Comparison Table: Director vs Shareholder
(Malaysia – Private Limited Company / Sdn. Bhd.)
| Item | Director | Shareholder |
|---|---|---|
| Main Role | Manages and operates the company | Owns the company |
| Controls daily operations? | ✅ Yes | ❌ No (unless also serving as a director) |
| Legal Responsibility / Criminal Risk & Liability for Debts | High. Breach of fiduciary duties, fraud, or negligence may lead to personal liability and recovery against personal assets. | Low. Liability generally limited to share capital, unless involved in crimes (e.g. money laundering) or a Personal Guarantee is signed. |
| Can sign contracts? | ✅ Yes | ❌ No |
| Makes business decisions? | ✅ Yes | ❌ No (but has voting rights on shareholder resolutions) |
| Compliance responsibility | ✅ Yes. Must ensure timely statutory filings; failure may result in fines, penalties, or disqualification. | ❌ Generally no. Not responsible for filings or compliance breaches. |
| Receives income as | Director’s fees / Salary | Dividends |
| Minimum requirement (Sdn. Bhd.) | At least 1 director, ordinarily resident in Malaysia | At least 1 shareholder (local or foreign individual or corporate entity; can hold 100%) |
| Can be the same person? | ✅ Yes | ✅ Yes |
Company Constitution (Important Note)
Although the Companies Act 2016 provides a default governance framework, a company that adopts a specific constitution may allocate decision-making powers more precisely.
This may include:
Signing authority for contracts
Reserved matters requiring shareholder approval
Limits or conditions on directors’ powers
📌 Always review the constitution to understand the actual authority of directors and shareholders.
What Is a Director?
A Director is responsible for operating and managing the company.
Think of a director as the driver of the business 🚗
Key Responsibilities
Manage daily business operations
Ensure compliance with SSM and LHDN requirements
Approve and execute contracts and agreements
Ensure timely completion of all statutory filings
Director’s Duties & Accountability
Legal responsibility
Directors are personally responsible for ensuring compliance with the Companies Act 2016 and tax laws.Extended personal accountability
Directors may be held personally liable for:Unpaid company taxes
EPF, SOCSO, and EIS contributions
Late or false statutory filings
Insolvent trading
Allowing the company to incur debts while knowing it is insolvent may constitute fraudulent or wrongful trading, leading to personal liability.
What Is a Shareholder?
A Shareholder is the owner or investor of the company.
Think of a shareholder as the owner of the vehicle 🚘
Key Rights
Holds shares (equity) in the company
Receives declared dividends
Appoints or removes directors through voting
Votes on major corporate matters such as:
Amendments to the constitution
Changes in share capital
Major restructurings (usually via special resolutions requiring >75% approval)
When Can a Shareholder Face Personal Risk?
Although shareholders generally enjoy limited liability, personal exposure may arise in the following situations:
Personal Guarantee (PG)
Banks often require major shareholders to sign a PG for loans, creating unlimited personal liability.Piercing the corporate veil
Courts may hold shareholders personally liable if the company is misused for fraud or if personal and company assets are mixed.Also serving as a director
A shareholder who is also a director must comply fully with all directors’ statutory duties.
Can One Person Be Both a Director and a Shareholder?
✅ Yes — very common for SMEs and startups
Example:
You incorporate a Sdn. Bhd.
You hold 100% of the shares → Shareholder
You manage the business → Director
This structure is fully legal in Malaysia.
📌 Important:
When the same person holds both roles, authority and responsibility coexist.
You enjoy ownership benefits but also bear directors’ legal obligations.
Common Mistakes to Avoid
⚠️ Assuming shareholders can sign company contracts
⚠️ Appointing directors without understanding legal liabilities
⚠️ Foreign shareholders assuming no local resident director is required
⚠️ Treating directors as “name-only” nominees without understanding the risks
Quick Summary
| Key Point | Explanation |
|---|---|
| Director | Operates and manages the company |
| Shareholder | Owns the company |
| Overlap of roles | Can be the same person |
| Director’s responsibility | High level of legal and compliance liability |
| Shareholder protection | Generally protected by limited liability |
Need to Structure Your Private Limited Company Correctly?
Choosing the right director and shareholder structure directly impacts:
Corporate compliance
Tax exposure
Employment pass & visa applications
Financing and banking facilities
👉 Contact iComSec for professional advice on:
Company incorporation
Director & shareholder structure planning
Nominee director solutions
Ongoing company secretarial compliance services
Recommendations
Rely on a qualified company secretary for compliance reminders and filings
Conduct regular internal reviews to identify risks early
Director vs Shareholder (Malaysia – Private Limited Company – Sdn Bhd)
