MISHU helps business owners incorporate their very first Sdn Bhd every day, and along the way, we’ve answered questions on company directorship a million times.
Note: we didn’t say a million questions, just a million times!
That’s why we’ve decided to compile our answers to the eight most frequently asked questions about directors in Malaysia.
- 1. Can a Sdn Bhd have a single director?
- 2. Can foreigners be sole directors of a Sdn Bhd?
- 3. Can a director also be Company Secretary?
- 4. Can the sole shareholder also be director?
- 5. Can family members be appointed as directors?
- 6. Are directors liable for company debts?
- 7. How do you remove a director?
- 8. What’s the difference between director fees vs salary?
- Let MISHU help incorporate your Sdn Bhd
1. Can a Sdn Bhd have a single director?
Yes, a Sdn Bhd can have a single director, so long as they meet the following requirements:
- is at least 18 years old,
- is a Malaysian resident, and
- is not an undischarged bankrupt
- has not been convicted of offences related to fraud or bribery
- has not been disqualified under Section 199 of the Companies Act 2016
2. Can foreigners be sole directors of a Sdn Bhd?
No, at least one of a company’s directors must reside in Malaysia.
If you are a foreigner with no plans to relocate, you have two options:
- Appoint a local nominee director to act as a placeholder
- Incorporate a Labuan Company which allows for sole foreign directorship
3. Can a director also be Company Secretary?
Yes, but this ‘yes’ comes with two big buts.
Becoming a Company Secretary is not as easy as becoming a director!
You must first have graduated from one of the following institutions in Malaysia:
- The Malaysian Institute of Accountants (MIA)
- The Malaysian Association of Company Secretaries (MACS)
- The Malaysian Institute of Chartered Secretaries and Administrators (MAICSA)
- The Malaysian Institute of Certified Public Accountants (MICPA)
- The Malaysian Bar
- The Advocates’ Association of Sarawak
- The Sabah Law Association
Following that, you must submit an application to SSM to become a licensed Company Secretary, and if your application is successful, appear on their register of CoSecs.
So, unless you already have the right professional qualifications, it’s not very practical to start studying for a law degree now!
The Companies Act 2016 prohibits acts in dual capacity – actions required to be done by both a director and a CoSec must be executed by two different persons.
This makes an unnecessary issue out of company documents that need signatures from both the director and Company Secretary.
4. Can the sole shareholder also be director?
Yes, and you can think of this structure as a leveled up version of a Sole Proprietorship.
Past a certain point, it simply makes sense to convert an Enterprise into a Sdn Bhd, but without adding additional partners.
If that describes your situation, rest assured you can safely transition to a new business structure without sacrificing any control over decision making.
5. Can family members be appointed as directors?
As long as they meet the minimum requirements to be a director, you can appoint any number of family members as directors.
Bear in mind this will for better or worse affect the company’s ability to raise funds and build partnerships with independent parties.
6. Are directors liable for company debts?
Provided they have demonstrated due diligence and good faith in their actions, a director is not accountable for the debts or losses of a Sdn Bhd.
This changes if they have offered a personal guarantee, engaged in wrongful or fraudulent trading, or violated company laws and regulations.
7. How do you remove a director?
We dedicated a post to director termination here, but for your convenience, here’s a summary on how to terminate a director:
Under Section 206 of the Companies Act 2016, a director’s removal requires several conditions to be met:
- this decision must be in the form of an ordinary resolution during the company’s general meeting
- it must receive agreement from a majority of the shareholders
- the director and board must be notified 28 days in advance
- the director is given a chance to defend themselves against the removal
Furthermore, this need for a resolution during a general meeting cannot be bypassed by a circular written resolution (where shareholders sign a document indicating their agreement without meeting).
8. What’s the difference between director fees vs salary?
This refers to the monthly remuneration a director receives as an employee of the company, which includes salary, stock options, and other bonuses.
This will be outlined in their employment contract and is subject to the same payroll obligations as any other staff salary.
A director’s fee is an annual amount paid to a director for their service on the company’s board of directors.
It is typically decided on an annual basis depending on the performance of the company and requires approval from the board of directors and shareholders.
Unlike the director’s salary, it is not subject to EPF, SOCSO or EIS deductions – but income tax still applies!
P.S. Exercise due dilligence and verify that what we said aligns with the Companies Act 2016, the primary piece of legislation on corporate governance in Malaysia.
Let MISHU help incorporate your Sdn Bhd
MISHU’s team of professionals is here to help you incorporate your new Sdn Bhd and advise you on how to navigate the various legal requirements and begin operating as quickly as possible.