Did you know that is it mandatory by law that a company is managed by a board of directors (usually the Chief Executive is part of) under Section 157A of the Companies Act. Although day-to day operations are delegated to executives, there are still business decisions that directors have to make in accordance with their duties which this blog post intends to highlight.
1. Keeping Accounting Records
Accounting records considered fit by directors must be kept by every company. These accounting records justify the company’s financial position, and should remain easily accessible for inspection by directors. Failure to comply render the company and directors liable in accordance to the Companies Act. Establishing an efficient accounting and filing system will help the company to meet this requirement. In addition, discrepancies in later stages can be prevented with such a system in place.
2.Maintaining and Consolidating Financial Statements
Financial statements of the company must be presented at its Annual General Meeting (AGM). These financial statements must be submitted and presented to shareholders every calendar year during the AGM. The first financial statements should be submitted no later than 18 months after incorporation, and in subsequent intervals of no more than 15 months thereafter. In the case of a public listed company, the financial statements should be up-to-date no more than 4 months before the date of the meeting. For other companies, the financial statements should be up-to-date no more than 6 months before the date of the meeting.
3. Meeting and Proceedings
(a) Statutory Meeting
Every public limited company with share capital shall hold a general meeting called “Statutory meeting” within a period of not less than 1 month and not more than 3 months upon the commencement of business. This non-recurring meeting is held only once.
(b) Annual General Meeting (AGM)
Companies must hold their first AGM no later than 18 months after incorporation. Subsequently, AGM must be held once every calendar year in intervals of not more than 15 months from the last meeting.
(c) Extraordinary General Meeting (EGM)
At the request of board members who hold a 10% share of the paid-up capital and carry the right to vote at general meetings, directors must convene the meeting no later than 2 months from the request date. For companies without share capital, members with at least 10% of voting rights shall make the request to hold the EGM. If the directors do not proceed to convene the meeting within 21 days from the date of request, board members can convene the meeting themselves.
4. Appointment of Corporate Secretary
Directors must appoint a company secretary and ensure that the person is qualified and possesses relevant experience. The company secretary should not be left vacant for more than 6 months in any period.
5. Appointment of Auditors
Directors must appoint an auditor which may be an accounting entity or entities within 3 months of incorporation. This will not be applicable to dormant companies or small companies that are exempted from audit requirements.
6. Duty to Disclose
Directors are generally required to make a disclosure at a meeting of the company directors that he/she is interested in a transaction or proposed transaction with the company. Directors are also to ensure that disclosures are made to avoid any potential conflict of interest. In addition, directors must disclose the nature and extent of any conflicts created by his own duties and interests that may arise due to the position held in the company or due to possession of property.
7. Fiduciary Duties
Directors must be loyal to the company and engage in actions that are in the best interest of the company. Directors have the duty to act honestly and use reasonable diligence. No undue advantage should accrue to any director in the course of carrying out his duties.
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Aside from the above mentioned, the list of duties of directors can be very comprehensive. Non-compliance or breach of any of the duties can result in penalties, and in serious cases, criminal prosecution and civil action be taken against directors.
You are advised to consult or engage a reputable corporate services firm that can guide and assist directors to discharge their duties in accordance with the law.
