PART 2(iii) – NEW COMPANIES ACT

PART 2(iii) – CONTINUATION OF PART 2(ii)

This morning I stumbled into a message asking me to translate this article to Bahasa Malaysia and requested it be written in a down to earth fashion.  I will and hope  that I can finish this and the translation before the Bill is tabled in Parliament.

(6) PERSONS DISQUALIFIED TO ACT AS DIRECTOR.

The existing Company Law says that a person is disqualified to act as director (of a company)  if he/she is

• undischarged bankrupt. (s.125)
  
  A person may also be disqualified if he is an undischarged bankrupt (s.125), except where the Court grants leave.

• convicted of offence relating to formation or management of corporation S.130
  
  
• convicted of offence involving fraud ( fraud -  scam, deception, con) or dishonesty. S.130
  
  
• convicted of offences relating to directors duties. s.132
  
  
• disqualified by Court due to his conduct resulting to companies being insolvent (S.130A)
  
  A person may be disqualified, where the court is satisfied that he has been a director of a company which has become insolvent and a director of some other companies that have gone into liquidation within five years of the insolvency of the first company. Also, that his conduct as a director of any of those companies makes him unfit to be concerned with the management of a company [section130A].
  
  (Insolvent - broke/bankrupt and carries different meaning as are often used in chemistry)
  
  

 PROPOSED NEW COMPANEIS ACT

Persons disqualified to act as director under the following criteria :

• undischarged bankrupt.
  
  
• convicted of offence relating to formation or management of corporation.
  
  
• convicted of offence involving bribery  fraud ( fraud -  scam, deception, con) or dishonesty.
  
  
• convicted of offences relating to directors duties
  
  
• disqualified by Court due to his conduct resulting to companies being insolvent
  
  
• due to habitual contravention of the Act

• Power of Registrar to remove name of disqualified director without having the company having to lodge with the registrar on the disqualification.
  
   

The rationale of inserting the word “bribery” in s.130 and “habitual contravention of the Act”  is an additional criteria,  (very specific as to crime related to bribery/corruption) for disqualification to act as director of a company and that the Registrar of Companies having power to remove name of disqualified director, the company will have less tussle  and save time to remove hardheaded disqualified director from sitting on the board. 

Now the burden to remove disqualified director is in the hand of the registrar and that will involve finding who and when a person becomes disqualified. 

In today’s IT world, the disqualified directors will hardly able to warm his sit acting as “disqualified” directors anymore.

A director may be removed from a company or physically remove his name from list of not unqualified directors by virtue of the above new provision, he may still work in the shadow giving directions and or instructions to the majority of the directors of a corporation on which he once stood as director to act in accordance to his instruction and his needs.  His influence or desire to act in the shadow can only end not until all his interests in the company are removed. 

The SSM with the help from CLRC and AICC have gone through considerable pain as well as expediency amending the Companies Act to provide an environment conducive enough for public to do business. Well done !!

To be continued to Part 2 (iv)

Mohdarismail
Company Secretarial Practitioner