Concept Of Next Of KinOctober 2016
by , Vivian Wong
With the reduction in the minimum number of director for private companiesi] to one, the Companies Act 2016 (“2016 Act”) has introduced the concept of ‘next of kin’ii to cater for situations where the sole director passes on or becomes incapacitated to perform his duties.
Pursuant to the 2016 Act, where the sole director becomes disqualified, becomes of unsound mind, dies or vacates his office according to the company’s constitution, the secretary shall, as soon as practicable, call a meeting of the next of kin, other personal representatives or a meeting of members for purposes of appointing a new director. In the event a new director is not appointed within 6 months, the Registrar may direct the company to be struck off from the register of companies.iii
What amounts to ‘next of kin’
The 2016 Act, however, does not define the term ‘next of kin’. Notwithstanding the lack of definition, reference may be made to the meaning of “a member of the director's family” which is defined under the 2016 Act iv to mean the director’s spouse, parent, child(ren), including adopted child and stepchild, brother, sister and the spouse of the director’s child, brother or sister. The expression ‘next of kin’ denotes relative or kin, and usually includes persons who would be entitled to succeed on intestacy.v
If a sole director who is also the sole member of a company is unable to manage the affairs of the company by reason of his mental incapacity, the committee appointed under the Mental Health Act 2001 to manage his estate may appoint a person as a director.vi
Considerations for sole directors of a private company who is also the sole member of the company
- Drawing up a Will
It is advisable for the director to draw up a last will and testament, expressing chosen name(s) of director(s) to be appointed to take over in the event of death or incapacity, so as to ensure continuity in the business and operations of the company.
- List of Successor(s)
Alternatively, the sole director may deposit with the company secretary a list of successor(s) to be appointed as director(s) of the company.
With such arrangements in place, any unnecessary disruption to the continuity in the business of the company and risk of being struck off from the register of companies can be eliminated.
i Section 9(d) and 196(1)(a) of the Companies Act 2016 permit a minimum of one (1) director for private companies
ii Section 209(3) of the Companies Act 2016
iii Section 209(5) of the Companies Act 2016
iv Section 197(2)(a) of the Companies Act 2016
v Re Application By Tengku Ahmad Tajudin bin Tengku Ibrahim  2 MLJ 231, at 234
vi Section 209(6) of the Companies Act 2016