Directors cannot self-remunerate without shareholder approval or explicit authorization in company articles; such payments must be reported as debts due to the company.

Introduction

[1] This is the Appellants' (as the first and second Defendants in the Court below) appeal against the judgment of the Kuala Lumpur Sessions Court delivered on 30 June 2015 against them. After hearing the appeal, I gave my decision dismissing the same, and this judgment, which contains the full reasons for my decision, focuses on that aspect of company law which governs payments of directors' remuneration.

Key Backgrounds Facts

[2] The Respondent is a public listed company and is involved in the manufacturing of aluminum foil packaging materials. On 8 June 2005, the first Defendant/Appellant was appointed as Managing Director of the Respondent/Plaintiff and on 3 April 2008, the second Defendant/Appellant was appointed as a director of the Respondent/Plaintiff.

[3] The claim against the first Appellant was for the return to the Respondent company the sum of RM260,000 being what was said to be an unauthorized payment of director's fees and that against the second Appellant was similarly for the return to the Respondent the sum of RM15,300, also being the payment of director's fees contended to be unauthorized.

[4] The claim by the Respondent against the third Defendant at the Sessions Court was withdrawn as he had refunded the relevant sum of money to the Respondent, and a judgment in default of appearance had been obtained against the fourth Defendant. In any case, both did not file an appeal against the relevant decisions.

[5] It was not disputed that for a period of 12 months from September 2011 to August 2012, the first Appellant received director's fees in the sum of RM576,000; and the second Appellant received RM42,000, in all cases without the approval of the Respondent's shareholders in a general meeting.

[6] On 21 February 2013, the Respondent convened an Annual General Meeting ("AGM") followed by an Extraordinary General Meeting ("EGM") for the year 2012, and the following, which are relevant for present purposes, too kplace:-

(a) At the AGM, the shareholders rejected both the resolutions to approve the payment of Directors' Fees (of RM 576,000 and RM 42,000 to the first and second Appellants, respectively) and to re-elect the second Appellant as a director.

(b) At the EGM, the shareholders also resolved to remove the first Appellant from his position as a director.

[7] The first and second Appellants subsequently thus duly returned the RM576,000 and RM42,000 to the Respondent respectively, and ceased to be directors of the Respondent.

[8] In the same year of 2013, it came to the knowledge of the Respondent that for a period of about four months, earlier, from 5 October 2012 to 6 February 2013 that the first Appellant had received a total sum of RM260,000 and the second Appellant, RM15,300 in directors' remuneration which had also not been approved by the shareholders.

[9] The Respondent's solicitors then issued Notices of Demand on 28 February 2014, to the first and second Appellants and demanded for the return of the said sums of RM260,000 and RM15,300 respectively. This was following the rejection of such payment by the AGM of the Respondent on 24 February 2014. Given their failure to abide by the demand, the Respondent commenced legal action on 24 June 2014 against the first and second Appellants at the Sessions Court, and following the completion of a full trial, the Sessions Court delivered judgment against the first and second Appellants on 30 June 2015,allowing the Plaintiff/Respondent's claim for RM260,000 and RM15,300 plus interests and costs against the first and second Defendants/Appellants respectively. Hence this appeal.

Summary Of Contentions