Can You Be Sued Personally as a Director of a Sdn Bhd? Yes — and Here's How

“I own a Sdn Bhd — you can’t touch me.”

That’s what many directors believe. Until they receive a court summons. Or a tax notice. Or worse — a criminal charge.

It’s true that Sdn Bhd (Sendirian Berhad) and Bhd (Berhad) companies in Malaysia are limited liability entities. But limited liability does not mean unlimited protection.

Under Malaysian law, directors of Sdn Bhd and Bhd companies can still be held personally liable in a number of situations — especially when there’s misconduct, negligence, or breach of duty involved.

If you're a company director, or doing business with one, you need to understand the boundaries.

🔍 What is “Limited Liability” in a Sdn Bhd?

Limited liability means that the company is treated as a separate legal entity, and in most cases, shareholders and directors are not personally liable for the company’s debts.

However, there are important exceptions under the Companies Act 2016, Penal Code, and common law principles. In these cases, the corporate veil can be pierced, and directors can be made to pay — personally.

⚠️ 7 Situations Where Malaysian Directors Can Be Personally Liable

1. Unpaid Statutory Contributions

If a company fails to remit:

• EPF (Employees Provident Fund)

• SOCSO (Social Security Organisation)

• EIS (Employment Insurance System)

• LHDN (Income Tax)

• SST (Sales and Service Tax)

  
  

...the directors may be held personally liable, especially if they were in charge of company finances or authorised the non-payment.

2. Disobeying Court Orders

When a director ignores a Judgment Debtor Summons (JDS) or fails to comply with other court orders related to company debts or director-specific rulings, they may be found in contempt of court — a serious offence that can result in fines or imprisonment.

Example: Failing to attend court when ordered or refusing to disclose company financials.

3. Fraudulent or Wrongful Trading

Under Section 540 of the Companies Act 2016, directors can be personally liable if they:

• Continue business when the company is clearly insolvent

• Incur debts knowing the company cannot repay

• Transfer assets to another company (“phoenixing”) to avoid creditors
  

This is known as fraudulent trading, and courts may order the director to personally compensate creditors.

4. Criminal Offences

Certain criminal acts by directors will expose them to personal criminal liability, including:

• Criminal breach of trust (CBT)

• Submitting false declarations to authorities

• Issuing cheques that bounce due to insufficient funds

• Accepting or giving bribes
  

These are not corporate offences — they are personal crimes, and the law holds the individual responsible.

5. Personal Guarantees

Did you sign a personal guarantee (PG) when securing a loan, tenancy, or trade credit for your company?

Then you’re personally liable — regardless of the company’s limited liability structure. If the company defaults, creditors can sue you directly.

6. Negligence

If a director’s careless actions cause loss, injury, or damage — either to the company or to third parties — courts may impose personal liability for negligence.

Under Section 213 of the Companies Act, directors must exercise reasonable care, skill, and diligence in managing company affairs.

Negligence is especially relevant in sectors like construction, F&B, or finance, where public safety and compliance are involved.

7. Breach of Fiduciary Duty

Directors are fiduciaries — meaning they must act:

• In good faith

• In the best interests of the company

• Without conflicts of interest

• Without making secret profits

  
  

Breaching these duties can lead to civil lawsuits for compensation or restitution.

Examples:

• Approving unfair deals that benefit themselves

• Withholding information from shareholders

• Diverting business opportunities for personal gain
  

💡 Summary: Limited Liability Has Limits

Being a director gives you power — but also personal legal exposure.

Yes, your company may be a Sdn Bhd.But if you cross the line — through dishonesty, fraud, negligence, or misuse of authority — the court can pierce the corporate veil and come after you directly.

📞 Need Legal Advice on Director Liability?

Whether you're:

• A director being pursued for company debts

• A creditor trying to go after a dishonest director

• Or a business partner concerned about your legal exposure
  

Our legal team can help assess your situation and advise you on your rights, risks, and recovery options. Reach us via email (rudi.cheu.law@gmail.com) or Whatsapp (+60102028095) Keywords:

• “Director fiduciary duty Malaysia”

• “Secret profit director law”

• “Breach of duty Sdn Bhd”

• “What is a personal guarantee Malaysia”

• “Director signed personal guarantee”

• “Can I be sued for company debt Malaysia”

• “CBT Malaysia director”

• “Bounced cheque offence Malaysia”

• “Director fraud criminal charge Malaysia”

• “Company not paying EPF SOCSO”

• “Director liable for company tax debt Malaysia”

• “EPF non-payment penalty Malaysia”

• "What is fraudulent trading Malaysia”

• “Phoenix company legal in Malaysia”

• “Can directors be sued after company is closed”

  
  

  AUTHOR PROFILE

  
  

  

  
  

  Rudi Cheu is the principal of Rule & Co. Advocates & Solicitors; a Malaysian law firm focusing on practical and cost-effective solutions for debt recovery and commercial disputes. With nearly a decade of debt recovery experience under his belt; Rudi is passionate about helping businesses navigate debt recovery challenges and shares insights at www.rulecolaw.com/blog and recoverdebt.my

  
  

  He can be reached via Whatsapp: +60102028095 or via email: rudi@rulecolaw.com