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The duty of directors can be simply divided into two statutory duties and fiduciary duties. The statutory duty of directors is those duties stated in the statutory law such as Company Act 2016. Besides, a person or an organisation is owed fiduciary obligations if they practice discretionary authority in the best interests of another party in the events that promote trust and confidence (Principles for Responsible Investment, 2015). In a corporation, the directors of the company will need to perform their fiduciary duties as the company interest will prevail compared to the personal interests.

There are certain fiduciary duties performed by the director of a company in order to fulfil their responsibilities (Fiduciary Duty, n.d.). First is the duty of care. It indicated that the directors should obtain sufficient information before they make any business decision. Besides, the directors also need to evaluate the credibility of the information presented in order to protect the company's interests. The second is related to the duty of loyalty as the directors should act as corporate fiduciaries and perform their duties without any personal economic squabble. As stated in the case of ‘Guth v. Loft, 5 A.2d 503, 510 (Del. 1939)’, the court explained the duty of loyalty as “corporate officials and directors may not utilise their positions of trust and confidence to advance their personal interests.” (Fiduciary Duty, n.d.).

Besides the two primary duties, there are some other fiduciary duties of a director such as the duty of good faith, the duty of confidentiality, and the duty of disclosure. The directors should put the company’s interests first and perform their duties under the boundary of law under the duty of good faith. Besides, the duty of confidentiality mentioned that the directors and the officers of a company should protect their company’s confidential information rather than disclose it for personal benefit. Furthermore, the duty of disclosure required the director or officer of the company to disclose all the relevant information regarding the directors’ decision to their shareholder. It stated that the director should act as ‘complete candor’, especially during the essential business decision. For example, big corporate business transactions, such as mergers with or acquisitions of other organisations, the directors need complete and fair disclosure of crucial facts before getting board or investor approval (Fiduciary Responsibility and Corporations, n.d.).

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According to Duties of Directors (n.d.), a director should act in good faith or bona fide in order to exercise the power, discharge the duties by using care, skill and diligence, retaining and exercising prudence when making a business judgement and lastly avoid the conflict of interest. If a director is unable to behave in good faith by prioritising the corporation's interests over other considerations, it can be considered the director has failed in performing their duties and may not be eligible as the company’s director anymore. Besides, there are some legal provisions stated in the Company Act 2016 which relate to the duty of the directors to exercise powers in good faith.

According to the Company Act (2016), Section 213(1), “A director of a company shall at all times exercise his power in accordance with this Act, for a proper purpose and in good faith in the best interest of the company.” Besides, Section 214(1)(a) of the Act also stated that the director who “makes a business judgement for a proper purpose and in good faith will be deemed to meet the requirement of his duty as a director.”

Furthermore, Section 113(5)(b) stated that the director shall declare that “the decision of purchase own company’s share through share buyback is made in good faith and in the interest of the company.”  Besides, Section 127(2)(c) of CA 2016 also mentioned one of the requirements of purchasing a company’s own shares is “the purchase must be made in good faith and in the interests of the company.”

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Directors of a company have their fiduciary duties to execute, however, they must not conflict with their duties owed to the company that they served. According to the Victorian Public Sector Commission (n.d.), conflict of duty can be defined as an occasion where a director needs to execute more than two responsibilities that may cause conflict between each of the duties and is eventually be recognised as a conflict of duties, whereas conflict of interest can be interpreted as a private interest that may affect the duties of a director towards the interest of the company. Despite the fact that directors attest that their decisions are free from any liability of conflict of duty and interest, some situations may arise to argue their declaration. This can be seen in three situations which are dealing with the company, the usage of the property of the company, and the competition with the company.

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As a director of a company, they have duties and responsibilities to enter a business transaction with a company. A business transaction can be defined as a monetary transaction between two or more parties in exchange for goods and services (Contract Counsel, n.d.). In entering into a transaction with a company, a director is indirectly exposed to circumstances where conflict of duty and interest may occur. Conflict of duty and interest may come about when the decision of a director is significantly influenced by the gain that they may receive if their decision were to be different. Benefits that may interest directors include financial gain from the transaction itself or obtaining non-monetary benefits such as a percentage of a share within the company they are entering a business transaction with. Conflict of duty and interest that arise from such a situation is not favourable as directors have duties towards the company to make sure the company gains maximum benefits from the transaction.

To ensure such conflict does not influence the directors when making a decision, the shareholders have the power to force the directors to yield all of their personal gain that may be derived from the transactions. This is to establish a decision that is beneficial to the company as the duties of the directors are toward the company and not themselves. Apart from that, when there is a possibility of a conflict of duty and interest that may transpire from the transaction, the director needs to declare to the other directors of the company, the nature and the range of interest (Waddell, 2020).

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When working as a director, a person has unlimited access to the assets of the company. Assets such as the facilities, resources, and information of a company are accessible by the directors. However, as the director of a company, they “shall not, without the consent or ratification of a general meeting use the property of the company; use any information acquired by virtue of his position as a director or officer of the company; use his position as such director or officer, and use any opportunity of the company which he became aware of, in the performance of his functions as the director or officer of the company”, as stated in S.218(1)(a), S.218(1)(b), S.218(1)(c), and S.218(1)(d) of the Companies Act 2016, which according to Section 218(2) of the Act, “any person who contravenes this section commits an offence and shall, on conviction, be liable to imprisonment for a term not exceeding five years or a fine not exceeding three million ringgit or to both.”

It is easy for the directors to use the assets of the company for their personal gain. However, it created a conflict of duty and interest as it goes against their official duty as a director where they should use the assets for the benefit of the company itself. For example, it would be against the fiduciary duties of a director if the director uses a building of a company for his own business instead of optimising the space for the operation of the company. This situation goes against the fiduciary duty of directors for proper purposes. The directors then will breach their duties and fail to act in good faith.

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Another situation that may create circumstances of conflict of duty and interest is when a director competes directly with the company they are working for or has a position as a director in the competing companies. By competing directly with the company they work for, directors will have conflicting opinions regarding what they should do. This is because when a director engages in a competition with a company, they will review their personal gain and the gain of the company. This is called a situational conflict of interest. According to Morris (2019), a situational conflict can be defined as the director may or may not have a conflict of interest when they have a duty to steer away from the situation. This can be seen in a situation if the director has a personal relationship with a person owning a company or has their own shares of the company.

According to Section 218(1)(e) of the CA 2016, “a director or officer of a company shall not, without the consent or ratification of a general meeting engage in business which is in competition with the company.” This is because the directors will be put in a position where their judgment will be put to the test. For example, if a director of a company has shares in another competing company, a conflict of interest may arise that influences his judgment when making a decision, which indirectly breaches his duties as a director.

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As the directors fail to exercise their duties in good faith, the implication of exercising their power in bad faith or for a bad purpose is voidable (Cooper, 2021). For example, when a director enters a business contract with a company with an improper intention, it is possible to call off the business contract and refund the money paid. There are other consequences for the directors who breach their duties such as they are liable to pay for the compensation and are disqualified from managing the company (Cooper, 2021).

It can be further explained by Cooper (2021) that the directors are ordered to repay all the profits that are made from the breach of duties and the court can also order the directors to restore the company to the actual position it is supposed to be in if it is not for the directors’ breach of duties. Lastly, according to Acclime (n.d.), if the directors breach the company law, they will be penalised with the penalties such as being compounded, delisting, dissolution, and getting fines based on applicable rules and regulations, being reprimanded, and suspended. Hence, the directors should exercise their powers in good faith to avoid any unlawful acts from damaging their reputation and also that of the company.

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Acclime. (n.d.). Directors’ roles and duties in Malaysia. https://malaysia.acclime.com/guides/director-roles-duties/

Ahmad Masum, Shahrul Nizam Salahudin, & Hanan Abdul Aziz. (2018). Corporate governance and directors duty to act in good faith and in the best interest of the company: The Malaysian experience. International Journal of Engineering & Technology, 7(4.38), 795-799. http://www.sciencepubco.com/index.php/IJET

Contract Counsel. (n.d.). What is a business transaction? https://www.contractscounsel.com/t/us/business-transaction#:~:text=A%20business%20transaction%20is%20a,be%20recorded%20for%20accounting%20purposes

Cooper, P. (2021). What does the duty to act in good faith really mean? https://legalvision.com.au/what-is-the-duty-to-act-in-good-faith-in-the-best-interests-of-the-company/

Duties of Directors. (n.d.). https://eiza2.pressbooks.com/chapter/duties-of-directors/

Fiduciary Duty. (n.d.). https://www.law.cornell.edu/wex/Fiduciary_Duty

Fiduciary Responsibility and Corporations. (n.d.). https://www.nolo.com/legal-encyclopedia/fiduciary-responsibility-corporations.html

ILBS. (2017). Companies Act 2016 (Act 777) & Regulations (As At 1 February 2017): /International Law Book Services. Malaysia: ILBS.

Mahkamah Tinggi Kuala Lumpur. (2019). Blackstream investments pte ltd & anor v D'Nonce technology bhd [2019] MLJU 923, HC. https://themalaysianlawyer.com/wp-content/uploads/2019/12/blackstream-investment-1-lagi-v-dnonce-technology.pdf

Morris, A. (2019). Directors’ conflict of interest (How to comply). https://www.davidsonmorris.com/directors-conflict-of-interest/#:~:text=Situational%20conflict%20refers%20to%20where,the%20director%20and%20the%20company.

Principles for Responsible Investment. (2015). What is fiduciary duty and why is it important? https://www.unpri.org/fiduciary-duty/what-is-fiduciary-duty-and-why-is-it-important/247.article

Victorian Public Sector Commission. (n.d.). Conflict of interest and duty. https://vpsc.vic.gov.au/html-resources/conflicts-interest-duty-directors-public-entities-practice-guide/2-conflict-interest-duty/#:~:text=Conflicts%20of%20duty%20arise%20when,as%20'wearing%20two%20hats'.

Waddell, J. (2020). Directors’ duties in relation to conflicts. https://www.stevens-bolton.com/site/insights/briefing-notes/directors-duties-in-relation-to-conflicts

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After completing this report on the duty of directors to exercise power in good faith, it shows how important it is being in good faith to promote the company’s success for the benefit of everyone in the company. Besides, we have also learned that by being a director, one must follow and agree to uphold the relevant standards of behaviour in order to gain trust and confidence from other people to achieve the vision and mission of the company. Other than that, we must abide by the relevant rules and regulations such as refer to the Companies Act 2016, Companies Regulation 2017, Case Law and other sources of law to ensure the company complies with necessary legislation and stays financially solvent. Therefore, to become a good director, one must exercise power in good faith and other principles.

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All in all, among the directors' all's obligations, the obligation to act within powers, the obligation to practise independent judgment, and the obligation to avoid irreconcilable situations are the most critical. A director can act in the absence of good faith without deliberately engaging in bad faith. The disintegration of a chief's need to act sincerely isn't smart for the cutting-edge association or the economy, and a significant comprehension of "not in good faith" is expected to help stop that disintegration. Directors should utilize their corporate powers for the reasons in which they were delegated as directors. This allows the court to invalidate decisions made by directors if the motivating objective is one that a court recognizes as being beyond those for which the particular power may legitimately be used, or if it is not to benefit the company as a whole. There is no question that the law administering directors' commitments in Malaysia contains a few types of regulation namely case regulation, regulation, and self-guideline. Thus, if a director uses his or her authority for personal gain, he or she has likely done it improperly and has failed to act in the best interests of the organization. Hence, to guarantee that they do not break their duty while completing their obligations to an organization, all directors should act within the directors' obligations as framed in the Companies Act 2016.

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Blackstream Investments Pte Ltd & Anor v D'Nonce Technology Bhd [2019] MLJU 923, HC.

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Blackstream Investments Pte Ltd & Anor v D'Nonce Technology Bhd [2019] MLJU 923, HC.

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Blackstream Investments Pte Ltd & Anor v D'Nonce Technology Bhd [2019] MLJU 923, HC, is a Malaysian case involving the duties of directors.

D'Nonce Technology Bhd was the defendant in a lawsuit brought on by Blackstream Investments Pte Ltd. Kuala Lumpur's High Court heard the case. It was Ong Chee Kwan JC who was in charge of the proceedings. Overall, this case concerned the duties of a meeting's chairman. The case focuses on crucial legal issues relating to shareholder meetings. These issues are addressed in a court decision involving the adjournment of a general meeting of a public company, as well as what happens if an adjournment is illegal.

To begin, the chairman of the meeting has the authority to call a recess. This can be essential in the adjournment of shareholder disputes, or a difficult meeting where directors are at risk of being dismissed.

It is usual for the company's constitution to include a provision that allows the chairman to adjourn the meeting. An article like Article 50 of Table A states that "[t]he chairman may, with the approval of any meeting in which there are five or more members present (and when so ordered by those present) adjourn" meetings. Notwithstanding, an executive will have a precedent-based regulation capacity to conclude no matter what the constitution's particular arrangement.

The executive had dismissed the gathering in this situation, yet the Court decided that such a deferment was unlawful. The meeting had been adjourned because the chairman had not met the legal requirements for a common-law adjournment. The gathering had been concluded by the director inexplicably by any means.

According to the Plaintiffs' counsel, there are no specific provisions in the Companies Act which require an adjourned general meeting to be adjourned via ballot. The plaintiffs' legal team argued that the same does not require a vote by ballot on adjournment, but instead explicitly states that polling is only for matters specified in the meeting notice and not for adjournment. A Bursa Malaysia official explained to him that a recorded backer should guarantee that any goal set out in the notification of a comprehensive gathering, or in the notification of a goal that might be moved and is planned to be moved at a comprehensive gathering, is decided on by-survey. Article 8.29A(1) under Article 8.54A of the Bursa Malaysia Securities Berhad Listing Requirements was clarified in the Questions and Answers, as follows: "8.54A" “A listed issuer must, among other things, ensure that any resolution set out in the notice of any general meeting, is voted on by a majority of the votes cast at the meeting.” At the point when a matter is excluded from the notification of regular gathering, it isn't dependent upon the survey casting a ballot necessity. Deferment of a regular gathering because of unexpected conditions is one instance of something not explicitly referenced in that frame of mind for a comprehensive gathering's notification.

Second, the Court held that the chairman had erroneously decided that the adjournment decision would be voted on by a poll. This was an error. The proper procedure would have been a simple show of hands.

Third, excluding proxy holders from voting on the adjournment resolution was a mistake made by the chairman. The adjournment question can be decided by proxy holders.

In addition, there is the inevitable legal repercussion of an improper adjournment. The meeting was able to go on and pass all of the necessary resolutions. The shareholders who have remained in the meeting are those who have remained. It is possible for shareholders to proceed with resolutions as long as the quorum is maintained. In other words, this is what happened. The goals to excuse specific chiefs and delegate new ones were done by the investors.

There are many similarities between this case and Datuk Johari Abdul Ghani & Ors v. QSR Brands Bhd & Ors [2007] 4 MLJ 19. This time, the chairman called a recess to announce the results of a poll that had been taken. The gathering had been led as proven by the individuals who remained. On the basis of Byng v. London Life Association [1989] BCLC 400 on adjournment, the Court ruled that the chairman's decision to adjourn was unreasonable and therefore void.