A company is a separate legal entity, and company debts are normally the company’s responsibility, not the individual director’s. But in Malaysia, specific legislation can reach into a director’s personal assets to recover a company’s unpaid tax. Section 75A of the Income Tax Act is the rule to understand here.
Yes, But Not Every Director Is Automatically Liable
Whether Section 75A applies depends on the statutory definition of “director,” the shareholding or control relationship involved, the nature of the amount owed, and who held the role when the payment fell due. The mere fact that someone’s name appears as a director with the Companies Commission of Malaysia (SSM) does not by itself mean that person must pay the company’s entire tax debt.
Section 75A’s Definition of “Director” Has Two Parts
The definition covers a person holding the office of director, and separately, a person involved in managing the company’s business. On top of either of those, the person must also, alone or together with connected persons, directly or indirectly own or control not less than 20% of the company’s ordinary share capital.
“Not less than 20%” includes exactly 20%. This is a different threshold from the “foreign ownership exceeding 20%” rule used for SME preferential tax rates, and the two should not be confused.
Shares held by connected persons, and indirect shareholdings, count toward this threshold too. A director’s own direct shareholding does not have to clear the 20% mark on its own; combined with a connected person’s holding or an indirect control arrangement, the threshold can still be met.
Recovery Looks at When the Tax Fell Due, Not Just Which Year Earned the Profit
A director who meets Section 75A’s conditions can be held jointly and severally liable, together with the company, for tax or other statutory amounts that fell due during the relevant period. This recovery can also extend to a company’s unpaid PCB (the monthly tax deduction withheld from employees’ salaries).
“Jointly and severally” does not mean each director is only liable for a share proportional to their shareholding. Holding 30% of the company, for example, does not cap recovery at 30% of the amount owed.
The date someone took up or left the role, when the tax fell due, and the assessment and payment history can all affect the outcome. A newly appointed director cannot assume they are automatically clear simply because the unpaid tax arose in an earlier year. Equally, a director who has stepped down cannot assume they are automatically clear simply because the recovery notice arrived after their resignation.
Falling Under 20% Does Not Rule Out All Personal Liability
Section 75A is one specific recovery rule within the Income Tax Act. Other statutory contributions, breaches of company law, false declarations, misuse of company assets, and other conduct are each judged under their own separate provisions.
A personal guarantee is another, separate source of liability. A director who has personally guaranteed a company loan can be required to pay under the terms of that guarantee if the company defaults, even where no breach of director duties has occurred.
Look at Documents, Not Verbal Assurances, When Taking Up or Stepping Down
Before accepting a director appointment, it is possible to request the company’s tax account records, past filings, outstanding tax, PCB payment history, and any existing guarantees. Where needed, a lawyer or tax professional can assess the specific period involved.
When stepping down, confirm that the resignation has taken effect, that the company has filed the resignation, and that bank authorizations have been updated, and keep a record of the handover. A promise from the company or other shareholders to cover the debt may give grounds for an internal claim between those parties, but it cannot by itself stop the tax authority from pursuing recovery under the law.
Common Misunderstandings
“I only hold 20%, so it doesn’t count as exceeding the threshold, so Section 75A doesn’t apply.”
The relevant threshold includes exactly 20%, and it must still be read together with the office-holding or management condition.
“Once I resign, all past liability is automatically cleared.”
Resigning does not automatically remove liability that had already arisen while the conditions were met.
What to Check Next
Start by establishing the nature of the debt, its due date, the period in which the role was held, and the full shareholding picture. If a recovery notice is received, it should be dealt with within the stated deadline; simply replying that one has already resigned, or was not involved in the bookkeeping, is not sufficient on its own.
FAQ
Is a company’s unpaid tax automatically pursued against every director?
No. The statutory conditions must be met; it cannot be assumed from the list of directors alone.
If I hold 30% of the company, am I only responsible for 30% of the unpaid tax?
No. Section 75A’s joint and several liability does not work as a pro-rata split based on shareholding.
If there is no personal guarantee, is there no personal liability at all?
No. Other legislation or personal conduct can still create liability; a guarantee is only one possible source of it.
Disclaimer
This article is based on information available as of October 8, 2026, for general information only, and does not constitute legal, tax, financial, or immigration advice. Director liability, the validity of documents, and eligibility all depend on the specific facts and the applicable law.
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Sources
LHDN (Inland Revenue Board of Malaysia) — Public Ruling 2/2019: Director’s Liability; SSM (Companies Commission of Malaysia) — Companies Act 2016 (Act 777), including Sections 66, 196, 213–218, 245–259
