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118 Director’s statutory duties

Director’s statutory duties

1. A director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office as mentioned in Section 132(1).

The Act further states that an officer or agent of a company or officer of the Stock Exchange shall not make improper use of any information acquired by virtue of his position as an officer or agent of the company or officer of the Stock Exchange to gain directly or indirectly an advantage for himself or for any other person or to cause detriment to the company as mentioned in Section 132(2).

Section 132 (3) of the Act states that an officer or agent or officer of the Stock Exchange who commits a breach of this section shall be –

(a) liable to the company for any profit made by him or for any damage suffered by the company as a result of the breach; and

(b) guilty of an offence against this Act.

The penalty for an offence against this section is imprisonment for five years or thirty thousand ringgit.

2. Dividends are payable from profits

Directors must ensure that dividends are paid out from profits only.

No dividends shall be payable to the shareholders of any company except out of profits or pursuant to Section 60 as mentioned in Section 365(1).

Section 365(2) of the Act states that every director or manager of a company who willfully pays or permits to be paid any dividend out of what he knows is not profits except pursuant to Section 60 –

(a) shall without prejudice to any other liability be guilty of an offence against this Act; and

(b) shall also be liable to the creditors of the company for the amount of the debts due by the company to them respectively to the extent by which the dividends so paid have exceeded the profits and that amount may be recovered by the creditors or the liquidator suing on behalf of the creditors.

The penalty for an offence against this section is imprisonment for ten years or two hundred and fifty thousand ringgit or both.

Section 365(3) of the Act states that if the whole amount is recovered from one director or from the manager he may recover contribution against any other person liable who has directed or consented to the payment.

No liability by this section imposed on any person shall on the death of the person extend or pass to his executors or administrators nor shall the estate of any such person after his decease be made liable under this section as mentioned in Section 365(4).

The Act states that “dividend” includes bonus and payment by way of bonus as mentioned in Section 365(5).

 

Section 135 General duty of directors to make disclosure

A director has a general duty to make disclosure.

Section 135 (1) of the Act states that a director of a company shall give notice in writing to the company –

(a) of such particulars relating to shares, debentures, participatory interests, rights, options and contracts as are necessary for the purposes of compliance by the first-mentioned company with the provisions of Section 134;

(b) of particulars of any change in respect of the particulars referred to in paragraph (a) of which notice has been given to the company including the consideration, if any, received as a result of the event giving rise to the change;

(c) of such events and matters affecting or relating to himself as are necessary for the purposes of compliance by the company with the requirements of this Act; and

(d) if he is a director of a public company or of a subsidiary of a public company on the date he attains or will attain the age of seventy.

The penalty for an offence against this section is imprisonment for three years or fifteen thousand ringgit.

Section 135(2) of the Act provides that a person required to give notice under subsection (1) shall give the notice –

(a) in the case of a notice under paragraph (1)(a) of that subsection, within fourteen days after –

(i) the coming into operation of this section;

(ii) the date on which the director became a director; or

(iii) the date on which the director acquired an interest in the shares, debentures, participatory interests, rights, options or contracts;

(b) in the case of a notice under paragraph (1)(b), within fourteen days after the occurrence of the event giving rise to the change referred to in that paragraph; and

(c) in the case of a notice under paragraph (1)(d) of that subsection, within fourteen days after –

(i) the coming into operation of this section; or

(ii) the date on which the director became a director.

A person required to give notice under subsection (1) of any matters relating to shares or debentures which are listed on the official list of a Stock Exchange as defined in the Securities Industry Act 1983 shall, on the day on which he gives that notice, serve a copy of the notice on the Stock Exchange and the Stock Exchange may publish, in any manner as it may determine, any information contained in that notice as mentioned in Section (2A).

The penalty for an offence against this section is ten thousand ringgit. The default penalty is five hundred ringgit.

Section 135(3) of the Act further states that a company shall within seven days of receiving a notice given under subsection (1) send a copy of the notice to each of the other directors of the company.

The penalty for an offence against this section is ten thousand ringgit. The default penalty is five hundred ringgit.

Section 135(4) in the Act refers to a participatory interest as a reference to an interest within the meaning of Section 84.

In determining, for the purposes of Section 135, whether a person has an interest in a debenture or participatory interest the provisions of Section 6A, save for subsections (1) and (3) of that section, have effect and in applying those provisions a reference to a share shall be read as a reference to a debenture or participatory interest as mentioned in Section 135(5).

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