Company Directorship Responsibilities Quiz
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Questions and Answers

Which of the following is NOT a requirement to be a director?

  • Must possess a law degree (correct)
  • Must be at least 18 years of age
  • Must not be convicted of specified offences
  • Must not be a bankrupt person

    • A shadow director claims to act openly as a director of a company.

    False

    What is the prohibition period for a person convicted of specified offences?

    Five years

    A director must act for a proper purpose and in _____ for the best interest of the company.

    <p>good faith</p> Signup and view all the answers

    Match the following duties or characteristics to their descriptions:

    <p>Duty of good faith = Acting in the best interest of the company Not a bankrupt person = Requirement to hold office Sound mind = Mentally capable of performing duties Duty to exercise reasonable care = Expected level of diligence as per responsibilities</p> Signup and view all the answers

    Which of the following can result in a person being restrained from acting as a director?

    <p>Being a director in a company that was wound up due to insolvency</p> Signup and view all the answers

    A director can be reappointed after being convicted of specified offences without any conditions.

    <p>False</p> Signup and view all the answers

    Who can apply to the court to restrain a person from acting as a director?

    <p>Registrar of Companies</p> Signup and view all the answers

    Which of the following definitions best describes a de facto director?

    <p>A person who assumes to act as a director without formal appointment</p> Signup and view all the answers

    The minimum number of directors required for a private company is two.

    <p>False</p> Signup and view all the answers

    What role do Chief Financial Officer (CFO) and Chief Executive Officer (CEO) play in a company's directorship?

    <p>They are considered directors as they are primarily responsible for the management of the company.</p> Signup and view all the answers

    A _______ director is someone who provides directions for the company's directors but is not officially appointed.

    <p>shadow</p> Signup and view all the answers

    Match the following types of directors with their definitions:

    <p>De Facto Director = Acts as a director without formal appointment Shadow Director = Gives directions to the directors Alternate Director = Appointed in place of a regular director Director = A person appointed as a director of a company</p> Signup and view all the answers

    According to the Companies Act, how many directors are required for a public company?

    <p>Two</p> Signup and view all the answers

    A person who is not formally appointed but claims to be a director can escape liabilities associated with that role.

    <p>False</p> Signup and view all the answers

    What is the primary function of a director within a company?

    <p>To manage the company and make decisions in the best interest of the corporation.</p> Signup and view all the answers

    What is the main responsibility of a director regarding their position?

    <p>To exercise power for a proper purpose</p> Signup and view all the answers

    Directors can use company property for personal gain if it is not explicitly stated as illegal.

    <p>False</p> Signup and view all the answers

    In the case of Re W & M Roith Ltd, why was the pension contract for the director's widow deemed void?

    <p>The board did not act in the best interest of the company.</p> Signup and view all the answers

    A director must exercise reasonable _____, skill, and diligence.

    <p>care</p> Signup and view all the answers

    What circumstance would indicate a breach of duty by a director?

    <p>Using company information for personal gain</p> Signup and view all the answers

    Match these directors' obligations with their descriptions:

    <p>Proper Purpose = Acting in the best interest of the company Duty of Care = Exhibiting knowledge and diligence expected of a director Conflict of Interest = Prioritizing personal interests over company responsibilities Board Attendance = Attending meetings when reasonably able to do so</p> Signup and view all the answers

    Directors must give continuous attention to the affairs of the company at all times.

    <p>False</p> Signup and view all the answers

    According to Sec 213(2) CA, what should the expected level of skill and diligence be for a director?

    <p>Knowledge, skill, and experience expected of a director with similar responsibilities.</p> Signup and view all the answers

    Which of the following is NOT a requirement for a director making a business judgment?

    <p>Evaluated by external auditors</p> Signup and view all the answers

    A director can rely solely on the information provided by another director without independent assessment.

    <p>False</p> Signup and view all the answers

    What must a director do if they have a conflict of interest during a board meeting?

    <p>Declare the nature of their interest</p> Signup and view all the answers

    Section 218 CA prohibits a director from improperly using the company's __________ to further personal interests.

    <p>assets</p> Signup and view all the answers

    Match the sections of the Companies Act with their corresponding duties.

    <p>Sec 213(1) = Duty to exercise power for proper purpose Sec 214(2) = Duty to make business judgments Sec 215(2) = Duty to assess information provided by others Sec 221(1) = Duty to declare conflicts of interest</p> Signup and view all the answers

    Which statement about the business judgment of a director is true?

    <p>The subject matter of the judgment must be appropriate.</p> Signup and view all the answers

    Directors can enter into contracts with the company without declaring their interest if the contract is beneficial.

    <p>False</p> Signup and view all the answers

    According to the Companies Act, who can directors rely on for information when making business judgments?

    <p>Competent officers, professionals, other directors, or committees</p> Signup and view all the answers

    Study Notes

    Company's Director

    • A director is a person appointed to a company's board. Section 2(1) of the Companies Act (CA) includes de facto directors, shadow directors, and alternate directors.
    • Directors can include CFOs, CEOs, COOs, or others primarily responsible for company management. Company directors are considered officers under Section 2(1) CA.
    • The minimum number of directors for a private company is one, and two for a public company (Section 196(1) CA).
    • A director is defined in Section 2(1) of the CA 2016 as someone who holds the position of director, regardless of the title. It also encompasses an individual whose instructions or directions are consistently followed by the corporation's directors, as well as a substitute or alternate director.

    Subtopics

    • Definition of directors
    • Qualifications of being a director
    • Duties and powers of directors
    • Removal of directors

    Who Can Be a Director?

    • A natural person, at least 18 years old (Section 196(2) CA).
    • Not a bankrupt person (Section 198(1)(a) CA).
    • Not convicted of specific offenses (Section 198(1)(b) CA).
      • A five-year prohibition period starts from conviction, or release from prison if incarcerated (Section 198(6) CA).
    • Can be reappointed with court leave (Section 198(4) CA).
    • Not an auditor of the company (Section 264(1)(c)(iii)(A) CA)
    • Of sound mind (Section 208(1)(e) CA)

    Qualifications of Directors

    • No specific academic or professional qualifications are required.
    • Directors must exercise reasonable care, skill, and diligence. Their knowledge, skill, and experience are evaluated against what is "reasonably expected" of a director in similar responsibilities, or any additional knowledge, skill, and experience the director actually possesses (Section 213(2) CA).

    Removal of Directors

    • The Registrar of Companies can apply to court to restrain a director from acting or holding office in company management (Section 199(1) CA).
    • Reasons for restraint can include: being a director of two companies that were wound up due to insolvency within five years (significantly contributing to the insolvency, Section 191(1)(a) CA).
    • Violating director duties (Section 191(1)(b) CA).
    • Repeatedly violating the Companies Act (Section 191(1)(c) CA)

    Duties of Director

    • Act in the company's best interest, in good faith for a proper purpose (Section 213(1) CA).
    • Consider only the company's interest, not personal gain (Good Faith).
    • Exercise powers for a proper purpose.

    Director's Conflicts of Interest (S 218 CA)

    • A director must not use the company's property, information, or opportunities for personal gain or use their position to compete with the company to gain personal benefit, without express consent (Section 218(1) CA).

    Duty to Make Decision for Company

    • Business decisions made by a director are known as a business judgment (Section 214(2) CA). A director must make business judgments for a proper purpose, in good faith, without material personal interest in the matter, and in the company's best interest (Section 214(1) CA).

    Relying on Information

    • Directors can rely on credible information from sources that are considered reliable (Section 215(1) CA), such as another company official, a professional, another director, or a BOD committee. However, directors must still evaluate information independently based on their knowledge to ensure it aligns with good faith and corporate interest (Section 215(2) CA).

    Duty to Delegate

    • Directors can delegate board powers to committees, officers, employees, experts, or other individuals (Section 216(1) CA).
    • Directors are ultimately responsible for the delegated activities (Section 216(2) CA).

    Case Law Examples

    • Re Hydrodam (Corby) Ltd [1994]: Defined a de facto director as someone who assumes the role of director without formal appointment.
    • Re W & M Roith Ltd: Demonstrates the director's duty to act in the best interest of the company, including avoiding conflicts of interest.
    • IDC v Cooley: Highlights the conflict of interest situation a director faces when their personal interests clash with the company's.
    • Re City Equitable Fire Insurance Co (1925): Non-executive directors are not expected to dedicate continuous attention to company affairs but still exercise reasonable skill, care and diligence commensurate with their experience & knowledge level.
    • Norman v Theodore Goddard (1991): Executive directors must exercise skills and knowledge commensurate with what a person in their position is expected to have and possess.

    Penalties for Non-compliance

    • Non-compliance with director duties may result in imprisonment for a term of up to five years, a fine not exceeding RM3 million, or both (Section 221(12) CA).

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    Company's Director PDF

    Description

    Test your knowledge on the requirements and responsibilities of company directors. This quiz covers important topics such as definitions, characteristics, and prohibitions related to directorship. Perfect for students of corporate law and business management.

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