Nominee director’s duty

Company Law

In an M&A transaction where the sale and purchase of shares is not for the entire issued share capital of a company, it is prudent for shareholders to enter into a shareholders’ agreement to govern their relationship.

The shareholders would typically want the right to nominate their representatives to be directors of the company and have such rights set out in a shareholders’ agreement. Such shareholders’ right to board seat is usually proportionate to their shareholding in the company and include the right to replace the director(s) they nominate.

A nominee director should bear this in mind:

Although the director is nominated by a shareholder, the director’s duty is first and foremost towards the company.

A director who was appointed by or as a representative of a member must 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 (section 217(1) of the Companies Act 2016).

#malaysiancorporatelawyer
#mergersandacquisitions

This post was first posted on Linkedin on 3 October 2022.

Linkedin Post
Five key steps for legal due diligence

Most lawyers are good at identifying issues, but legal due diligence shouldn’t be limited to merely reviewing documents and identifying issues. Here are my five steps for conducting legal due diligence: 1. Identify the issues based on the scope of legal due diligence as agreed with the clients. 2. Provide recommendations …

Linkedin Post
Begin with the end in mind: Post-completion integration

I once worked on an M&A deal that took more than a year to complete. While the deal was not inherently complex, it dragged on due to delays in finalizing the details of the transaction agreements for reason beyond my control. As the deal involved a larger corporation acquiring a …

Lawyering
Being a Corporate Lawyer: Why I Do What I Do

After years of demanding schedule and juggling simultaneous corporate exercises which take a toll on physical and mental health, it is not surprising that some corporate lawyers experience burnout. Unlike some legal practice areas, the work of a corporate lawyer may not seem immediately impactful or “make a difference” to …