What to Do When a Director or Shareholder of a Sdn Bhd Passes Away?
What to Do When a Director or Shareholder of a Sdn Bhd Passes Away?
What to Do When a Director or Shareholder of a Sdn Bhd Passes Away?
When a director or shareholder of a private limited company (Sdn. Bhd.) in Malaysia passes away, the company must take formal legal and administrative steps to ensure compliance with the Companies Act, 2016, and to maintain proper governance.
This situation affects two separate roles:
a) The deceased’s position as a director
b) The deceased’s ownership of shares
1. Immediate Effect of Death
Once a director or shareholder passes away:
The individual is immediately removed from the position of director.
Any authority to act on behalf of the company ceases automatically.
If they are also a shareholder, their shares become part of their estate.
There is no automatic transfer of rights to family members.
2a. If the Deceased Was a Director
The directorship automatically ceases upon death.
If there are remaining directors, they may continue managing the company.
If required, appoint a new director in accordance with the Companies Act 2016 or the company's Constitution (if any).
The Company Secretary must update the statutory records and submit the necessary filings to SSM.
2b. If the Sole Director Passes Away
The directorship automatically ceases upon death.
Company operations and banking arrangements may be affected until a new director is appointed.
The company secretary must, as soon as practicable, convene a meeting of the deceased's next of kin, personal representatives, or members (as applicable) to appoint a new director in accordance with the Companies Act, 2016.
The company secretary should update the company's statutory records and submit the necessary filings to SSM.
3. If the Deceased Was a Shareholder
When a shareholder of a Sdn Bhd passes away, their shares do not automatically transfer to family members. Instead, the shares become part of the deceased’s estate and must go through a legal process before any transfer can take place.
(a) Shares Form Part of the Estate
Upon death:
The shares are effectively “frozen” in the deceased’s name.
No transfer, sale, or voting rights can be exercised until the estate is properly administered.
The shares will form part of the estate administration process under inheritance law.
(b) Legal Personal Representative
Only the legally appointed representative can deal with the shares:
Executor (if there is a will)
Administrator (if there is no will)
To act on behalf of the deceased, the Legal Personal Representative must obtain:
Grant of Probate (with will), or
Letters of Administration (without will)
Without these legal documents, the company cannot recognise any instruction relating to the shares.
(c) Transmission of shares
Once the Legal Personal Representative has been legally appointed and supporting documents are available:
The Company Secretary will process a transmission of shares.
The Register of Members will be updated accordingly and reflected in SSM records.
The shares will then be transmitted from the deceased to the beneficiary(ies) or dealt with according to the estate distribution.
It is important to note that this is not a normal share transfer or sale, but a legal process known as “transmission of shares” due to death.
4. Key Considerations
Shares cannot be dealt with until probate or letters of administration are obtained.
Any dividends declared may be held until the estate is settled.
If the deceased held a controlling interest, business decisions may be temporarily affected.
The process may take time depending on the estate's complexity.
When a director or shareholder passes away in a Sdn Bhd, the company must carefully follow legal procedures to ensure proper governance and compliance. The key steps involve appointing a new director (if needed) and processing the transmission of shares through the deceased’s estate.
𝐕𝐢𝐬𝐢𝐭𝐮𝐬
Wisma 𝐓𝐇𝐊, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru
Wisma 𝐊𝐓𝐏, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru
𝐓𝐇𝐊 (𝐒𝐞𝐜𝐫𝐞𝐭𝐚𝐫𝐢𝐚𝐥, 𝐀𝐜𝐜𝐨𝐮𝐧𝐭/𝐏𝐚𝐲𝐫𝐨𝐥𝐥, 𝐀𝐝𝐯𝐢𝐬𝐨𝐫𝐲)
A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsource booking, accounting and payroll services to clients
Website www.thks.com.my
Facebook https://bit.ly/42XKWsk
Instagram https://bit.ly/42Uqf0e
Linkedin https://bit.ly/3EH885M
Malaysia