MALAYSIA Law and Practice Contributed by: Dato’ Tan Yee Boon, Stephanie Chan Pik Jia and Joaana Keng Li Xin, David Lai & Tan
Duty to Implement Adequate Procedures To Prevent Corrupt Practices Section 17A of the Malaysian Anti-Corruption Commission Act 2009 (MACCA) imposed a duty on directors to ensure that the company establishes an adequate procedure to reason - ably protect the directors and the company from liabilities under the MACCA. Duty to Prevent Exposure to Anti-Money Laundering Activities Directors must adopt policies and procedures consistent with the principles set out under the Anti-Money Laundering, Anti-Terrorism Financ - ing and Proceeds of Unlawful Activities Act 2001 (AMLA), and there is also a duty to keep share - holders and employees abreast of matters under the AMLA. Directors must also remain vigilant against undertaking any business transaction that may be connected with or facilitate money laundering/terrorism financing. 4.7 Responsibility/Accountability of Directors Directors owe their primary legal duties to the company. However, in discharging these duties, directors are also required to consider the inter - ests of various stakeholders. In Malaysia, direc - tors owe their duties to: • the shareholders of the company – direc - tors have a fiduciary duty to act in the best interests of the company’s shareholders as a whole; • the creditors of the company – directors shall manage the company’s financial affairs prudently to safeguard creditors’ interest, especially in situations of financial distress or insolvency; • the stakeholders, including employees, cus - tomers and suppliers of the company – direc - tors shall ensure fair labour practices, ensur -
ing product safety and quality, maintaining ethical supply chain standards and contribut - ing positively to community development as recommended by the MCCG; and • the community and environment – directors are expected to be mindful of the company’s impact on the natural environment, includ - ing issues such as resource usage, pollution control, carbon footprint and compliance with environmental regulations. 4.8 Consequences and Enforcement of Breach of Directors’ Duties In Malaysia, enforcement of directors’ duties is primarily the responsibility of the company itself. However, when the company fails to act, the shareholders of the company and regulators such as the CCM can intervene. Pursuant to Section 347 of CA 2016, a share - holder (or other complainant) may, with the court’s leave, initiate a derivative action on behalf of the company against a director who has breached their duties. This process requires giving 30 days’ written notice to the company’s directors, outlining the intention to apply for such leave. In addition, regulators also play a significant role, particularly where a breach involves non-compli - ance with statutory obligations or raises issues of public interest. The CCM has the authority to investigate and prosecute directors for offences under CA 2016, including breaches involving dishonesty, negligence or abuse of power. For public listed companies, enforcement may also be undertaken by the SC or Bursa Malaysia, particularly in respect of contraventions of the Listing Requirements. The consequences of breaching directors’ duties may be both civil and criminal in nature. A direc -
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