Case Background & Strategy

Under section 230 of the Companies Act 2016, the fees of directors of a public company (and benefits payable to them) must be approved by shareholders at a general meeting. For a private company, the board may approve fees and benefits, subject to the constitution, but members holding at least 10% may object, and payment must not be made if the objection procedure is engaged.

The approval framework

Public companies: shareholder approval is mandatory, and for listed issuers the Malaysian Code on Corporate Governance layers on remuneration-committee oversight and disclosure expectations. Private companies: board approval suffices unless the constitution says otherwise, but the board must notify members, and dissenting members holding the threshold percentage can require the payment to be passed at a general meeting.

Remuneration as a weapon in disputes

In family and quasi-partnership companies, remuneration is a frequent battleground: majority factions vote themselves generous salaries while starving minority shareholders of dividends. Malaysian courts have intervened where remuneration is excessive, unauthorised or oppressive — remedies range from repayment orders to relief under section 346. Conversely, cutting off a director-shareholder’s remuneration to force an exit is itself classic evidence of oppression.

Practical safeguards

Boards should ensure fees and benefits are properly authorised, benchmarked and minuted; that service contracts are approved in accordance with the constitution; and that any change in a dispute environment is defensible. Aggrieved shareholders should gather the remuneration history early — it often tells the story of the dispute.

Frequently asked questions

Is a director automatically entitled to be paid?

No. There is no inherent right to remuneration; entitlement must come from the constitution, a valid resolution or a service contract.

Can shareholders recover excessive remuneration already paid?

Where payment was unauthorised or in breach of duty, recovery may be ordered, including through derivative or oppression proceedings.

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.