1. PAST YEAR PRESENTATION
Prepared by:
NUR AMALINA ABD RASHID
NUR UMI HANI MANSOR
ASIAH KAMILAH BINTI NOH

2. Question 6, March 2005
(a) Arsene, Alex and Rafael are the directors of PQR Sdn Bhd, a
company specialising in the making of football equipment. Last year
Arsene was requested by Alex and Rafael to negotiate a contract on
behalf of PQR Sdn Bhd with a company in Bangkok for the setting
up of a manufacturing plant there. The Bangkok company, however,
was not prepared to grant such a contract to PQR Sdn Bhd and
Arsene promptly reported this to the board of PQR upon his return.
Two months later he left the company. Alex and Rafael have now
discovered that since leaving the company he managed to secure
the contract with the Bangkok company and has made very high
profits. They seek your advice on whether PQR Sdn Bhd can
successfully sue Arsene for the profit that he has made from the
contract with the Bangkok Company. Advise Alex and Rafael.
(70 marks)

3. ISSUE
• Whether the director which is Arsene breach
his fiduciary duty to avoid conflict of interest.
• Whether the director Arsene breach his duty
of disclosure.
• Whether the company can apply the
remedies.

4. Director
• Section 4 CA 1965
is a person occupying the position of director of
corporation, by whatever named called
Also include those whose directions or instructions
accustomed to act

5. Duties of Director
Fiduciary duty (S 132)
Statutory duty (S 131 & 135)
Duties of skills, care and diligence (S132 1A)

6. Fiduciary Duty
acting in good faith and in the interest of the
company.
- good faith = honesty
Re W and M Roith Ltd
whereby the director had entered into agreement
with the company that benefit him alone. Court
held that the agreement is void since the director
had breach his duty to act honestly and for the best
interest of the company.

7. Acting within the power given and use the
assets for the purpose of the company.
- ensure that all company’s asset & power
are use within it’s capacity and for the
purpose co. is formed
Mills vs Mills
- Court held that director are fiduciary agent
- power conferred upon them cannot be
exercised in order to obtain private
advantage or purpose foreign to the
power.

8. Avoidance of conflict of interest
- not put himself in a position where his
interest and duty are likely to conflict.
Aberdeen Railway Co v Blaikie Bros -
- contract was entered with one of the partners
was a director of the company
- court held that the company could avoid the
contract even though the terms is fair.
it means that the director cannot enter into the
contract that creates conflict of interest to him.

9. Case: Canadian Aero Service Ltd v O’Mally
 The director who has resigned with the
intention to obtain opportunity for himself may
not be able to do so as he still owes duty.
 Court held that the resignation was irrelevant as the
purpose of the resignation was to take opportunity
for himself.
Case:Peso Silver Mines Ltd v Cropper
 Court allowed the director to take the opportunity as
the company had bona fide rejected it

10. Case: Queensland Mines Ltd v Hudson
The director had fully informed the company
about his interest in the contract. Court held
that the director is not liable to the company for
his profit.

11. Circumstances whereby conflict of interest
might occur(S. 132 (2))
a) Use property to gain profit
b) Use any information acquired by virtue to his
position as officer or director
c) Use his position as such director or officer
d) Use any corporate opportunities
e) Engage in the business which is competing
with the company

12. S 132(2)(d) Use of corporate opportunity
Case: Industrial Development Consultants v Cooley
the managing director of IDC attempted to secure
a contract with EBG on behalf of the company.
EBG indicated to the managing director that they
were not prepared to deal with IDC but the
director personally.
Later on, he quit and obtained the consultancy
for himself.
Court held: director breach his duty to the
company.

13. Using information acquired by virtue of his
position (S 132 (2)(b)
Directors are not allowed to use any information
and property entrusted to him for the purpose of
obtaining advantage for themselves and cause
detriment to the company.
They are liable to the co. for any damage suffered
by the co as the result of the breach. S 132 (3)

14. Statutory duty
• S 131A (1)
- required director to disclose any potential
conflicts of interest
- shall not participate in any discussion while the
contract that the company want to enter is being
considered by the company
- shall not vote for the contract or proposed
contract
• S 131A (3)
- where the contract or proposed contract is entered
into in contravention of subsection (1), the
contract or proposed contract shall be voidable at
the instance of the company

15. • S 135
General duty to make disclosure
a) Particulars related to share, debentures,
participatory, interests, rights, options and
contract
b) Particulars of any change in respect of particular
in section (a)
c) Events and matters affecting and relating to
himself compliance by the company with the
requirement of the act
d) Date on which he attains or will attain the age
seventy (public co. and subsidiaries of public co)

16. Duties of care, skill and diligence
• S 132 (1A)
- a director shall exercise reasonable care,
skill and diligence
a. The knowledge, skill and experience may be
reasonably be expected of a director having the same
responsibilities
b. Any additional information which the director in fact
has.

17. Remedies
Injunction- ultra vires case
- Section 20
Declaration of power as Invalid/Rescission of
Contracts
Recovery of profits/Suing for damages
Case: Mahesan v Malaysian Government Officer
Return of specific property
- where the property is acquired in breach of duty,
must return it to the company

18. APPLICATION

19. 1ST ISSUE
Whether the director which is Arsene breach his
fiduciary duty to avoid conflict of interest.

20. Circumstances whereby conflict of interest
might occur(S. 132 (2))
a) Use property to gain profit
b) Use any information acquired by virtue to his
position as officer or director
c) Use his position as such director or officer
d) Use any corporate opportunities
e) Engage in the business which is competing
with the company

21. • Taking up corporate opportunity
IDC = PQR Bhd
EBG = Bangkok Co
Director= Arsene
Case: Industrial Development Consultants v Cooley
the managing director of IDC attempted to secure a
contract with EBG on behalf of the company.
EBG indicated to the managing director that they were
not prepared to deal with IDC but the director personally.
Later on, he quit and obtained the consultancy for
himself.
Court held: director breach his duty to the company.

22. Case:Peso Silver Mines Ltd v Cropper
Arsene can only take the opportunity offered by
Bangkok Bhd if the company had bona fide rejected
it.
Case: Queensland Mines Ltd v Hudson
Arsene will not be liable to the company if he had
fully disclose his interest on the contract to the
company.

23. • Using information acquired by virtue of his
position (S 132 (2)(b)
Directors are not allowed to use any information
and property entrusted to him for the purpose of
obtaining advantage for themselves and cause
detriment to the company.
In this case, Arsene maybe use the information
that he gain when he met Bangkok Co on behalf of
the company. He then quit from PQR and enter
into a secured contract with Bangkok Co. Thus, he
is consider to breach his duty.

24. 2nd issue
Whether the director Arsene breach
his duty of disclosure.

25. Duty to avoid conflict of interest is directly
related to duty of disclosure. Thus, if a director
was in conflict of interest he has a duty to
disclose it.
Section 131 A stated that Arsene has a duty to
disclose his interest to PQR if he want to take the
opportunity that he get during his meeting with
Bangkok Co. upon his disclosure, Arsene shall not
participate or vote for the contract while the
contract is in consideration. However, Arsene had
failed to disclose his interest to PQR Bhd. Thus,
Arsene had breach the duty of disclosure.

26. 3rd issue
Whether the company can apply the
remedies.

27. • The remedies that PQR Bhd can apply is
recovery of profits or suing for damages
• According to Section 132 (3), the director shall
be liable to the company for any profit made
by him as a result of the breach.
• It means that PQR Bhd can ask for recovery of
profits that Arsene make from his contract
with Bangkok Bhd.

28. Conclusion
PQR Bhd shall take action on Arsene since he does
breach his duty to avoid conflict of interest since
he took corporate opportunity without disclosing
it to the company and use the information that he
get by virtue of his position as director to enter
into a secured contract with Bangkok Co.
PQR Bhd is able to apply the remedies of recovery
of profits or suing for damages. Arsene is liable to
the company for profit made according to Section
132 (3).

29. MALAYSIAN CORPORATE LAW
LAW485
MAC 2005
QUESTION 6 (B)

30. QUESTION 7 (b)
Alex and Rafael also wish to
appoint a person to replace Arsene
as a director of the company. They
are contemplating appointing Jose,
a Portuguese , aged 75. They wish
to know whether, and if so, how,
such an appointment may be
effected.
(30 marks)

31. ISSUE
1. Whether Jose can be appointed as a
director.
 Portuguese
 Aged 75

32. LAW
• SECTION 122 (1)
Every company shall have at least two
directors, who each has his principal or only
place of residence within Malaysia.

33. CASES
• Foh Poh Yoke & Ors v The Central
Construction Company (Malaysia) Sdn Bhd
– Illustrated the requirement of being a resident in
Malaysia for the office of director .
– Court said that the term residence connotes
residence in one place with some degree of
continuity.
– Person who resides in other place besides Malaysia
would not entitle him/her to claim residency in
Malaysia.

34. • Abdul Hamid J in MY v Comptroller-
General of Inland Revenue [1972]
 Held that to be a residence in a place, an
individual must first of all reside in that place.
 He may be absent from the place provided
( temporary & reasonable).

35. • SECTION 129 - Age limit for directors
(1) ….no person of or over the age of seventy years shall be
appointed or act as a director of a public company or of a
subsidiary of a public company.
(6) ….a person of or over the age of seventy years may by a
resolution of which no shorter notice than that required to be
given to the members of the company of an AGM has been
duly given, passed by a majority of not less than three-fourths
of such members of the company as being entitled so to do
vote in person or, where proxies are allowed, by proxy, at a
GM of that company, be appointed or reappointed as a director
of that company to hold office until the next AGM…

36. • Section 135 – General duty to make disclosure
(1) (d) A director of a company shall give notice
in writing to the company - if he is a director of a
public company or of a subsidiary of a public
company of the date on which he attains or will
attain the age of seventy.

37. APPLICATION
• In this situation, Jose are considered as non-
resident according to section 122 (1).
• Case : Abdul Hamid J in MY v Comptroller-
General of Inland Revenue [1972] 1 MLJ 84
• Based on Section 129, Jose who is over the
age of seventy years still can be appointed or
act as a director as PQR Sdn Bhd is a private
company.
• No age limitation is provided for private
company.

38. CONCLUSION
• Jose cannot be appointed as a first
two director as he is a non
resident.
• But, he can be another director if
Alex and Rafael are resident.
• Based on his age, Jose still can be
a director of the company since
PQR Sdn Bhd is a private company.