How does Section 230 of the Companies Act apply differently to private vs. public companies?

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Section 230 of the Companies Act Differentiates Approval Requirements for Director Fees and Benefits Based on Company Type

Section 230 of the Companies Act 2016 outlines distinct procedures for approving directors' fees and benefits, with stricter requirements for public or listed companies and their subsidiaries compared to private entities. For public or listed companies, any fees and benefits payable to directors must receive explicit approval at a general meeting. Failure to comply with this can result in a fine of up to RM3,000,000, and any payments made in contravention are considered a debt owed by the directors back to the company.
Public Companies Require General Meeting Approval for Director Remuneration

In the case of public companies, including listed entities and their subsidiaries, Section 203(1)(a) and (b) of the Act mandates that directors' fees and any associated benefits must be formally approved by shareholders during a general meeting. This ensures a higher level of oversight and accountability for remuneration decisions in entities with a broader shareholder base.
Private Companies Allow Board Approval Subject to Constitution and Shareholder Notification

For private companies, such as TH Properties, Section 230(2) permits the Board of Directors to approve directors' fees and benefits, provided such approval aligns with the company's constitution. However, this authority is accompanied by procedural obligations. Any such approval must be meticulously recorded in the minutes of the directors' meeting. Furthermore, Section 230(3) stipulates that shareholders must be informed of these approved fees and benefits within a 14-day period following the board's decision.
Penalties for Contravention Differ Significantly Between Company Types

The consequences for contravening Section 230 provisions vary substantially based on the company's status. Public and listed companies face severe penalties, with fines potentially reaching RM3,000,000 and directors personally liable for any improperly paid remuneration. In contrast, private companies and their officers who breach these rules may be subject to a fine not exceeding RM250,000, as outlined in Section 230(7).
Shareholder Rights in Private Companies Allow for Challenge of Unfair Payments

Private companies also offer a mechanism for minority shareholders to intervene if they perceive director remuneration to be unfair. Section 230(4) empowers members holding at least 10% of the total voting rights to demand a resolution, either written or at a general meeting, to approve a payment within 30 days of becoming aware of it. If such required approval is not subsequently obtained, the payment is legally deemed a debt owed by the director to the company, as specified in Section 230(5).

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How does Section 230 of the Companies Act apply differently to private vs. public companies?

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