Case Background & Strategy

How to Remove a Director of a Private Company in Malaysia

A director of a private company (Sdn Bhd) in Malaysia may be removed before the expiry of their term by ordinary resolution of the shareholders under section 206(1)(a) of the Companies Act 2016, subject to anything in the company’s constitution. Because removal is a shareholder decision, the board alone cannot remove a director — a properly convened general meeting (or written resolution, where available) is required.

The statutory route: section 206

For a private company, section 206(1)(a) allows removal by ordinary resolution — a simple majority of members voting. The constitution may impose additional requirements or entrench a director’s position, so the constitution must always be checked first. Where the director to be removed holds shares, watch for weighted-voting clauses that can defeat an ordinary resolution.

The resolution must follow proper notice and meeting procedure. Defective notice is the most common ground on which removals are challenged, so the requisition, notice period and agenda wording should be handled carefully.

Common pitfalls in director removal

Frequent errors include: relying on a board resolution instead of a members’ resolution; failing to check the constitution and any shareholders’ agreement; ignoring employment consequences where the director is also an employee under a service contract; and overlooking the director’s right to make representations. A removal that is procedurally sound under the CA 2016 can still trigger claims for breach of a shareholders’ agreement or unfair dismissal in the Industrial Court where the director is in reality a ‘workman’.

After the resolution passes

The company must update its register of directors and notify SSM of the cessation within the prescribed period. Access, signatories, statutory positions and public-facing records should be updated at the same time. Where the outgoing director refuses to cooperate, injunctive relief or declaratory proceedings may be necessary.

Frequently asked questions

Can a sole director be removed?

A company must have at least one director ordinarily resident in Malaysia. Removal of a sole director should be paired with the appointment of a replacement in the same meeting.

Can the removed director claim compensation?

Removal does not deprive a director of compensation or damages payable under a service contract, and section 227 CA 2016 regulates any payment for loss of office.

How Messrs Ng, Zainurul, Seke & Khoo can help: our corporate and commercial litigation team advises boards, directors and shareholders across Malaysia on governance disputes, from advisory and board-level strategy through to trial. Contact us for a consultation.