Who Are the Board of Directors of a Company?

Under the Companies Act 1965, every company has directors who form its board. The Board of Directors of a company comprises individuals (male or female) who are appointed by shareholders for a specific term.

If you are still confused about the types of businesses available in Malaysia, you may refer here.

The members of the Board of Directors are legally responsible for administering the company concerned. They act as trustees and agents of the company in dealing with external parties and have the authority to manage the company.

It is their duty to appoint a Chief Executive or General Manager to carry out daily operations. However, important and specific matters must be referred to and decided by the Board of Directors.

Categories of Directors

You must have heard of positions such as executive director, managing director, independent non-executive director and non-executive director. Have you ever wondered what the differences between these director positions are and what their respective duties entail?

Board of Directors of Bank Islam Malaysia Berhad

Executive and Non-Executive Directors

An executive director is usually appointed from among the directors and holds a salaried position with the company. Some companies appoint their executive staff from senior management to serve as directors, in addition to holding the position of executive director.

Non-executive directors, on the other hand, are usually not involved in the daily operations of the company but are jointly responsible with other directors for formulating and implementing company policies.

They have the same rights and bear the same liabilities as other directors, even though they do not hold salaried positions and are not involved in the daily operations of the company.

Managing Director

The managing director is appointed by the board of directors under the provisions of the company''s Articles of Association. Articles 91 to 93 of Table A, for example, empower the board of directors to appoint a managing director.

The board of directors decides on the appointment, sets the terms and conditions of the position, and determines the extent of authority that will be delegated to the managing director.

The appointment may be revoked, and the authority may be amended and modified. The managing director is not subject to retirement by rotation as the position is governed by a service contract for a specified period.

Associate Director

Associate directors are usually selected from among executives in senior management. The selection of a person as an associate director aims to serve as a successor to existing directors and to be trained in preparation for future board membership. The status of an associate director is explained by Article 94 of Table A as follows:

"The directors may from time to time appoint any person as an associate director and may from time to time revoke any such appointment. The directors may fix, determine and vary the powers, duties and remuneration of any person so appointed, but a person so appointed shall not be required to hold any share to qualify for appointment or have any right to attend and vote at any meeting of directors unless invited and with the consent of the directors."

Alternate or Substitute Director

An alternate or substitute director may only be appointed if there is authority to do so in the company''s Articles of Association. Article 82 of Table A empowers any director, with the approval of other directors, to appoint any person as an alternate or substitute director to act on their behalf for a period deemed appropriate.

Given that an alternate or substitute director falls within the definition of Section 4, they are personally liable for all their actions and subject to statutory obligations as a director. Their personal details and position must be included in the Register of Members, Annual Return and Form 49, and filed with the Registrar of Companies.

An alternate or substitute director must also make a statutory declaration in Form 48A before their appointment. Usually, an alternate or substitute director is not entitled to claim any fees from the company as it is a personal arrangement between them and the director who appointed them as a substitute or alternate. An appointment form signed by the appointing director must be presented at a board of directors meeting for the approval of other directors. Similarly, the same procedure must be followed when revoking the appointment.

The responsibility of being a member of the Board of Directors is immense. To prevent abuse of power, they must practise corporate governance. Next, we will explain the functions and responsibilities of the Board of Directors.

New to stocks? Want to learn about stocks? Want to know more? But don''t know where to start? Don''t worry, contact us now!

https://app.mahersaham.com/chat

Reference: Rodzi.com

Enhance Your Investment Knowledge

Successful investing begins with solid knowledge.

Investment Basics:

Download our free ebook for a complete guide.

Open a CDS Account:

Ready to start? Open a CDS account now.