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Q：
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What is indemnity for company officers in Malaysia?
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A：
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The term “indemnity” refers to security or protection from financial liability. It typically takes the form of a contractual agreement between parties, where one party commits to covering the losses or damages incurred by the other party.
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Q：
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Who is defined as an officer?
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A：
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According to Section 289(9) of the Companies Act 2016, the definition of “officer” includes any director, manager, secretary, employee, former officer, receiver and manager, as well as liquidator appointed for the voluntary dissolution of a company.
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Q：
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Why is indemnification and insurance essential for officers?
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A：
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While performing their duties, officers may be exposed to personal liability claims for their actions. Indemnity and insurance provide protection against personal financial losses resulting from claims or lawsuits related to their decisions while serving the company. They also cover legal costs and expenses incurred in defending against such claims, alleviating the financial burden of legal proceedings. This ensures corporate stability and good governance, allowing officers to focus on strategic growth without fearing personal repercussions. However, companies cannot indemnify officers against liability for negligence, default, or breach of duty, nor for costs associated with defending legal actions brought against them for these reasons.
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Q：
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Is the indemnity provision in Constitution sufficient to safeguard officers?
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A：
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No. Constitution is a legal instrument binding solely between the company and its members, not between the company and its officers. The indemnity provision in the Constitution itself does not provide an indemnity to the directors. It is important to outline the indemnity provision in a distinct contract or agreement between the company and the directors.
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Q：
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How can a company provide indemnity and insurance to its officers?
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A：
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Prior approval from the Board of Directors is required to effect the insurance for the company’s officers. The directors shall ensure that the particulars of the indemnity and insurance are recorded in the minutes of the Board of Directors and disclosed in the directors’ report.
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FAQ
