Responsibilities of Directors [Issue 1 of 2]
Introduction
In Malaysia, the role of a director is pivotal in steering a company towards success while ensuring compliance with legal and ethical standards. Directors bear significant responsibilities, making it essential to fully grasp their duties to uphold corporate governance and maintain legal integrity within the organization. This comprehensive understanding not only safeguards the company’s interests but also shields directors from potential legal repercussions.
Fiduciary Duties
Directors are required to act in the best interests of the company at all times, placing the company’s needs above their own. This includes avoiding any conflicts of interest that could compromise their impartiality. A director must always prioritize the company’s welfare, ensuring that personal gains do not interfere with their responsibilities. This duty of loyalty and trust is fundamental, setting the foundation for all other responsibilities a director holds.
Duty of Care, Skill, and Diligence
A director’s duty extends beyond mere loyalty; it encompasses the expectation to act with a high degree of care, skill, and diligence. Directors are expected to perform their roles with competence, which involves making informed decisions based on a thorough understanding of the company’s affairs. This duty requires directors to stay informed about the company’s operations, financial status, and industry developments. The standard of care is particularly high, demanding that directors seek professional advice when necessary and rely on accurate, comprehensive information before making decisions. Neglecting this duty can lead to poor decision-making, which could have severe repercussions for the company and its stakeholders.
Compliance with Statutory Obligations
Malaysian law imposes specific statutory obligations on directors, primarily under the Companies Act 2016. Directors must ensure that the company complies with these legal requirements, which include maintaining accurate financial records, filing annual returns, and ensuring that the company meets its tax obligations. Failure to adhere to these statutory duties can result in penalties, both for the company and for the directors personally. Directors must also ensure that the company’s financial statements are prepared in accordance with the law and that these documents are a true and fair reflection of the company’s financial position. This responsibility underscores the importance of transparency and accuracy in corporate reporting.
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