151. Validity of acts of directors and officers

Question 1

151. Validity of acts of directors and officers

Answer 1

General overview
[151.01] This section is necessary to preserve the validity of acts or contracts that had been entered into with the company by a director or manager or secretary whose appointment or qualification was defective or flawed. This is because third parties who deal with the company are often unable to ascertain internal matters such as the validity of the appointment or qualification of such persons.

Question 2

Validity of acts

Answer 2

[151.02] This section protects third parties who have dealt with the company through its directors, where it is subsequently discovered that the director’s appointment or qualification is defective. There is a distinction between a defective or flawed appointment and no appointment at all. A person disqualified under the Malaysian equivalent of s 148 had no capacity to affirm an affidavit on behalf of the company

Question 3

Contracts with “insiders”

Answer 3

[151.03] Two directors who did not take up the qualification shares ceased to be directors according to the company’s articles, and were unable to bind the company to a contract entered into by them, as de facto directors with one of themselves. The contract was a nullity, but the said director who had rendered services to the company, in his capacity as an estate agent, was able to claim on a quantum meruit

Question 4

Injunctions

Answer 4

[151.04] See s 409A where the company or any interested person may obtain an injunction to prevent a disqualified director from acting in breach of the Act.