Company Registration

Corporate Liability And The MACC Act

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Section 17A of the Malaysian Anti-Corruption Commission Act was passed on the 5th of April 2018 and took effect on the 1st of June 2020. With the introduction of the section into the Act, it has put companies and its members in a position whereby they have to observe strict procedures to ensure they are not found liable for corruption. In today’s article, we will be briefly sharing on this matter i.e. what is section 17A all about and what can a company do to ensure that they are not caught under the section.

The law in relation to this matter

What is “commercial organization”?

It is basically the legal term for a company. As noted under the Act, a commercial organization is:

  1. A company incorporated under the Companies Act 2016 [Act 777] and carries on a business in Malaysia or elsewhere;
  2. A company wherever incorporated and carries on a business or part of a business in Malaysia;
  3. A partnership–
    1. under the Partnership Act 1961 [Act 135]and carries on a business in Malaysia or elsewhere; or
    2. which is a limited liability partnership registered under the Limited Liability Partnerships Act 2012 [Act 743] and carries on a business in Malaysia or elsewhere; or 
  4. A partnership wherever formed and carries on a business or part of a business in Malaysia.
  1. When is the company deemed to have committed such an offence?

When person associated with the commercial organization corruptly gives, agrees to give, promises or offers to any person any gratification whether for the benefit of that person or another person with intent: 

  1. To obtain or retain business for the commercial organization; or 
  2. To obtain or retain an advantage in the conduct of business for the commercial organization

Which company officer will be caught in the crossfire?

Any director, controller, officer or partner, or anyone who is concerned with the management of the company’s affairs.

Are there reprieves for the company mentioned above i.e. defence?

Yes- provided that the individual is able to prove that the offence was committed without his consent or connivance and that he exercised due diligence to prevent the commission of the offence as he ought to have exercised, having regard to the nature of his function in that capacity and to the circumstances.

  1. Are there reprieves for the company itself i.e. defence? 

Yes- provided that the company is able to prove that the commercial organization had in place adequate procedures to prevent persons associated with the company from committing an offence under the section. In this regard:

  1. A person is associated with the company if he is a director, partner or an employee of the commercial organization or he is a person who performs services for or on behalf of the company; and
  2. Whether a person performs services for or on behalf of the company is determined by reference to all the relevant circumstances and not merely by reference to the nature of the relationship between him and the company.
  1. What happens if a company is found liable under Section 17A of the Act?

If found liable, a company can be fined not less than ten times the sum or value of the gratification which is the subject matter of the offence, where such gratification is capable of being valued or is of pecuniary nature, or one million ringgit, whichever is the higher, or to imprisonment for a term not exceeding twenty years or to both. 

So what can a company do?

As noted above, the company can raise the defence that they have put in place adequate procedure in place to prevent the commission of section 17A.  According to the guidelines issued by the Prime Minister’s Office In December 2018, an adequate procedure is where (amongst others):

  1. The top-level management of the company must ensure that that the highest level of integrity and ethics is practised in the company. This includes complying to the relevant laws, giving assurance to its stakeholders that such laws are being complied with, constantly establishing, maintaining and periodically reviewing the company’s compliance on such laws and encouraging the use of any reporting i.e. whistle blowing channel;
  2. There is a comprehensive risk assessment being done every three years and that such assessment is being used to establish proper processes, system and controls to mitigate the risk of the company (approved by top-level management) being exposed to a section 17A offence;
  3. There are appropriate control and contingency measures, endorsed by top-level management, being implemented and enforced to address any corruption risk arising from weaknesses in the company’s governance framework;
  4. There are regular reviews being conducted by the top-level management of the company to assess the performance, efficiency and effectiveness of the anti-corruption programme of the commercial organization and to ensure the anti-corruption programme is enforced effectively; and
  5. The company should develop, disseminate and provide training and communications to all their employees and business associates in relation to their anti-corruption management system and their position on anti-corruption to ensure their thorough understanding of the company’s anti-corruption position, especially in relation to their role within or outside the company. 

Make an appointment with Company Secretary for advice and consultation

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