reason for suspicion, a director who
trust a delegate does so at his own risk.
 B. DUTY OF SKILL, CARE AND
REASONABLE DILIGENCE

System of Internal Control S246

Requires a director of a public co / its
subsidiary to ensure that the co has
implemented a system of internal
control.
Such system should provide a reasonable
assurance that:
• the co’s assets are safeguarded against
loss from unauthorized use/ disposal &
• all transactions are properly authorized
/ recorded to enable preparation of the
co’s financial statements.
 Approval Contract with
sole member
by who is also a
Directors Director

Disclosure of
Consequences
Interest
CONTRACT
WITH
COMPANY

C. STATUTORY DUTIES – CONTRACT WITH COMPANY

 C. STATUTORY DUTIES
CONTRACTS WITH COMPANY
S218
Prohibits a director from improperly
using the co’s assets to further his
own interest / that of another
person.
If he wants to, he should obtain the
consent of the members at a general
meeting.
Questions
Can a director / a person connected
with him enter into a contract with
the company?
 C. STATUTORY
DUTIES
Disclosure of Interest s221
If a director has interest in any way
(directly/ indirectly) in a contract /
proposed contract, he is to DECLARE as
soon as practicable, the NATURE OF HIS
INTEREST at the board of director’s
meeting.
s221(9)
Where his spouse, natural child, adopted
child/ step child has interest in the
shares of the other contracting party, a
DIRECTOR is also DEEMED TO HAVE AN
INTEREST in the contract & should
declare that interest.
The spirit of the provision would require
compliance of s221 where the other
contracting party is the director’s spouse
/ child.
 C. STATUTORY DUTIES Approval by Directors

S222 During
board S222(2) During board meeting
meeting

Cannot
Interest
delibera
ed
te/ vote Interested Director may attend, deliberate &
Director
on vote on resolution if:
may
resoluti
attend
on

the co is The co is The director

a a The director is also a the contract is an
has interest
private private director of other indemnity for
in not more
contracting party & the any losses which
co co & is <5% of the
number of shares held by may be suffered
which is wholly other
him is not more than the by the director in
not a owned contracting
number of qualifying his capacity as a
subsidia subsidia party’s paid
shares guarantor
up capital
ry ry
 C. STATUTORY DUTIES

Contract with sole member who is

also a director
Incorporation
A private co – can be incorporated with
one member & one director.
the sole member can also be its
director.
A public co – can be incorporated with
one member & two directors.
the sole member can also be one of
the two directors
 C. STATUTORY DUTIES
Contract with sole member who is also
a director s234
Where the co is a limited co with only
ONE member & the sole member is
also a director, the co shall ensure
that the terms of the contract are
RECORDED in the minutes of the
directors’ meeting IMMEDIATELY
after the making of the contract
unless:
-the contract is entered into in the
ordinary course of the co’s business /
- the contract is in writing
 Consequences
Failure to declare interest/ interested party/
voted on the resolution
C. STATUTORY 1. The contract is VOIDABLE at the co’s option
DUTIES unless the other contracting party has no actual
notice and the transaction is for valuable
consideration s221(10) & s222(3)
2. Director shall be GUILTY of an offence s221(12)
& s222(4)
Thank you
METHOD OF TEACHING:

LECTURE, TUTORIAL AND STUDENT-CENTRED

LEARNING

EVALUATION:
CONTINUOUS ASSESSMENT : 60%
1 Quiz 20% S3
2 Test 20% S5
3 Group Assignment 20% S6
FINAL EXAMINATION : 40% 22 July 2021 onwards
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100%