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deemed to be an alien concept to British company jurisprudence and culture and in
this is also true in relation to Malaysia which shares the same structures and
legislation relating to company. Therefore any reforms on the area of directors’ duty
should be made within the ambit of the existing law and would not involve any
drastic changes to directors’ duty.
The law in Malaysia in relation to whom directors’ duties are owed have always
been to the shareholders and only in 2009 in Kawin Industrial Sdn Bhd (in
liquidation) v Tay Tiong Soong 4 that the court indicate there is a duty owe to
creditors when the company is insolvent. The Malaysian Corporate Law Reform
Committee (CLRC) agreed that a company must be a good corporate citizen and for
the long term sustainability of the company, it must foster good relation with its
stakeholders although the Committee did not agree to have such a duty incorporated
into statute. 5 This reflected similar view to that of the Steering Committee and the
traditional approach; that the duty is owed to the company and the interest of the
company coincide with shareholders.
Another area which needs to be reviewed is in relation to duty of directors for
fraudulent and insolvent trading. The current laws are based on the English
Companies Act 1948 and the Australian Uniform Companies Act 1961-2, which the
have since repealed. The Malaysian Corporate Law Reform Committee (CLRC) was
of the view that the issue has been sufficiently dealt with and hence did not need any
further amendments. However, it is submitted that the approach taken by the CLRC
on this matter was inadequate and these provisions do not attract any problems
probably due to their lack of usage.
In Malaysia, the fraudulent and insolvent trading provisions are governed by section
304(1) and section 303(3) respectively. The fraudulent trading provision imposes
liability on ‘any person who knowingly a party to the carrying on of the business’
4 [2009] 1 MLJ 723.
5 A Consultative Document on Clarifying and Reformulating the Directors’ Role Duties, Corporate
Law Reform Committee at [4.7].
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