Director Service Agreement (Malaysia)
DIRECTOR SERVICE AGREEMENT
Companies Act 2016 (Act 777) | Employment Act 1955 (Act 265) | Contracts Act 1950 (Act 136)
THIS DIRECTOR SERVICE AGREEMENT is made on [Agreement Date]
BETWEEN:
(1) [Company Name] (SSM No. [Company SSM]) having its registered address at [Company Address] (hereinafter referred to as the "Company"); AND
(2) [Director Name] (NRIC/Passport: [Director IC]) of [Director Address] (hereinafter referred to as the "Director").
1. APPOINTMENT
1.1 The Company hereby appoints the Director as [Director Title] of the Company with effect from [Commencement Date], on the terms and conditions set out in this Agreement.
1.2 The Director's appointment is on a [Contract Term] basis. Where the appointment is for a fixed term, the Agreement shall expire on [Contract End Date] unless earlier terminated or renewed in writing.
1.3 The Director shall report to the [Reporting To] of the Company.
2. DUTIES AND FIDUCIARY OBLIGATIONS
2.1 The Director shall perform all duties and responsibilities appropriate to the office of [Director Title], as directed by the Board of Directors from time to time.
2.2 The Director shall at all times act in good faith in the best interests of the Company, exercise reasonable care, skill, and diligence, and avoid situations in which the Director has or may have a conflict of interest, in accordance with Sections 213–222 of the Companies Act 2016 (Act 777).
2.3 The Director shall promptly disclose any direct or indirect interest in any contract or transaction entered into by the Company in accordance with Section 221 of the Companies Act 2016 and shall abstain from voting on any resolution relating to such contract or transaction.
2.4 The Director shall comply with all applicable laws including the Capital Markets and Services Act 2007 (Act 671) prohibition on insider trading and dealing in Company securities during closed periods under Bursa Malaysia's Guidelines on Dealings in Listed Issuers' Securities (where applicable).
3. REMUNERATION AND BENEFITS
3.1 Monthly Salary: The Company shall pay the Director a monthly salary of [Monthly Salary], subject to Monthly Tax Deduction (PCB) under the Income Tax Act 1967 (Act 53) and EPF contributions under the Employees Provident Fund Act 1991 (Act 452) where applicable.
3.2 Director's Fee: The Director shall be entitled to an annual director's fee of [Director Fee], subject to shareholder approval at a general meeting of the Company under Section 230 of the Companies Act 2016 (for public companies).
3.3 Bonus: [Bonus Entitlement].
3.4 Other Benefits: [Other Benefits].
4. CONFIDENTIALITY AND INTELLECTUAL PROPERTY
4.1 The Director shall maintain the confidentiality of all proprietary and confidential information of the Company during and after the term of this Agreement, including trade secrets, client information, and financial data.
4.2 The Director shall comply with the Personal Data Protection Act 2010 (Act 709) in handling personal data of employees, customers, and business partners.
4.3 All intellectual property created by the Director in the course of service shall be the property of the Company, and the Director hereby assigns all such rights to the Company.
5. TERMINATION
5.1 Either party may terminate this Agreement by giving [Notice Period] written notice to the other party.
5.2 The Company may terminate this Agreement immediately without notice for cause, including breach of fiduciary duty under Section 213 of the Companies Act 2016, conviction of a criminal offence involving dishonesty, gross misconduct, or insolvency of the Director.
5.3 Removal of the Director by shareholders pursuant to Section 206 of the Companies Act 2016 shall not prejudice the Director's contractual rights to damages for breach of this Agreement.
5.4 Post-Termination Restrictions: For a period of [Non-Compete Period] following termination, the Director shall not solicit clients or employees of the Company with whom the Director had material contact during the last 12 months of service. The parties acknowledge that post-employment non-compete restraints are subject to Section 28 of the Contracts Act 1950 (Act 136).
6. GENERAL
6.1 This Agreement is governed by and construed in accordance with the [Governing Law].
6.2 Any dispute arising from this Agreement shall be submitted to the exclusive jurisdiction of the courts of Malaysia.
6.3 This Agreement constitutes the entire agreement between the parties on the subject matter and supersedes all prior negotiations and representations.
IN WITNESS WHEREOF the parties have executed this Agreement on the date first written above.
SIGNED for and on behalf of [Company Name]
Authorised Signatory: _______________________________
Name: _______________________________
Designation: _______________________________
Date: _______________________________
SIGNED by [Director Name]
Signature: _______________________________
Date: _______________________________
Witness: _______________________________
Name: _______________________________
Date: _______________________________
Authorised Signatory (Company)
________________
Signature
Director
________________
Signature
What Is a Director Service Agreement (Malaysia)?
A Director Service Agreement in Malaysia records the terms the parties accept and the commitments each makes to the other.
Under Section 213 of the Companies Act 2016, every director of a Malaysian company owes a duty to act in good faith in the best interests of the company, to exercise reasonable care, skill, and diligence, and to avoid conflicts of interest. A Director Service Agreement codifies these statutory duties and supplements them with contractual obligations including exclusivity of service, disclosure of related-party interests under Section 221 of the Companies Act 2016, and compliance with Bursa Malaysia Listing Requirements for publicly listed companies.
The Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia, SSM) requires all companies incorporated under the Companies Act 2016 to maintain a register of directors under Section 236, and the Director Service Agreement must be consistent with the particulars filed with SSM on Form 49 (Borang 49) — now superseded by electronic SSM MyCoID filings. For companies listed on the Main Market or ACE Market of Bursa Malaysia Securities Berhad, additional disclosure obligations under Paragraph 15.02 of the Main Market Listing Requirements apply to directors' remuneration and service contracts.
The Employment Act 1955 applies to executive directors only where their remuneration does not exceed RM4,000 per month and they are engaged in manual labour or certain categories of work specified in the First Schedule to the Act. Most executive directors of larger Malaysian companies fall outside the Employment Act 1955 and are governed solely by the Director Service Agreement and the common law of contract. For such directors, the Industrial Court of Malaysia under the Industrial Relations Act 1967 (Act 177) may still have jurisdiction over dismissal claims if the director concurrently holds a managerial or executive employee status.
The legal framework governing the Director Service Agreement (Malaysia) in Malaysia draws on several key statutes and regulatory bodies. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Parties executing a Director Service Agreement (Malaysia) in Malaysia should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Companies Act 2016 (Act 777) sets the foundational requirements.
When Do You Need a Director Service Agreement (Malaysia)?
A Director Service Agreement is required in Malaysia whenever a company formally appoints an individual as an executive director and wishes to document the terms of that appointment in a legally binding contract.
A Director Service Agreement is needed when a private limited company (Sdn Bhd) incorporated under the Companies Act 2016 appoints a founding director or brings in a new executive director from outside the founding shareholders, to establish clear terms for remuneration, notice periods, and post-termination restrictions.
A Director Service Agreement is required when a public listed company on Bursa Malaysia appoints a new Managing Director or Chief Executive Officer, as Paragraph 15.07 of the Bursa Malaysia Main Market Listing Requirements requires that the terms of service contracts for executive directors be disclosed in the company's annual report and approved by shareholders at a general meeting where the contract exceeds three years.
A Director Service Agreement is needed when a foreign-invested company operating through a Malaysian subsidiary registered with SSM appoints a local director to satisfy the Companies Act 2016 requirement under Section 196 that every company must have at least one director ordinarily resident in Malaysia.
A Director Service Agreement is required when a Malaysian company enters a joint venture arrangement and each joint venture partner nominates a director to the board of the joint venture vehicle, to confirm the nominated director's duties to the joint venture company are clearly distinguished from their duties to the nominating shareholder.
A Director Service Agreement is needed when a company subject to Bank Negara Malaysia (BNM) oversight under the Financial Services Act 2013 (Act 758) or the Islamic Financial Services Act 2013 (Act 759) appoints a director, as BNM's Guidelines on Corporate Governance (BNM/RH/GL 001-3) require that fit and proper assessments and service terms be documented before the appointment is notified to BNM.
What to Include in Your Director Service Agreement (Malaysia)
A valid Malaysia Director Service Agreement must address the following essential elements to be enforceable and compliant with the Companies Act 2016.
Parties and Commencement: Full legal name of the company (with SSM registration number), the director's full name and NRIC/passport number, the date of commencement of service, and whether the appointment is for a fixed term or until removal under Section 206 of the Companies Act 2016.
Role and Duties: The director's title (e.g. Managing Director, Executive Director), the principal duties and responsibilities, the requirement to comply with the Companies Act 2016 Part IV fiduciary duties, the company's Memorandum and Articles of Association (or Constitution under the Companies Act 2016), and any board charter or governance policy.
Remuneration: Director's fee (subject to shareholder approval under Section 230 of the Companies Act 2016 for public companies), monthly salary, performance bonus, motor car allowance, and other benefits. All remuneration must be expressed in Malaysian Ringgit (RM) and is subject to Monthly Tax Deduction (PCB) under the Income Tax Act 1967 and EPF contributions under the Employees Provident Fund Act 1991 (Act 452) where applicable.
Conflict of Interest and Disclosure: Obligation to disclose interests in contracts and transactions under Section 221 of the Companies Act 2016, prohibition on dealing in company securities during closed periods under Bursa Malaysia's Guidelines on Dealings in Listed Issuers' Securities, and compliance with insider trading prohibitions under the Capital Markets and Services Act 2007 (Act 671).
Confidentiality and Intellectual Property: Obligation to maintain confidentiality of company information during and after service, assignment of intellectual property created in the course of directorship to the company, and compliance with the Personal Data Protection Act 2010 (Act 709) when handling personal data of employees and customers.
Post-Termination Restrictions: Non-competition and non-solicitation clauses. Malaysian courts apply the Contracts Act 1950 (Act 136), Section 28, which renders agreements in restraint of trade void unless the restraint is reasonable as to scope, duration, and geographical area. The Federal Court of Malaysia in Wrigley Jr Co v Alois Josef Wachter [1979] 1 MLJ 128 confirmed that courts will not enforce overbroad restraints. Best practice is to limit non-compete clauses to 12 months and a defined territory.
Termination: Notice periods (commonly three to six months for executive directors), grounds for summary termination without notice (including breach of fiduciary duty, conviction of a criminal offence, or insolvency), and the interaction with Section 206 of the Companies Act 2016 which allows shareholders to remove a director by ordinary resolution at any time.
Additional compliance elements for a Director Service Agreement (Malaysia) used in Malaysia include: Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Forms-legal.com provides this template as a starting point for Malaysia-compliant documentation.
Cite this page
Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Director Service Agreement (Malaysia) (Malaysia) [Legal document template]. Forms Legal. https://forms-legal.com/malaysia/employment/contracts/director-service-agreement-malaysia
"Director Service Agreement (Malaysia) (Malaysia)." Forms Legal, 2026, https://forms-legal.com/malaysia/employment/contracts/director-service-agreement-malaysia.
@misc{formslegal-director-service-agreement-malaysia,
author = {{Forms Legal}},
title = {Director Service Agreement (Malaysia) (Malaysia)},
year = {2026},
howpublished = {\url{https://forms-legal.com/malaysia/employment/contracts/director-service-agreement-malaysia}},
note = {Free legal document template. Based on Companies Act 2016 (Act 777)}
}Also available for these jurisdictions:
Frequently Asked Questions
A Director Service Agreement is not mandatorily required by the Companies Act 2016 (Act 777) or any other Malaysian statute for private companies. However, for public companies listed on Bursa Malaysia, Paragraph 15.07 of the Main Market Listing Requirements requires disclosure of the material terms of service contracts for executive directors in the annual report. In practice, a Director Service Agreement is strongly recommended for all companies because, without one, the director's remuneration, duties, notice period, and post-termination obligations are governed only by the statutory defaults under the Companies Act 2016 and the common law, which may not reflect the parties' actual intentions. The Companies Commission of Malaysia (SSM) requires directors to be formally appointed by board resolution and registered on the company's register of directors under Section 236 of the Companies Act 2016, but does not require a service agreement to be filed with SSM.
Yes. Under Malaysian law, a director can simultaneously hold employee status. Whether the Employment Act 1955 (Act 265) applies to a director-employee depends on whether the director's remuneration is RM4,000 per month or less and whether the director is engaged in work falling within the First Schedule to the Act. Most executive directors of larger companies earn above RM4,000 and are therefore not covered by the Employment Act 1955, meaning they cannot claim statutory termination benefits under the Employment (Termination and Lay-Off Benefits) Regulations 1980 as of right. The Industrial Court of Malaysia under the Industrial Relations Act 1967 (Act 177) has jurisdiction over unfair dismissal claims by director-employees who hold a 'workman' status — defined in Section 2 of the Industrial Relations Act 1967 — regardless of their directorship, as the Court of Appeal confirmed in Syed Ahmad Alhabshi v Etiqa Insurance Bhd [2018] MLJU 1078.
Non-compete clauses in Malaysian Director Service Agreements are governed by Section 28 of the Contracts Act 1950 (Act 136), which provides that every agreement by which any person is restrained from exercising a lawful profession, trade, or business of any kind is void to that extent. Malaysian courts do not adopt the English 'reasonableness' test in the same way as common law jurisdictions. The Federal Court in Wrigley Jr Co v Alois Josef Wachter [1979] 1 MLJ 128 and the Court of Appeal in Mesuma Sports Sdn Bhd v Mahkamah Perusahaan Malaysia [2015] MLJU 456 have applied Section 28 strictly. A limited exception applies where the restriction is ancillary to the sale of a business goodwill under the proviso to Section 28. Post-employment non-compete clauses in pure employment or service agreements are generally unenforceable in Malaysia, though courts may enforce narrowly drawn non-solicitation of customers clauses that protect legitimate business interests without being a restraint of trade.
Under Section 206 of the Companies Act 2016 (Act 777), a director of a Malaysian company may be removed before the expiration of the director's period of office by an ordinary resolution of the shareholders passed at a general meeting, notwithstanding anything in the company's Constitution or any agreement between the director and the company. The company must give special notice of 28 days to the director before the general meeting, and the director has the right to make representations to the shareholders. Removal under Section 206 does not affect any contractual right to damages the director may have against the company for breach of the Director Service Agreement — confirmed in Tan Ah Bah v Ho Swee Nee [1978] 1 MLJ 236. The company must file a change of director notice with SSM within 14 days of the removal under Section 58 of the Companies Act 2016, using the SSM MyCoID portal.
Under Section 196(4) of the Companies Act 2016 (Act 777), every company incorporated in Malaysia must have at least one director who is ordinarily resident in Malaysia — meaning a Malaysian citizen, permanent resident, or holder of a valid Employment Pass under the Immigration Act 1959/63 (Act 155) with a residential address in Malaysia. There is no citizenship requirement for additional directors. Foreign nationals serving as directors of Malaysian companies must hold valid immigration passes and must disclose their nationality and passport details in the company's register of directors filed with SSM. For companies in regulated sectors — such as banking institutions under the Financial Services Act 2013 — Bank Negara Malaysia's fit and proper criteria must be satisfied before a foreign director is appointed, and BNM's prior written approval may be required under Section 54 of the Financial Services Act 2013.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
Found an error? Let us knowRelated Documents
You may also find these documents useful:
Board Resolution — Employment Matters (Malaysia)
A Board of Directors Resolution for Malaysia governing employment matters such as appointment of directors, approval of executive remuneration, authorisation of employment contracts, and HR policy changes under the Companies Act 2016 (Act 777). Includes minutes format and SSM compliance requirements.
Mutual Separation Agreement (Malaysia)
A Mutual Separation Agreement (MSA) for Malaysia that records the agreed terms of consensual termination of employment between employer and employee. Covers settlement payment, tax exemption under the Income Tax Act 1967, full release of claims, and EIS benefit notification under the Employment Insurance System Act 2017.
Bonus Scheme Letter (Malaysia)
A formal Bonus Scheme Letter for Malaysia that sets out the terms and conditions of a discretionary or contractual bonus arrangement between employer and employee under the Employment Act 1955. Specifies bonus type, eligibility criteria, calculation method, performance targets, and payment schedule.