UKML2013 Company Law Assignment: Directors' Duties and Breaches

This report analyzes the duties of company directors, focusing on the legal ramifications of breaching these responsibilities, particularly within the context of Malaysian company law. The report uses a 2020 news article from The Star as a case study, where a director faced charges for misappropriating company shares. It explains that directors have a fiduciary duty to act in the best interest of the company, and any violation constitutes a breach of trust, which is a criminal offense under the Malaysian Companies Act. The report references key sections of the Act, including sections 213 and 218, which outline fiduciary duties like acting in good faith and for a proper purpose. It also cites the case of Great Eastern Railway v Turner, which established directors as trustees of company assets. The report highlights that directors are not permitted to profit from their position and that breaches can lead to imprisonment and fines. The assignment also references the case of Cook v Deeks and emphasizes that fiduciary duties extend to related companies within a group. The report concludes by illustrating the application of these principles to the specific case of Mr. Ng Kek Wee, who was charged with misappropriating shares, thereby violating his fiduciary duty of trust and committing fraud under the Act.

QUESTION TWO
The report is about the duties of directors to the company and the law sanctions that come with
breach of such duties. It is a 2020 news article from The Star whereby a former company
director is facing charges for misappropriating three million shares belonging to the subsidiary of
the main firm. Directors must always act in the best interest of the company and should not use
the company assets to enrich themselves unjustly. Where such directors violate these orders it
results to breach of trust in the company which is a criminal wrong under the Malaysian
company’s Act. The director therefore committed an offence of fraud and dishonesty which is
punishable by criminal sanctions under the Malaysian Company’s Act.
Section 213 and 218 of the Malaysian Act provides for common law Fiduciary duties of a
director. The fiduciary duties involve duty to act for proper purpose and in good faith. Directors
are therefore bestowed and entrusted with utmost faith and confidence by shareholders to
manage and protect company property whether in cash or non-current assets. In the case of Great
Eastern Railway v Turner [1872] it was held that directors are company trustees bestowed with
the duty to protect company’s money and property. A director is therefore not supposed to profit
from the company by virtue of his position as provided for under section 218 of the Company’s
Act. A director who breaches the above discussed principles commits an offence and is liable to
imprisonment for 5years or a fine not exceeding RM3 million or both. When a director is acting
in the interest of the company he is said to be acting in the interest of company members as
whole, employees, creditors, and the interest of all the company subsidiaries.
In this particular new report in The Star news article dated 17 February 2020 Mr. Ng Kek Wee
committed a criminal breach of his fiduciary duty of trust to a firm called Singalab which deals
in the provision of customized electronic services. The offence was fraud due to
misappropriation of 3 million shares of a firm subsidiary. He was therefore guilty of the offence
under section 213(1) and 218 of the Malaysian company’s Act. Fiduciary duties encompass
acting in good faith even to the other companies linked to the mother company where there is
existence of group of companies existing as the subsidiaries of the holding company. Mr. Ng
Kek was required by law to act in good faith and for the purpose of the company. In the case of
Cook v Deeks [1916] directors, appropriated the company’s property for personal gain and profit

making. They were found to be liable even though the company did not make losses. The kind of
offence committed was termed as ‘fraud on the minority’

References
The Company’s Act of Malaysia
Cook v Deeks [1961] 1 AC 554, [1916] UKPC 10
Great Eastern Railway v Turner (1872) L.R.8 Ch.App.149
Singapore, A. (2020, February 11). Company director who fakes own death to escape jail nabbed
in KLIA. The Star. https://www.thestar.com.my/news/nation/2020/02/17/company-
director-who-fakes-own-death-to-escape-jail-nabbed-in-klia