In Malaysia, the remuneration of company directors are governed by specific legal requirements under the Companies Act 2016. Non-compliance can lead to significant legal repercussions.
Approval of Directors’ Fees in Private Companies
According to Section 230(2) of the Companies Act 2016, a private company’s board of directors may approve directors’ fees and benefits, provided this aligns with the company’s constitution. Such approvals must be recorded in the board meeting minutes, and shareholders must be notified within 14 days from the date of the approval as required by Section 230(3) of the Companies Act 2016. Non-compliance may result in fines of up to RM250,000.
Shareholders holding at least 10% of the total voting rights who believe that the payment of fees and benefits to directors is unfair to the company may request the company to pass a resolution to approve the payment. This can be done either through a written resolution or at a general meeting, provided the request is made within 30 days of becoming aware of the payments. The payment is considered a debt owed by the director to the company unless it is approved through a resolution passed under Section 230(4) of the Companies Act 2016.
Approval of Directors’ Fees in Public Companies
For public companies, as well as subsidiaries of listed companies, directors’ fees and benefits must be approved at a general meeting, in compliance with Section 230(1) of the Companies Act 2016. Failure to adhere to this requirement is an offence, subject to fines of up to RM3 million, and any unauthorized payments are considered debts owed by the director to the company.
——
Author(s):
Ashley Yeo, Founder
E: ashley@yeoashley.com.my
Nicole Goh, Associate
E: nicole.goh@yeoashley.com.my
Tan Nian Tze, Pupil
E: niantze.tan@yeoashley.com.my
——
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.
——
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.
