A company director in Malaysia must exercise statutory duties of good faith, proper purpose, and reasonable care, skill, and diligence, whether or not the director draws a salary and whether or not day-to-day work is handed to someone else. This article sets out what those duties mean in practice, when relying on professional advisers is acceptable, and how a director’s liability differs from a shareholder’s limited liability under the Companies Act 2016.
Directors Must Understand the Business Before Deciding For It
A Malaysian company director must exercise powers for a proper purpose, in good faith, and in the company’s best interests, and must meet a duty of reasonable care, skill, and diligence. These requirements do not disappear simply because the director is unpaid or hands day-to-day work to someone else.
That said, a company loss or a failed investment does not automatically mean the director broke the law. What matters includes how information was obtained at the time, whether there was a conflict of interest, the purpose behind the decision, and whether it met the relevant legal requirements.
Company Interests and a Nominating Shareholder’s Wishes Are Not the Same Thing
A director may be nominated by a particular shareholder but owes duties to the company, not to that shareholder. When the nominating shareholder wants the company to lend money to a related business, sell an asset, or provide a guarantee, the director cannot simply go along with it because “the major shareholder asked for it,” without exercising independent judgment.
If a director has a personal interest in a transaction, or the transaction involves a related party, the director should disclose this early and confirm whether additional approval, recusal, or other procedures are required. Voting restrictions can differ between companies and between transactions, so a single verbal agreement cannot substitute for following the correct procedure each time.
Company opportunities, property, and information also cannot be diverted to personal use, or used to let someone else profit improperly.
Reasonable Care Must Match the Director’s Own Role and Ability
A director is generally expected to have the knowledge and diligence reasonably expected of someone in that position. If the director personally holds additional professional knowledge or experience, that can raise the standard of care expected of them.
In practice, this duty can be met through a few ongoing habits: regularly reviewing the company’s finances and cash position, understanding material contracts, following up on tax matters and filings, asking for explanations of unusual transactions, and keeping records of the reasoning behind important decisions.
This does not require every director to personally keep every account entry, but it does mean a director cannot keep signing documents on someone else’s say-so over a long period while never being given access to the underlying information.
Directors May Rely on Professional Advice, But Not Hand It Off Entirely
A company may engage a company secretary, accountant, tax agent, and lawyer. When a director relies on information or delegates work to them, the director must still exercise reasonable judgment as required by law, including paying attention to whether the person handling the matter is competent, what their reports actually say, and any obvious red flags.
For example, if a tax agent says a tax return has been filed, the director can ask for the filing receipt and the computation; if it turns out the company has had no proper accounts for a long period, the director should look into why. Engaging professionals and maintaining oversight are not mutually exclusive.
Limited Shareholder Liability and Director Duties Are Not Interchangeable
A shareholder of a company limited by shares is generally liable only up to the unpaid amount on the shares they hold. A director, however, may be held personally liable for breaching their duties, for breaching specific legislation, or under a personal guarantee.
When the same person is both a shareholder and a director, that person cannot rely solely on “the company has limited liability” to exclude responsibility for their own conduct as a director. At the same time, this does not mean every debt of the company is automatically the director’s personal responsibility either.
Situations Often Misunderstood
“I’m a Non-Executive Director, So I Don’t Need to Understand the Finances.”
How a director participates in the company can vary, but the underlying statutory duties do not disappear because of that.
“If the Company Ends Up Losing Money, the Director Must Be at Fault.”
Whether a director is at fault has to be judged against the decision-making process, the purpose of the decision, the information available at the time, and the applicable legal provisions, not simply the eventual outcome.
What to Check Before and After Taking the Role
Before accepting an appointment, understand the company’s business, finances, and any disputes, and confirm that you will actually be able to access the information you need. After taking office, put in place arrangements for regular reporting, approval of material transactions, and oversight of filings, and keep records of significant questions raised and how they were resolved.
FAQ
Q1: Does not taking a director’s fee automatically remove liability?
No. Statutory duties are not determined solely by whether the director is paid.
Q2: Does a director nominated by a shareholder only answer to that shareholder?
No. The director must still act in the company’s interests and cannot automatically prioritize the nominating shareholder whenever there is a conflict.
Q3: Must a director personally handle the accounts and tax filings?
This can be delegated to a qualified person, but the director must still exercise appropriate judgment and oversight.
Disclaimer
This article is based on information available as of October 8, 2026, and is for general information only. It does not constitute legal, tax, financial, or immigration advice. A director’s liability, the validity of documents, and permit eligibility depend on the specific facts and the applicable law.
References
SSM — Companies Act 2016, Sections 66, 196, 213-218, 245-259, and others; SSM — Companies Act 2016 (to be read together with amending legislation); LHDN — Public Ruling 2/2019: Director’s Liability
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