How does the approval process for director fees differ for public versus private companies?

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Director Fee Approval Processes Differentiate Between Public and Private Companies

The approval process for director fees and benefits varies significantly between public and private companies under the Companies Act 2016. For public companies and their subsidiaries, any director fees and benefits must be formally approved at a general meeting of shareholders. In contrast, private companies, such as TH Properties, have a different framework where the Board of Directors can approve these payments, provided it is in line with the company's constitution.
Shareholder Approval Mandated for Public Companies

In the case of public companies and their subsidiaries, Section 203(1)(a) and (b) of the Companies Act 2016 stipulates that director fees and any benefits payable to directors require explicit approval from shareholders during a general meeting. Failure to adhere to this requirement constitutes an offence, carrying a potential fine of up to RM3,000,000. Furthermore, any payments made in contravention are considered a debt owed by the director(s) back to the company.
Board Approval Permitted for Private Companies with Notification

For private companies like TH Properties, Section 230(2) of the Act allows the Board of Directors to approve director fees and benefits, subject to the company's constitution. However, this authority is accompanied by specific procedural obligations. Any such approval by the Board must be meticulously recorded in the minutes of the directors' meeting. Crucially, the Board is then required to notify the company's shareholders of this approval within 14 days from the date it was granted.
Shareholder Recourse Available in Private Companies

Private companies also provide a mechanism for shareholders to challenge director fee approvals they deem unfair. Under Section 230(4), shareholders who collectively hold at least 10% of the total voting rights can, within 30 days of becoming aware of such payments, request that the company pass a resolution to approve the payment. This can be done either through a written resolution or at a general meeting. If shareholder approval is not subsequently obtained through this process, the payment is treated as a debt due from the director to the company, as outlined in Section 230(5).
Penalties for Non-Compliance in Private Companies

Contravention of the provisions governing director fee approvals in private companies carries specific penalties. Section 230(7) states that the company and any officer who breaches these rules commit an offence and are liable upon conviction to a fine not exceeding RM250,000. This highlights the regulatory framework designed to ensure transparency and accountability in the remuneration of directors within private entities.

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How does the approval process for director fees differ for public versus private companies?

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