What to Do When Directors Clash?
A Practical Guide to Resolving Boardroom Disputes in Malaysian Companies
Corporate governance and board-level conflicts are among the most common internal risks undermining the success of SMEs in Malaysia. Left unresolved, director disputes can quietly drain company value, disrupt operations, and jeopardize long-term growth.
Director Disputes: The Hidden Threat to Business Value
Disagreements in the boardroom, sudden resignations of key executives, and deadlocks in critical decision-making may appear to be routine governance issues. However, these disputes often erode profitability and destabilize business continuity.
Four Early Warning Signs of Boardroom Conflicts
- Decision-making delays – Strategic proposals are repeatedly postponed or rejected without resolution.
- Declining attendance – Directors frequently absent themselves from meetings.
- Reduced transparency – Crucial operational information is withheld among directors.
- Boardroom factions – Distinct groups or alliances form within the board.
Common Causes of Director Disputes
Understanding the root causes helps mitigate and prevent future conflicts:
- Diverging views on company strategy or financial priorities
- Conflicts of interest or breaches of fiduciary duties
- Poor communication or lack of trust
- Power struggles among founders or shareholders
- Unequal contributions or performance imbalances
Professional Approaches to Resolving Director Disputes
- Review Corporate Governance Documents
- Obtain the latest company records from the Companies Commission of Malaysia (SSM).
- Compare the company constitution with shareholder agreements to ensure compliance and consistency.
- Convene a Legally Valid Board Meeting
- Provide at least 7 days’ notice to all directors.
- Prepare an agenda aligned with the Companies Act 2016.
- Engage a qualified company secretary to record accurate minutes.
- Ensure voting procedures follow constitutional requirements.
- Activate Shareholder Governance Mechanisms
If the board reaches an impasse:
- Call an Extraordinary General Meeting (EGM).
- Exercise shareholder voting rights.
- Initiate director removal procedures if necessary.
- Lawfully Remove Non-Compliant Directors
Under Section 206 of the Companies Act 2016:
- A special notice of 28 days is required.
- Removal is by ordinary resolution.
- The affected director has the right to be heard.
- Seek Legal Support, Mediation, or Arbitration
- Appoint legal professionals specializing in company law and corporate disputes.
- Consider mediation (non-binding) or arbitration (binding) for faster, private, and less disruptive resolutions compared to court proceedings.
Building a Director Dispute Prevention Framework
Three Layers of Protection
- Prevention – Define directors’ roles clearly; establish performance and accountability measures.
- Monitoring – Regularly assess board effectiveness and implement early-warning systems.
- Resolution – Standardize dispute resolution protocols and maintain partnerships with professional advisors.
Key Governance Documents
- Director service agreements (with exit clauses)
- Shareholder agreements (decision-making mechanisms and dispute resolution provisions)
- Company constitution (modern governance and dispute clauses)
Need Assistance with Director Disputes?
At iComSec, we help Malaysian companies resolve boardroom conflicts effectively while ensuring compliance with the Companies Act 2016.
Our experienced company secretaries and legal advisors provide discreet, professional support to safeguard your company’s value and long-term stability.
A Practical Guide to Resolving Boardroom Disputes in Malaysian Companies – What to Do When Directors Clash?
