Short answer. Directors decide how the company is run day to day, because the Companies Act 2016 gives the Board the power to manage the business (section 211). Shareholders decide the matters the Act or the constitution reserve for members, such as adopting a constitution, removing a director or approving a share allotment. Each decision is recorded in a resolution of the right body.
Axecta provides company secretarial service for companies across Malaysia. Talk to our team.
In this article
- The core difference: managing vs owning
- Who decides what: a decision table
- How each type of resolution is passed
- Can the shareholders overrule the directors?
- Illustrative scenario: expanding a Sdn Bhd
- What this means for different structures
- Common mistakes
- How Axecta helps
- Next steps
- Frequently asked questions
The core difference: managing vs owning
A Malaysian company has two decision-making bodies. The Board of directors manages the company. The members (shareholders) own it and decide a smaller set of reserved matters. Section 211 of the Companies Act 2016.pdf) says the business and affairs of a company “shall be managed by, or under the direction of the Board”, and that the Board has all the powers needed to do so, subject to any modification, exception or limitation in the Act or the constitution.
So the starting position is that directors can decide anything unless the Act or the constitution gives it to the members. A directors’ resolution records a Board decision. A shareholders’ resolution, also called a members’ resolution, records a decision of the members, either at a meeting or, in a private company, in writing.
Who decides what: a decision table
The table below combines provisions we read in the Act with the usual practical split. It is a guide, not a substitute for reading your own constitution.
| Decision | Usually decided by | Basis |
|---|---|---|
| Opening a bank account, signing ordinary contracts, hiring staff | Directors | Board’s management power, section 211 |
| Approving the financial statements | Directors | Section 251 |
| Declaring a dividend or other distribution | Directors | Section 132(1): authorised by the directors, who must be satisfied the company will be solvent immediately after |
| Fees and benefits of directors in a private company | Board, subject to the constitution | Section 230(2) |
| Allotting new shares | Members must approve before the directors act | Section 75(1); approval lodged with SSM within 14 days (section 76(2)) |
| Adopting a constitution | Members, by special resolution | Section 32(1) |
| Changing the company name | Members, by special resolution | Section 28; notify SSM within 30 days |
| Removing a director before the end of the term | Members, at a meeting | Sections 206 and 297(2) |
| Acquiring or disposing of a substantial undertaking or property | Directors, but only with the company’s approval by resolution | Section 223(1) |
| Using company property or opportunities for personal benefit | Needs consent or ratification of a general meeting | Section 218 |
Two points stand out. First, many “owner” decisions in a Sdn Bhd, such as paying dividends, are actually Board decisions that shareholders cannot take over. Second, anything that dilutes or changes the members’ position, such as new shares or constitutional change, sits with members.
For the director appointment and removal process in detail, see appointing and removing directors of a Sdn Bhd.
How each type of resolution is passed
Need this done for you? Axecta’s company secretarial service team can handle this for your company. See the company secretarial service service.
Directors’ resolutions
Unless the constitution provides otherwise, the Third Schedule to the Act governs Board proceedings (section 212). It provides that:
- A Board meeting is convened by notice from a director, or from the secretary at a director’s request, sent to every director in Malaysia, stating the date, time, place and matters to be discussed.
- The quorum is fixed by the Board, and failing that is a majority of the directors.
- Each director has one vote and the chairperson has a casting vote.
- A resolution is passed if all directors present agree without dissent, or if a majority of the votes cast are in favour. A director present is presumed to agree unless they expressly dissent.
- A resolution in writing signed or assented to by all directors then entitled to receive notice is as valid as one passed at a duly convened meeting, and it may consist of several documents.
See how to hold a board meeting for a Sdn Bhd for the full process.
Shareholders’ resolutions
Members’ resolutions come in two kinds, defined in sections 291 and 292.
| Ordinary resolution | Special resolution | |
|---|---|---|
| Threshold | Simple majority of more than half of the members entitled to vote and voting | Not less than 75% of the members entitled to vote and voting |
| Notice | Normal meeting notice | Notice of not less than 21 days |
| Written form (private company) | Allowed | Allowed only if the written resolution states that it is a special resolution and is passed as one (section 292(2)) |
| Examples | Removing a private company director, subject to the constitution (section 206(1)) | Adopting a constitution (section 32), changing the name (section 28) |
At a meeting on a show of hands, each member has one vote; on a poll or written resolution, one vote per share, unless the constitution says otherwise (section 293). A resolution of members can be passed at a meeting of members under section 309 onward or, for a private company only, as a written resolution under sections 297 to 308. See written resolutions for a Sdn Bhd.
Can the shareholders overrule the directors?
Not directly. Members do not run the business, but they have levers:
- They can remove a director by ordinary resolution (private companies, subject to the constitution) at a meeting, with special notice.
- Under section 195, a meeting of members may pass a resolution making recommendations to the Board on matters affecting management. The recommendation is not binding unless it is in the best interest of the company and either the constitution provides the right or the recommendation is passed as a special resolution.
- They can requisition a meeting (section 311): at least 10% of paid-up voting capital, or 5% in a private company if more than twelve months have passed since the last requisitioned meeting.
Directors, in turn, remain bound by their duties. Read directors’ duties under the Companies Act 2016 for the standard of conduct.
Illustrative scenario: expanding a Sdn Bhd
Assume a Sdn Bhd owned by two founders and one investor wants to open a second office, raise funding by issuing new shares to the investor and pay a dividend. The decisions split like this.
- Second office lease. A directors’ resolution authorises a named director to sign the tenancy. No member approval is needed unless the constitution requires it.
- Bank account for the office. A directors’ resolution, see board resolution for opening a bank account.
- Issuing new shares. Members first pass a resolution approving the directors’ power to allot (section 75(1)). The approval is lodged with SSM within 14 days (section 76(2)). The directors then resolve to allot. See increasing paid-up capital.
- Dividend. The directors authorise it after being satisfied the company will be solvent immediately afterwards (section 132). Shareholders do not vote on the amount unless the constitution says so.
- New constitution. If the investor negotiates a new constitution, the members pass a special resolution under section 32 with at least 21 days’ notice, or as a written resolution marked as special.
Some steps are Board-only, some member-first, and one needs both. Mapping them in advance avoids resolutions signed by the wrong body.
What this means for different structures
- Sole director who is also the sole shareholder. The same person signs both types of resolution, but they are still different documents with different authority. A sole member’s decisions that could be taken at a meeting must be recorded under section 344 unless done by written resolution.
- Company with outside investors or a shareholders’ agreement. Agreements often add reserved matters needing investor consent. Treat these as an additional layer, and check that your constitution does not conflict.
- Foreign-owned Sdn Bhd. The foreign parent decides as shareholder, while a Malaysian-resident director (at least one is required under section 196) signs Board decisions. Banks often want both documents. Keep the two roles separate in the paperwork.
- Sole proprietor or partnership. None of this applies. Those businesses have no board or members; the owner decides. Resolutions only arise on incorporation.
Common mistakes
- Using a shareholders’ resolution for a Board matter, or vice versa. A bank or counterparty may reject the wrong document.
- Forgetting the share allotment approval. Section 75 requires prior approval by resolution before directors allot shares.
- Passing a written resolution for a director’s removal. Section 297(2) prohibits it.
- Calling something special without the right wording. A special resolution needs the 75% majority and the notice requirements; in written form it must say it is special.
- Not keeping the record. Section 341 requires resolutions of members passed otherwise than at a meeting and minutes of meetings of members to be kept for at least seven years. Section 47 requires minutes of Board and members’ meetings to be kept at the registered office.
- Ignoring interested directors. A director interested in a contract must declare the interest at a board meeting (section 221). See directors’ conflict of interest and disclosure.
How Axecta helps
Axecta’s company secretaries draft both types of resolution, check the constitution before each one, and file with SSM where a filing is needed, such as the allotment approval or a change of name. We also maintain the minute book. See our company secretarial service.
Next steps
- Get a copy of your constitution and highlight every “subject to the constitution” provision that applies to you.
- List the decisions you expect in the next 12 months and tag each as Board or members.
- Decide whether you will use meetings or written resolutions for member decisions.
- Create a template pack: board resolution, ordinary written resolution, special written resolution.
- Review the Sdn Bhd compliance checklist with your secretary.
Frequently asked questions
What is the difference between a directors’ resolution and a shareholders’ resolution?
A directors’ resolution records a Board decision on managing the business, passed at a Board meeting or in writing by all directors. A shareholders’ resolution records a decision of the members on matters the Act or constitution reserve for them, passed at a meeting or, for private companies, in writing.
Which is more powerful?
Neither is stronger in general; each decides different matters. The Board has the management power under section 211, while members hold reserved powers such as adopting a constitution or removing directors. Members’ recommendations on management bind the Board only in the limited cases in section 195.
Do directors need shareholder approval to issue shares?
Yes. Section 75(1) says directors shall not exercise any power to allot shares, grant subscription rights or convert securities into shares unless the company has first given approval by resolution. The approval must be lodged with the Registrar within 14 days under section 76(2).
Who approves a dividend?
The directors. Section 132 requires a distribution to be authorised by the directors, who must be satisfied that the company will be solvent immediately after the distribution. Your constitution may add procedural requirements, so check it before proposing a dividend to shareholders.
What is an ordinary resolution compared with a special resolution?
An ordinary resolution needs a simple majority of more than half of the members entitled to vote and voting (section 291). A special resolution needs at least 75% and notice of at least 21 days (section 292). Written special resolutions must state that they are special.
Can directors sign a resolution without holding a meeting?
Yes, unless the constitution says otherwise. The Third Schedule allows a written resolution signed or assented to by all directors then entitled to receive notice of a Board meeting, and it is as valid as one passed at a duly convened meeting. It can be signed in several counterparts.
Do I need both resolutions to open a bank account?
Usually a directors’ resolution is enough, naming the account, signatories and authority. Banks may also ask for a members’ resolution or constitution extract, depending on their own policy, which is provider-specific. Our bank account resolution guide lists the typical contents.
Can shareholders sign a resolution instead of a director?
Only for matters that belong to the members. If the decision is a Board matter, a shareholders’ resolution does not replace it, although the same person may hold both roles and sign both documents. The records should show which capacity each signature was given in.
How long must resolutions be kept?
At least seven years from the date of the resolution, meeting or decision. Section 341 covers members’ resolutions passed otherwise than at a meeting and meeting minutes, and section 343 treats a signed record as sufficient evidence of the resolution being passed. Board minutes must be kept as well.
Who drafts the resolutions for a Sdn Bhd?
The company secretary normally drafts and files them after checking the constitution. Axecta prepares both types of resolution, keeps the minute book up to date and lodges any SSM filing that follows, all as part of its company secretarial service.
Unsure who must approve a decision in your company?
Axecta Management Services is a full-suite accounting, company secretarial and consulting firm in Kuala Lumpur, serving companies from SMEs to MNCs.
Ask Axecta to map your approvals
Keep reading
- Written Resolutions for a Sdn Bhd Under the Companies Act 2016
- How to Hold a Board Meeting for a Sdn Bhd in Malaysia
- Does a Sdn Bhd Need to Hold an AGM? What the Companies Act 2016 Says
- How to Increase Paid-Up Capital of a Sdn Bhd: Steps, Approvals and SSM Filing
- No-Par Value Shares Under the Companies Act 2016: What Section 74 Means for Your Sdn Bhd
- How to Appoint and Remove a Director of a Sdn Bhd in Malaysia
- Directors’ Conflict of Interest and Disclosure in Malaysia: Sections 221 to 230 Explained
- AGM vs EGM in Malaysia: Differences, Notice and Who Can Call Them
- Shareholder Meetings: the full guide
Official sources to check
- Companies Act 2016 (sections 32, 75, 132, 206, 211, 212, 223, 230, 291, 292, 297)
- SSM Company Directors’ Responsibilities booklet
This article is general information and not legal, tax or accounting advice for your company. Rates, thresholds, deadlines and procedures change, so confirm current requirements with the sources above or with Axecta.