Duty of nominee director to act in the best interest of company prevails

Company Law

A director may be appointed to represent the interests of a person or a particular group such as employees, creditors or debenture holders.

When a shareholder invests in a company, the shareholder and the company may agree that the shareholder has the right to appoint a director to represent the shareholder’s interest in the company.

Such director is known as a nominee director.

Although a nominee director is appointed to represent the interest of his nominator, the nominee director must act in the best interest of the company. In the event of any conflict between his duty to act in the best interest of the company and his duty to his nominator, the duty to act in the best interest of the company prevails. This is provided under section 217 of the Companies Act 2016.

A director who contravenes this duty commits an offence under the Companies Act 2016 and on conviction, is liable to imprisonment or a fine or both.

#malaysiancorporatelawyer
#directorsduties
#nomineedirector
#companiesact2016

This post was first posted on Linkedin on 15 April 2021.

Linkedin Post
Partial Share Sales in Malaysia: What Sellers Need to Know About Guarantees

In partial disposals, it’s common for sellers and buyers to agree that any existing guarantees given by the sellers to secure banking facilities of the target companies will be adjusted to reflect the post-completion shareholding. For public listed companies (PLCs) in Malaysia, this can affect the deal timeline if not …

Linkedin Post
M&A Break Fees: Practical Constraints in Malaysia

In M&A transactions, break fees refer to a pre-agreed sum payable if a party withdraws from a proposed transaction without any breach by the counterparty. In principle, break fees are intended to deter frivolous exits and to compensate the other party for transaction-related costs, including due diligence and advisory expenses. …

Linkedin Post
M&A Disclosure Letter: DIY or Get a Lawyer?

In M&A transactions, a disclosure letter sets out the exceptions and qualifications to the representations and warranties (R&Ws) given by a seller in a share sale and purchase agreement (SPA). Getting it wrong can turn an unintentional misstatement into a breach of contract, with serious legal and financial consequences. Should …