MANAGEMENT OF COMPANIES &

FINANCIAL ARRANGEMENT
INTRODUCTION
(1) s. 122(3) requires at least 2 initial directors
named and appointed in the AOA or MOA.
s. 4(1) includes directors , secretary and
employee as officers of the company
A company consist of 2 components i.e.
!oard of directors and the "eneral meetin"
(2) #nitially it $as held that the "eneral
meetin" $as the company and the %oard of
directors as a"ent.
!ut in practise the AOA $ill usually confers
po$ers to mana"e the company to the %oard
of directors & 'A (3.
(3) )hether *M of mem%ers can o+erride the
directors and in+ol+e in the mana"ement of
their company.
Automatic Self-Cleansing Filter Syndicate
Co. v Cunnighame.
*M order the directors to sell the company
properties %ut $as refused relyin" on 'A
(3.,eld& AOA pro+ides the directors $ith
mana"ement po$ers $hich includes to sell
the property of -o. 'he mem%ers cannot
interfere.
John Shaw & Sons v Shaw
'he !oard of director $as properly e.ercisin"
the po$er of mana"ement confered under
articles and the "eneral meetin" cannot
usurp this po$er.
Scott v Scott
'he company "eneral meetin" resol+ed,
firstly to pay di+idens to preference
shareholders and secondly that the financial
affairs of the company %e in+esti"ated %y a
firm of accountant. #t $as held that the
resolution s $ere in+alid as they usurped the
po$ers $hich the articles had +ested in the
directors.
(4) #f the mem%ers in the "eneral meetin"
disappro+e the action of the %oard, they only
can do it %y alterin" the AOA to reduce the
%oards po$ers.
(/) #f the directors e.ceed their po$ers, or
e.ercise them improperly, their act can %e
ratified %y ordinary resolution in a "eneral
meetin". 0o$ the improper e.cersi+e of
po$er %ecomes +alid.
(e") 'A 12 pro+ides that po$er to declare
di+iden +ested on "eneral meetin" %ut the
%oard declare it.
#f the !oard of 3irectors refused to initiate a
le"al proceedin" %eco. they themsel+e
in+ol+e in the %reach, then the "eneral
meetin" can initiate on %ehalf of the
company .
POWERS OF THE DIRECTORS
'he po$ers are conferred not on
indi+idual directors %ut to the %oard of
directors as follo$&
(a) Management 4 'A (3 (e") to
%orro$ money, char"e the -o
property , %usiness or unpaid
capital , issue de%entures "i+e
security for de%ts.
(%) Delegation of poe!" 4usually
article $ill pro+ides po$ers to
directors to dele"ates its
mana"ement function to
mana"in" directors &'A13,
dele"ates its po$er to commitees
of directors &'A25 and any
person to %e company6s
attorney &'A(5
(c) I""#e S$a!e" 7 once incorporated
they can issue share& 'A 2
(d) Call" 7$hether and $hen to ma8
call of unpaid shares &'A 13, if
not paid order for forfeiture &'A
22, disposin" forfeited share &'A
31
(e) T!an"fe! of "$a!e" 49i"ht to
refuse transfer of shares&'A22,
he can suspend the re"isteration
of transfer of shares temporary&
'A23
(f) C$e%#e" an& !e'eipt" 7
company6s cheque, ne"otia%le
instruments, receipt must %e
si"ned %y directors& 'A ((
(") Common Seal 43irectors must
8eep safecustody of the company
seal and used it $ith authority&'A
15
(h) Con(ene meeting" of mem)e!"
*con+enin" "eneral meetin" if
article pro+ide so.
(i) Di(i&en"* *eneral Meetin" has
po$er to declare di+idens& 'A 12
%ut it cannot e.ceed amount
recommended %y %oard of
directors.
PROCEEDING OF THE +OARD
(a) Meeting" 4 'A (1 ena%les the
directors to meet to"ethter as a
%oard and re"ulate their meetin"s
as they thin8 fit.
(%) Noti'e of Meeting" ,TA -./0
'he "eneral rule is that directors
must recei+e notice that a %oard
meetin" has %een con+ened.
0otice of each meetin" not
necessary unless it is required
so. #n such case the meetin" is
irre"ular %ut irre"ularity does not
pre:udice outsider. Royal British
Bank v ur!uand(any
irre"ularity has no effect to
outsider an it is presumed all
internal rules are complied $ith.
(c) 1#o!#m 4 articles usually specify
ho$ many directors to constitute
a quorum. 'A 23 lea+es it to the
directors themsel+es to decide
the quorum.#f not pro+ided %y
article then the minimum num%er
is 2 directors $ho has +otin"
ri"hts.
(d) P!o'ee&ing" at )oa!& meeting"
4 Article or !oard of directors $ill
determine the procedure of
meetin"s. 'A 2;. <ection 1/5
the company to 8eep minute of
the meetin".
DIRECTORS
s. 4(1) defines directors includes
.7 any person occupyin" the position of director e+en
thou"h he may %e descri%ed %y another name
7 an alternate and su%stitute directors and
.7 any person $hose directions or instructions are
customarily follo$ed %y the directors of a company.
"a# Sing $ock v %%
'he definiton u=s. 4(1) is confined to -A only and does
not e.tend to >enal -ode.
T2PES OF DIRECTORS
A company must 8eep a re"ister of directors, mana"ers
and secretaries u=s. 141. #t must contains
particulars their consent in $ritin" for
appointment & s. 141(2).
(a) Go(e!ning Di!e'to!"
?sually pu%lic company %ut some pri+ate company
formed to operate family %usiness also nominate
"o+ernin" directors to etc mana"e the company
%usiness, $ho has a%ility to nominate etc.
(%) Managing Di!e'to!"
<ometime !oard of directors dele"ate some of their
functions to mana"in" director &'A 11. 'heir functions to
act as directors and as an employee.
(c) C$ai!man of Di!e'to!"
0ormally appointed to chair %oard meetin" #t is not
pro+ided in AOA or 'A.

(d) Committee of Di!e'to!"
!i" companies may dele"ate +arious mana"ement
function to commitees of directors .'A 25 pro+ides that
they e.ercise po$ers pro+ided %y the !oard. 'heir
function is to o+ersee the company6s lar"e scale
%orro$in"s or construction of %i" pro:ect.
(e) Alte!nate o! S#)"tit#te Di!e'to!"
<ometime directors cannot e.ercise their function as
director for certain period, so they assi"n alternate
directors.
s. 132(1) 4only pu%lic company can assi"n A3 pro+ided
appro+ed %y special resolution.AOA may pro+ides rule
and procedure of appointment.
s. 132(2) the appoint does not constitute as office of
director only transfer his position.
s. 4(1) states A3 are also directors.
'hey ha+e ri"hts to +ote, function li8e a director and
entitle for notice of meetin".
(f) A""o'iate Di!e'to!"
<ometime :unior e.ecuti+e is appointed as Associate
director. 'he purpose is to act as ad+isor and as an
incenti+e of promotion.'heir +otin" ri"ht and ri"ht to
attend meetin" depends on the !oard .
(") Nominee Di!e'to!"
<ometime directors appoint to represent the interest of
shareholders or creditors. ,oldin" -o. usually appoint
0.3 in su%sidiary.
REMUNERATION
Re &eorge 'ewman & Co. @indley @A& 3irectors ha+e no
ri"ht to %e paid for their ser+ices unless pro+ide for under the
MOA or AOA.
'A (; h=e+er pro+ides that directors are entitle for
remuneration from time to time as determined %y the "eneral
meetin" and also tra+ellin" and other e.penses.
B.cessi+e remuneration may amount to oppression to
shareholder& s. 121.
LOANS TO DIRECTORS
,P!o$i)ito!3 T!an"a'tion/
s. 133 restrict "i+in" loan to directors %y companies other than
e.empt pri+ate company &s. 133(1)
s. 133A prohi%its a company other than n e.empt pri+ate
company from ma8in" a loan to any person connected $ith a
director of the company.
s. 122A follo$in" person are connected $ith the director&
(a) mem%ers of family (spouse, parents, %rothers, sisters
and spouse of his children.)
(%) a %ody corporate associated $ith director (that he can
direct, controllin" the interest and has 1/C +otin" ri"ht
in the company.)
(c) 'rustee of a trust(other than an employee share
scheme or pension)
(d) A partner of that director or a partner of a person
connected $ith that director.
E4CEPTIONS to s. 133 and 133A&
(1)lendin" money in the ordinary cause of %usiness.
(2) loan to meet the e.penditure incurred for the purpose of
the company or ena%le the officer to perform their duty.Must
appro+ed %y *eneral Meetin"
(3) housin" loan
(4) loan to director $ho are fultime employee and must
appro+ed %y *M.
Che (an )evelo#ment*s case 3irector too8 loan from 3
rd
party %ut company "uarantee.,eld 'he prohi%ited transaction
is DO#3
CCB v Sy Bukit inggi held >rohi%ited transction is +alid.
s. 133(/) -o. can reco+er the amount $hich $as "i+en under
"uarantee or security.
>rohi%ited 'ransaction ?nder -ommon @a$& Doid ?nder
Bn"lish la$& Doida%le and Malaysian @a$ &silence.
COMPENSATION FOR LOSS OF OFFICE
s. 13((1) pro+ide a "eneral rule that it is unla$ful for the
company to ma8e payment or any %enefit to directors for loss
of office or on retirement unless particular of such payment
has %een disloced to the mem%ers in *M.
,=e+er s. 13((/) "i+es some e.ceptions&
(a) any payment made under an a"reement entered %4
commencement of repealed $ritten la$s.
(%) >ayment made under an a"reement appro+ed %y *M
%y a special resolution
(c) !ona fide payment %y $ay of dama"es for %reach of
contract
(d) A %ona fide payment of pension=lumsom in respect of
past ser+ices.
(e) A payment made under an a"reement entered %et$een
the companies and director %efore he too8 office as
part of the consideration a"reein" to hold office.
FINANCIAL
ARRANGEMENTS
MANAGEMENT OF THE COMPAN2