According to Company Law in Malaysia, a company is regarded by law as an artificial person that can only function or operate through humans. Therefore, the affairs of the company must be managed and entrusted to humans being called directors. In section 122 (1) said that is every company shall have at least two directors who each has his principal or only place of residence within Malaysia. Section 122(1A) said in subsection (1), “director” shall not include an alternate or substitute director.
Directors are officers of the company but are not always employees, although they may have services agreements with the company or otherwise work for it as employees. The directors are also not servants. Directors also be described as trustees and agents of the company. Once a person agreed to become a director, he is said to stand in a position of trust towards another who is in a position of dependence. There are three types of directors duties, that is fiduciary duties, statutory duties and duties of skill, care and diligence.
Even though the Companies Act 1965 is silent about the requirement of having special qualification or skill for such office, a person who accepted the office of director is expected to be competent to manage the company affairs. Duty of care, skill and diligence are elated to director’s competence in managing the company. Section 132 (1) write that, a director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office. Section 132 (1A) said, an officer, agent or employee of a corporation or officer of the Stock Exchange who in or in relation to a dealing in securities of the corporation by himself or any other person makes improper use to gain, directly or indirectly, an advantage for himself or any other person of specific confidential information acquired by virtue of his position as such officer, agent or employee, or officer of the Stock Exchange which if generally known might reasonably be expected to affect materially the price of the subject matter of the dealing on a stock exchange shall.
Traditionally, the duty has been minimal that is director is judged according to his own knowledge and experience. In Re Brazillian Rubber Plantations & Estates Ltd (1911), for instance illustrates a situation that a director should not be made liable for not having skill or qualification for the office. In this cases a rubber company made serious losses in a ruinous speculation in Brazil. The directors, who had no experience in the business of rubber plantations, were sued for negligence. The action however failed and Neville J said of a directors duty of skill and care that is, the directors should have the skill even it just a basic skill in company.
In Re City Equitable Fire Insurance Co, Romer J had formulated three qualifications pertaining to the duties of skill and care of a director. The three qualification are, a director need not exhibit on the performance of his duties a greater degree of skill than may be reasonably be expected from someone of his knowledge and experience. Second is a director is not bound to give continuous attention to the affairs of the company. Last qualification pertaining in duties of skill and care are where duties may properly be left to some other official, a director is justified in the absence of grounds of suspicion, in trusting that official to perform his duties honestly.
Section 132 (1A), pretend that as a director of a company, the person is required to exercise the duty subject to it’s rules. There are two rules, that is the duty of skill, care and diligence must be exercised in accordance with the knowledge, skill and experience that reasonably to be expected from a director having the same responsibilities. The second rules are, the duty of skill, care and diligence must also be exercised by using any additional knowledge, skill and experience that the director in fact has. All this rules provide that a person in carrying out his function as director of a company must not only use the knowledge, skill and experience that he himself has but he must also takes regard to other knowledge, skill and experience which reasonably be expected to be possessed by a director having such responsibilities.
More recent cases suggest a move to a tougher standard like Norman v Theodore Goddard. In this case, Mr Quirk, a chartered surveyor was a director of a property company. The shares in the company were the principle assets of a trust administered by Theodore Goddard, a leading firm of solicitors. A partner in the solicitors firm advised Quirk that the tax would be saved if the company’s surplus cash was lent on deposit to a company which the partner claimed was controller by Theodore Goddard. In fact the company was controlled by the partner personally and was one of the devises he used to steal money from trust funds administered by his firm. The court held that although Quirk was not negligent in relying on the partner’s advice but a director should have the skill that may reasonably be expected from a person undertaking those duties.
: : 50 marks!!! : :
* bole dpt ke? aayyoooo :(
* bole dpt ke? aayyoooo :(
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