MALAYSIA Law and Practice Contributed by: Dato’ Tan Yee Boon, Stephanie Chan Pik Jia and Joaana Keng Li Xin, David Lai & Tan
tor found in breach may be held personally liable to compensate the company or to account for any gain obtained through misconduct. Where the breach involves fraud, dishonesty or gross negligence, criminal sanctions may apply. Pur - suant to Section 213 (3) of CA 2016, a direc - tor who fails to act in good faith or for a proper purpose shall be subject to a fine not exceeding RM3 million, imprisonment of up to five years or both. 4.9 Other Bases for Claims/Enforcement Against Directors/Officers There are various legal avenues through which directors and officers may be held liable for breaches of corporate governance standards, as follows. Breach of Statutory Duties Directors and officers may be held liable for breaching statutory duties imposed under CA 2016, securities laws and other relevant regu - lations. These obligations include the duty to ensure accurate and timely corporate filings, the maintenance of proper financial disclosures and the declaration of directors’ interests as and when required. Breach of Fiduciary Duties Directors are bound by fiduciary duties to act in good faith, exercise reasonable care and dili - gence and act in the best interests of the com - pany. A breach of fiduciary duty may give rise to civil proceedings initiated by the company, shareholders or other affected stakeholders. Negligence Under Tort Law Directors and officers may also face liability under the law of tort for negligence in the per - formance of their corporate duties. This applies when they fail to act with the level of care, skill or diligence that a reasonable person would exer -
cise in similar circumstances. Negligence may arise from poor oversight, lack of proper govern - ance or failure to detect and prevent operational or financial misconduct. Fraud or Misrepresentation Directors who engage in fraudulent activities or misrepresentation of information may be subject to legal actions and penalties. Corrupt Practices Directors who fail to establish an adequate procedure that can be used to reasonably pro - tect the directors and the company from liabili - ties under the MACCA may be subject to legal actions and penalties. Anti-Money Laundering Activities Directors who fail to adopt policies and proce - dures in line with the principles set out under the AMLA may be subject to legal actions and penalties. In Malaysia, there are limited circumstances in which the director or officer’s liability can be lim - ited. The company may indemnify directors or officers for liabilities incurred in the course of performing their duties, provided that the indem - nification is permitted under the company’s Con - stitution and the indemnity does not extend to fraud, dishonesty or wilful misconduct. Furthermore, directors may also seek direc - tors’ and officers’ (D&O) liability insurance as an added layer of protection, covering liabilities incurred in their official capacity subject to legal limitations. CA 2016 also provides certain statu - tory protections that may limit the personal liabil - ity of directors or officers under specific circum - stances. These include the business judgment rule, which protects directors from liability for decisions made in good faith, with reasonable
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