Quick answer: Section 224 of the Companies Act 2016 says a company may not lend to a director or a related company, or guarantee or secure a loan made to such a director by a third party. Exceptions cover exempt private companies, loans for expenses incurred for company purposes, and home-purchase loans to a director who is a full-time employee. Members must approve the purpose and amount, and a director who authorises a non-compliant loan may face up to 5 years' imprisonment, a fine of up to RM3 million, or both.
- General rule: no loans to directors or related companies.
- Exceptions: exempt private companies, company-purpose expenses, home loans to full-time employee directors.
- Members must approve the purpose and amount.
- Repay within 12 months if a private company's loan is not approved.
- Penalty: up to 5 years' jail and RM3 million fine.
The Rule and Its Exceptions
| Item | Position |
|---|---|
| General rule | A company may not lend to a director or related company, or guarantee or secure a third-party loan to the director |
| Exempt private company | Exception |
| Expenses for company purposes (s224(2)(b)) | Exception for expenses incurred for company purposes or in performing duties |
| Home purchase (s224(2)(c)) | Exception for a director who is also a full-time employee |
Approval and Repayment
| Item | Rule |
|---|---|
| Member approval (s224(3)) | Purpose and amount must be disclosed and members must approve |
| Repayment if not approved, private company (s224(5)) | Within 12 months of the loan or security being given |
| Repayment if not approved, public company (s224(5)) | Within 6 months after the AGM concludes |
| Indemnity (s224(6)) | Directors who authorised a duty-related or home loan not approved by members are jointly and severally liable for any loss |
Penalty
Under section 224(10), a director who authorises a non-compliant loan may face up to 5 years' imprisonment, a fine of up to RM3 million, or both.
What Is Not Covered Here
This page covers the Companies Act position as summarised in SSM's booklet. It does not cover the tax treatment of director's loans or advances, or money a director lends to the company, because the sources reviewed do not address them. Take advice on your own facts before you record or repay a director balance.
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Mistakes
Treating the director's account as informal
Section 224 applies to loans to directors.
Skipping member approval
Disclosure and approval are required.
Missing the repayment window
Private companies repay within 12 months if not approved.
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Frequently Asked Questions
Quick answers.
Can a Sdn Bhd lend money to its director?
Generally no. Section 224 prohibits loans to directors, subject to exceptions.
Does it cover related companies?
Yes, loans to a related company are also covered.
Does it cover guarantees?
Yes. A company may not guarantee or secure a loan made to the director by a third party.
What are the exceptions?
Exempt private companies, loans for company-purpose expenses, and home-purchase loans to a full-time employee director.
Do members need to approve?
Yes. The purpose and amount must be disclosed and members must approve.
What if members do not approve?
A private company's loan must be repaid within 12 months.
What is the repayment period for a public company?
Within 6 months after the AGM concludes.
What is the penalty?
Up to 5 years' imprisonment, a fine of up to RM3 million, or both.
Who is liable for the loss?
Directors who authorised an unapproved duty-related or home loan are jointly and severally liable to indemnify the company.
Is a director's advance to the company covered?
The sources reviewed do not address money a director lends to the company.
What is the tax treatment?
The sources reviewed do not address it. Take advice on your facts.
Can you review our director's account?
Yes. We review the balance and the records.
Sources
Official sources
This page is general information, not legal advice. Agencies change their requirements, so confirm the current rules with LHDN, the Royal Malaysian Customs Department and SSM, or with us, before you act. Checked November 2026.
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