Here at Ashton Corporate, we understand the journey of starting a business in Malaysia can be daunting, especially when it comes to understanding the roles and responsibilities of directors in Sdn Bhd companies. That's why we've crafted this comprehensive FAQ to address the most common questions we receive about directorship.
1. Can a Sdn Bhd have a single director?
Indeed, a Sdn Bhd can operate with just one director. This setup is particularly advantageous for small businesses or startups where one individual has full control over company decisions. However, it's essential to ensure that the sole director meets specific eligibility criteria, including being at least 18 years old, a Malaysian resident, free from certain criminal convictions, and not an undischarged bankrupt.
2. What about foreigners serving as sole directors?
While foreigners cannot serve as sole directors, there are alternative solutions available. At least one director must be a Malaysian resident to comply with legal requirements. However, foreigners can explore options such as appointing a local nominee director or setting up a Labuan Company to establish their business presence in Malaysia.
3. Can a director also be the Company Secretary?
Yes, it's possible, however, it's crucial to understand that certain qualifications and procedures must be met to ensure compliance with regulatory requirements. Additionally, there are limitations on actions that can be performed in this dual capacity to maintain transparency and accountability within the company.
4. Can the sole shareholder also be a director?
Absolutely! In fact, having the sole shareholder double up as a director is a common scenario, especially in smaller companies or startups. This streamlined approach not only simplifies decision-making but also aligns the shareholder's interests directly with the company's objectives.
5. What about appointing family members as directors?
Family members can indeed be appointed as directors, provided they meet the necessary eligibility criteria. This option is particularly appealing for family-owned businesses looking to maintain control and continuity within the company. However, it's essential to consider the potential implications on the company's ability to attract external funding and partnerships, as relying solely on family members may raise concerns among investors.
6. Are directors personally liable for company debts?
In most cases, directors are not personally liable for company debts, provided they act diligently and in good faith. This limited liability protection is one of the key advantages of operating as a registered company rather than a sole proprietorship or partnership. However, it's essential for directors to exercise due diligence and fulfill their fiduciary duties to avoid any potential breaches that could lead to personal liability.
7. How can a director be removed?
Removing a director involves following specific procedures outlined in the Companies Act 2016 to ensure transparency and fairness. This typically includes passing an ordinary resolution at a general meeting of shareholders and formally notifying the director of their removal. It's essential to adhere to these procedures to prevent any legal disputes or challenges to the director's removal.
8. Director fees versus salary: What's the difference?
Director fees and director salary are two distinct forms of compensation for directors, each with its own implications and considerations. Director fees are an annual payment made to directors for their service on the board of directors, while director salary is a monthly remuneration paid to directors in their capacity as employees of the company. Understanding the differences between these two forms of compensation is crucial for both directors and company owners to ensure compliance with legal and regulatory requirements.
Navigating the ins and outs of directorship in a Sdn Bhd company may seem complex, but with the right knowledge and guidance, it's entirely manageable. If you're ready to take the next steps or have further questions, don't hesitate to reach out to Ashton Corporate. We're here to support you on your entrepreneurial journey.
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