How does Section 230 of the Companies Act apply to private companies?

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Application of Section 230 to Private Companies

For private companies, Section 230 of the Companies Act outlines a specific framework for the approval of directors' fees and benefits. The Board of Directors possesses the authority to approve these fees, provided it aligns with the company's constitution. This approval must be formally documented in the minutes of the directors' meeting. Furthermore, the Board is mandated to inform shareholders of this approval within 14 days of its decision.

The legislation also provides a mechanism for shareholder oversight. Members who collectively hold at least 10% of the total voting rights can request that the company seek shareholder approval for such payments. This can be done either through a written resolution or at a general meeting, particularly if these members believe the payment is not fair to the company. Such a request must be made within 30 days of the members becoming aware of the payments.

Failure to adhere to these provisions carries significant consequences. If the required approvals are not obtained, any payments made for directors' fees or benefits are considered a debt owed by the director back to the company. Moreover, both the company and any officer found to be in contravention of these sections face potential criminal charges, liable to a fine not exceeding RM250,000 upon conviction.

The Tabung Haji Royal Commission of Inquiry report highlighted a case involving TH Properties, a private company, where bonus payments totalling RM2.19 million were made in 2017 and 2018. The RCI found that these payments breached Section 230 of the Companies Act, as the necessary approvals and shareholder notifications were not properly secured. This situation underscores the importance of strict adherence to the procedural requirements stipulated in Section 230 for private entities.

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How does Section 230 of the Companies Act apply to private companies?

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