When we think of “directors” in the context of corporate law, we often picture formally appointed individuals on a board. However, the term “director” is broader than you might think.

The definition of a “director” is not limited to a person who is formally appointed as a director. Whether a person is considered a director depends more on the person’s functions than title.

The definition of a “director” under section 2 of the Companies Act 2016 of Malaysia is not exhaustive. It includes a person in accordance with whose directions or instructions the majority of directors of a corporation are accustomed to act, as well as an alternate or substitute director.

For the purposes of certain provisions of the Companies Act 2016 relating to directors’ duties and responsibilities, section 210 of the Act extends the definition of “director” to include chief executive director, chief financial officer, chief operating officer or any person primarily responsible for the management of the company.  This means they would also be liable for breaches of directors’ duties and responsibilities under the CA 2016 where the definition of “director” includes them.

For example, under section 213, CEO, CFO, COO or persons primarily responsible for the management of a company must exercise their powers for a proper purpose and in good faith in the company’s best interest. The business judgement rule in section 214 applies to them and they are responsible for actions of their delegatee pursuant to section 216.

If you’re a CEO, CFO, COO, or in a similar role, it’s essential to understand that you have the same responsibilities and potential liabilities as a formally appointed director under certain provisions of the Companies Act 2016.

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This post was first posted on LinkedIn on 10 January 2025.