Professional Documents
Culture Documents
1. Were there any abuses of power by the management and breach of fiduciary on the
part of the directors?
For this matter the answer is yes, there is an abuses of power by the management and
breach of fiduciary duty of the director which refers to Encik Zayed and Puan Hashimah.
Director’s fiduciary obligations are to exercise their powers under the company’s
constitutions for proper purpose and to avoid conflict of interest. According to
Companies Act 1965 Section 132(1) as to the duty and liability of officers, a director of a
company shall at all times exercise his powers for a proper purpose and in good faith in
the best interest of the company. As a fiduciary, a director’s duties are:
i. Duty to exercise of power in good faith and in the interest of the company
In this case, the controlling directors, Encik Zayed and Puan Hashimah tried to
negotiate with their external auditors Aziz & Co (Chartered Accountant) to not
qualify the financial statement due to several unresolved issues but failed. They
planned to terminate the auditor’s appointment and appoint a new ‘friendly party’
auditor who can cooperate with them. The directors showed the intention to
commit fraud and they absolutely did not act in the best interest of the company.
ii. Duty to act for the proper purpose
From this case, Encik Zayed and Puan Hashimah had wrong intention to use
company money for a personal purpose. Personal vehicle expenses were charged
to the company and several withdrawals of company’s money were made without
proper documentation. It breaches of their duties to the company. The amount
cannot be recorded under company expenses and must declare to their personal
withdrawn.
iii. Duty to act with reasonable care, skill and diligence
Due to this case, as a director’s of the company, Encik Zayed and Puan Hashimah
should attend a training for top management because both of them only has
secondary school background and zero knowledge about business. They need to
learn and familiar with the Accounting Standard and the provision of the
Companies Act 1965 to make sure their staff have been segregate their duties
accordingly and enhance understanding relation the job scope.
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A DELIMA
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A DELIMA
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A DELIMA
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A DELIMA
i. Management
Encik Zayed as the Managing Director of Delima Enterprise Sdn Bhd cannot hold the
position as Chief Executive Officer (CEO). He should appoint new CEO which is
responsible for the decision making and implement the company’s goal. Encik Zayed and
Puan Hashimah also appointed Encik Salam and Puan Balqis which are their family
members of Encik Zayed and have zero basic educational requirement as managers in the
company. Besides, Cik Amy is a newly appointed as Finance Executive which is fresh
graduated with no relevant working experience. Encik Salam as Human Resource and
Administrative Manager should hire employees with experience and knowledgeable which
are able to take the responsibility in order to increase the level of effectiveness and
efficiency of the company. Apart from that, the company should provide necessary training
to all the employees. They can appoint an external party to conduct a seminar for their staff
to make sure all staff have knowledge about accounting standard and new policies about
the business due to their employee has no knowledge about that. The company also need
to improve by stating a clear job description of each position in the company and
competency to perform their job to prevent redundancy and breach of fiduciary
responsibilities.
ii. Authorization
The decisions in the company are made and authorized by Encik Zayed or Puan Hashimah
which cause a lack of authorization in the business transaction. There is no Standard
Operating Procedure (SOP) provided in the company. This can lead to manipulation and
abuses of power by the directors. This also can lead to a poor decision making which will
affect the company as a whole. Besides, lack of authorization in the company can be seen
when personal vehicle expenses of the director is charged to the company. The personal
expenses should not be charged in the company’s expenses. The director must comply with
the regulation by not include the expenses in the company’s account. The authorization
should be approve and stamping with different person which is in compliance with the
SOP.
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A DELIMA