In a company, directors and shareholders play distinct and critical roles. Understanding this distinction is essential for protecting both the company’s interests and the individuals involved.
Shareholders
Shareholders are the owners of the company. They invest capital and, in return, hold shares that give them certain rights, including:
- receiving dividends (if and when declared),
- attending and voting at general meetings, and
- deciding on significant matters relating to the company.
Directors
Directors, on the other hand, are responsible for managing the company’s affairs and making decisions in its best interests.
Under Section 213 of the Companies Act 2016, a director must:
- at all times exercise his powers in accordance with the Companies Act 2016, for a proper purpose and in good faith in the best interest of the company.
- exercise reasonable care, skill and diligence with—
(a) the knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities; and
(b) any additional knowledge, skill and experience which the director in fact has.
Conclusion
While shareholders focus on ownership and investment returns, directors carry the legal and fiduciary responsibility of running the company and must comply with the duties set out under the Companies Act 2016.
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Author(s):
Ashley Yeo, Founder
E: ashley@yeoashley.com.my
Nicole Goh, Associate
E: nicole.goh@yeoashley.com.my
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Hello! This is Yeo Ashley & Partners, a law firm based in Kuala Lumpur, Malaysia. We provide comprehensive services tailored to growing businesses to meet your complex needs.
Our experiences include structuring of company shares for purposes of fundraising and incentivising employees, capital markets, mergers and acquisitions, regulatory compliance, and other shares-related matters, ensuring efficient and compliant processes. Our dedicated team is committed to empowering companies with the tools and guidance needed to navigate these critical areas, enabling them to focus on growth and success with confidence.
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This article is intended to provide general information and does not constitute and/or should be relied on as any legal opinion or professional advice. For more information, you may reach out to Yeo Ashley & Partners, a law firm based in Kuala Lumpur, Malaysia.
