Malaysia: Legal Representative

     

An employee employed in a different capacity can carry out the role of a legal representative. It is common for companies to appoint one of their senior employees to act as a legal representative. The employee would then be holding a dual a role and it is essential to have the duties and obligations of the employee clearly outlined.

      

In a scenario where the legal representative is also an employee of the company, they would receive remuneration as part of their employment contract. However, if the legal representative is not an employee of the company, remuneration is subjective depending on the company’s policies and terms of their appointment. Based on company’s practices some directors receive a director’s fee or compensation for their services.

     

In general, a legal representative is not personally liable in the performance of his or her duty. In private limited companies, directors’ liability is limited to the extent of their shareholding according to the Companies Act 2016, this applies to legal representatives serving in this capacity. However, there are certain exceptions to this general rule. In cases of fraud, wrongful trading or certain specific circumstances such as breach of fiduciary duties, failure to comply with statutory obligations e.g. failure to pay taxes the legal representative may be held personally liable. 

     

Legal representatives, directors and officers of the company hold a fiduciary duty to the company and its shareholders. They are obligated to act in good faith, exercise reasonable care and act in the best interest of the company. Failure to do so may attract personal liability for the legal representative.

     

A legal representative can delegate their powers and responsibilities to a certain extent, but they cannot delegate their fiduciary duties and liabilities. Delegation of administrative powers such as day to day operational decisions is allowed. However, the ultimate responsibility remains with the legal representative. It is the legal representative´s obligation to ensure that the delegations are appropriate and comply with legal and regulatory requirements.

     

Fiduciary duties owed to the company and shareholders cannot be delegated. The legal representative is ultimately responsible for exercising diligence in the performance of their duties. There is a likelihood that they may still be held liable for the actions of those whom they have delegated powers if they fail to exercise proper oversight or if the delegation is unlawful. For practical purpose, delegation of administrative powers and authority is permissible, legal representatives must ensure though that appropriate supervision mechanisms are in place to mitigate risks and to ensure compliance. Clear delegation protocols must be established, and proper oversight is essential.

      

Termination in general, regardless of the position held, must be done in accordance with the principal fairness, good faith and compliance with applicable laws and regulations. Termination should not be arbitrary or discriminatory.

     

Termination of a legal representative should follow the provisions outlined in the company’s constitution or contract between the legal representative and the company regarding the removal or resignation of the legal representative.

      

It is prudent for companies to maintain accurate records documenting the reasons for the termination decision and any communication with the legal representati​​​​​ve regarding the termination.