Allow me to take you on a tour to find the red herring.
In the new section 131B, subsection (1) uses the word “must” in respect of business and affairs of a company. The section requires a company to be managed by the board of directors. However, the powers of the company director may be qualified by the company’s constitution, as provided in subsection (2) of the same section. Therefore, in theory at least, the company must be managed by the board, but the Act or articles can also validly take away all or a substantial portion of their powers. So is this where the red herring lie? This section apparently recognises the role of the board of directors, but does it really confer rights onto the directors?
A new section 132 (1F) was introduced in the Act which allows for the delegation of directors duties to a delegate or committee who may act in the directors’ capacity. The directors are, however bound by the actions of the delegatee and will be liable for acts and/or omissions of the latter. However, two defenses are afforded to the directors who delegate their duties. In section 132(1G)(a), it states that if the directors believed on reasonable grounds that the delegatee would exercise his powers in conformity with the mandate provided by the directors and the company’s constitution, the directors would not be held responsible. This section is, however silent in terms on the state of knowledge of the delegate and it therefore, raises some interesting questions. Must the directors be aware of the company’s constitution and does the delegatee have a duty to inform/ procure in writing his mandate and/or the constitution of the company? Does the delegatee have a duty to inquire further about the boundaries of the company’s constitution, so as to avoid acting ultra vires? These sections may seem to have conferred powers onto the directors to delegate their duties, however it is humbly submitted that it is of low practicality as the responsibility may be too vague to be of any benefit. May this be another red herring?
These questions and inconsistencies may only be solved by cases decided in courts by learned judges and the eloquent arguments by counsels attempting to make sense of these provisions, as it may seem that the new amendments in the Act may be insufficient to address the problems in the Malaysian Company Law. Only then we may capture the ever elusive red herring.
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