SIDC Module 6 Business structures and the participating organisation question: Lima Bhd

SIDC Module 6Business structures and the participating organisation

Lima Bhd, a public company, has exactly two directors, both ordinarily resident in Malaysia. One director hands in his resignation and no replacement has been appointed. What is the effect?

A It takes effect, but a replacement must be appointed within 6 months
B It takes effect after 30 days' notice is lodged with the Registrar
C It is ineffective until a replacement director is appointed
D It takes effect at once, as one director is enough for a company of this kind

Show the answer and explanation

Answer: C. It is ineffective until a replacement director is appointed

Section 196(1) of the Companies Act 2016 requires a public company to have at least two directors (a private company needs one). Section 196(3) provides that a director may not resign or vacate office if this would reduce the number of directors below the minimum, and any purported resignation in breach is deemed ineffective unless a person is appointed in his place. One director is the minimum only for a private company. The Act sets no 30-day notice route or 6-month grace period for this situation. Source: Companies Act 2016 (Act 777) s.196(1), (3) (as at October 2026).

Common mistake

Applying the one-director minimum for private companies to a public company.

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