Can someone with a lawsuit still serve as a company director?
1. Which Lawsuits Will Disqualify a Director? (Even Without Jail Time)
According to the Malaysian Companies Act, lawsuits involving the following situations will lead to the disqualification of a director:
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Bankruptcy
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Once an individual is declared bankrupt by the court, they generally cannot serve as a director.
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Unless they obtain special approval from the court or the Director General of Insolvency (DGI).
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Offences Involving Fraud or Dishonesty
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Includes forging documents, misappropriating cash, financial fraud, or Criminal Breach of Trust (CBT).
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Once convicted, they will be disqualified from serving as a director.
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Breach of the Companies Act
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Includes failure to properly maintain accounting records, making false declarations, misusing funds, or failing to disclose conflicts of interest.
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2. Which Lawsuits Will Not Affect Directorship?
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Ordinary Civil Cases
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Includes debt disputes, contractual disputes, tenancy issues, or partnership disputes.
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These typically do not affect one's eligibility to be a director.
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Core Key Point: Whether a lawsuit affects directorship depends entirely on whether it involves dishonesty, fraud, bankruptcy, or severe illegal misconduct.
3. Important Reminder: Directorship Is Not Just a Title
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Some individuals only "lend" their names to act as nominee directors; however, once the company encounters issues, the Inland Revenue Board (LHDN), SSM, banks, and courts will target the directors first.
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Being a director is not merely holding a title—it carries profound legal responsibilities.
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Choosing the wrong director means the company will not only pay for the mistakes but could also directly ruin its own future.