Firing someone is undoubtedly tough. But, imagine having to deliver the bad news to the person who is responsible for directing and managing the company’s affairs – the DIRECTOR! Perhaps not known to many, even a company director is not exempted from such a reality if warranted.
There are of course necessary steps to consider and special notice to be issued in advance. Why? Because if the process is not done rightfully and by the law, a fired director can take legal actions to contest against being fired.
Based on Company Act 2016, a director may be removed before the expiration of the director’s period of office subjecting to the constitution or by ordinary resolution.
For private companies, shareholders possess the right to remove a particular company director by bringing the matter at any company’s annual general meetings (AGM). It is similar for public companies, but based on the company’s association articles that details the prescribed procedures.
In certain situations, the removal of the director of a Malaysian company must take place. Such situations occur if the director breaches his duties, which includes:
The Necessary Steps To Consider
Types of Offence There are reasons why terminations were deemed necessary, and it is crucial to understand its urgency.
Serving a Prior Special Notice A notice as required by the company act must be given to the director to inform them of such intent.
Understanding the Legal Requirements The Companies Act and articles of association (public companies) will need to be referred to determine the proper procedures necessary.
- Ensure Proper Conduct The reasons for termination must be justified as well as the process being by-the-books to ensure proper conduct.
What Must Be Done Before Firing the Director of a Malaysian Company?
For both public and private Companies, a special notice of at least 28 days is required for a resolution to remove or replace a director at the same meeting. However, no such notice is required if the power to remove the director is exercised under the constitution.
Unsure about the procedure for the removal of a company director in Malaysia? Reach out to us via WhatsApp https://wa.me/60122192492 📲 and we would be happy to help.