The Malaysian Bar's International Malaysia Law Conference ("IMLC") 2018 is taking place from 14 to 17 Aug 2018 at The Royale Chulan Kuala Lumpur.
by Louis Liaw, Member of the Bar
Company directors have a fiduciary obligation to always act in the best interests of their company and to discharge their directors’ duties in compliance with the law. This session on “Corporate Responsibilities: The Place of Fiduciary Obligations” seeks to dissect these fiduciary duties. The session was moderated by Datuk Roger Tan, Member, Bar Council Malaysia; Chairperson, Bar Council Conveyancing Practice Committee; Messrs Roger Tan & Partners.
The Honourable Justice Margaret Beazley AO, President, New South Wales Court of Appeal started off the session by stating that a fiduciary obligation can be defined as a duty of loyalty to the principle, and the said duty takes a more “proscriptive” form — that it details things that should not be done — rather than a “prescriptive” form — that is things that need to be done. The Honourable Justice Margaret introduced two main rules of fiduciary duties, namely the “non–conflict rule”, where a director should avoid any position that poses a “real and sensible risk of conflict”; and the “non–profit rule”, where a director should avoid making profit that is at the expense of the company, and against the best interests of the company.
Dato’ Anantham Kasinather, Judge, Court of Appeal (Retired); Messrs Sree Harry & Co furthered the discussion by zooming into fiduciary duties as provided in the Companies Act 2016, and compared them to provisions in the Australian jurisdiction. Dato’ Anantham pointed out the several provisions that were different. Section 213 of the Malaysian Companies Act provides for criminal sanctions when a director fails to act in the best interest of the company whereas in Australia, criminal sanctions only apply when the director displays recklessness or dishonesty. Dato’ Anantham also addressed the matter of multi–directorships. He said there is no prohibition against multi–directorships, including multi–directorships in companies with competing businesses, however, a director must disclose the multi–directorships and should not vote in matters that presented a risk of conflict.
Dato’ Mohammed Faiz Azmi, Executive Chairman, PwC Malaysia was the next to speak on the business judgement rule. The business judgement rule requires the director to act in the best interests of the company. However, he explained that even if that rule was strictly adhered to, it never stopped companies from failing and going into liquidation. He also said that other than the obligations imposed by the Companies Act 2016, a director was also bound by duties imposed by other legislation like the Income Tax Act 1967, Real Property Gains Tax Act 1976 and Employees Provident Fund Act 1991.
The last to speak was Lee Shih of Messrs Skrine who dissected the case of Petra Perdana. According to him, one of the key takeaways from the decision is that the Federal Court has restored the conventional position that shareholders cannot control the powers of the directors. The second takeaway of the decision is the courts will be slow to interfere with business decisions as long as the directors acted bona fide. However, he concluded that there are still questions and uncertainties regarding fiduciary duties of company directors which will need to be answered by the courts.
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