Business Advise

S. 17A MACC ACT 2009: Corporate Liability

Did You Know?

Commercial organisations may now be liable for corruption offences in Malaysia and the commercial organisation’s director, officer or management may also be deemed liable if the commercial organisation is found liable.

Section 17A Malaysian Anti-Corruption Commission Act 2009 (“MACC Act”) introduces corporate liability for corruption offences. As such, both local and foreign commercial organisations conducting business in Malaysia should be aware of the implications and liabilities of S.17A MACC Act towards their commercial organisation, directors, partners, management as well as their employees.

Introduction

S17A MACC Act provides that “A commercial organisation commits an offences if a person associated with the commercial organisation 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 to obtain or retain business for the commercial organisation or to obtain or retain an advantages in the conduct of business for the commercial organisation.”

This means that S17A MACC Act criminalises the corrupt acts of a commercial organisation if any persons associated with that organisation gives or offers gratification to any person to obtain a business advantage for the commercial organisation.

Commercial Organisation

  • Local company, partnership or limited liability partership incorporated under Malaysian law carrying on business in Malaysia or elsewhere; or
  • Foreign company or partnership that carries on business or part of a business in Malaysia.

Associated Persons

  • Directors, partners and employees of the Commercial Organisation; or
  • Persons who perform services for and on behalf of the Commercial Organisation.

Two-Fold Liability

S17A MACC Act introduces deeming liability which is two-fold:

  • Corporate Liability : Whereby if an offence is committed by Persons Associated to the Commercial Organisation, the Commercial Organisation is automatically deemed to have committed the offence unless it can prove “adequate procedures to prevent” the conduct.
  • Personal Liability : If the Commercial Organisation is found liable, the director, controller, officer or partner of the Commercial Organisation or any person who is concerned in the management of the affairs of the Commercial Organisation is also automatically deemed liable unless he can prove the statutory defence discussed below.

Penalties

Fine of not less than 10 times the sum or value of the gratification or RM1.0 Million, whichever is the higher; or imprisonment for a term not exeeding 20 years; or both.

Deferences

Corporate Liability

The defence available to a Commercial Organisation is to prove that the Commercial Organisation had in place adequate procedures to prevent Persons Associated with the Commercial Organisation from undertaking such conduct. The Prime Minister’s Department released the Guidelines on Adequate Procedures (“Guidelines”) which helps Commercial Organisation understand what kind of adequate procedures should be implemented to prevent the occurrence of corrupt practices while conducting business. The implementation of the Guidelines could be relied on as a defence to absolve liability under S17A. The Guidelines were formed on the basis of 5 principles which may be used as reference points for any anti-corruption policies, procedures and controls that Commercial Organisations should choose to implement:

* Top Level Commitment

The management of a Commercial Organisation is required to demonstrate commitment by creating a corporate culture where bribery is not an acceptable practice by promoting a culture of integrity within the CommercialOrganisation.

* Risk Assesment

The Commercial Organisation is required to identify, analyse and prioritise corruption risk through comprehensive risk assessment once every three years.

* Undertake Control Measures

The Commercial Organisation is required to establish appropriate controls and contingency measures to confront corruption. Example of control measures includes conduction due diligence on relevant parties and establishing a trusted and accessible reporting and whistleblowing channel.

* Systematic Review, Monitoring and Enforcement

The Commercial Organisation is required to conduct regular reviews to assess the performance, efficiency and effectiveness of the anti-corruption programme.

* Training and Communication

Commercial Organisation should diligently train and communicate to their employees onm the relevant anti-corruption policies and procedures.

* Personal Liability

The director, controller, officer or partner of the Commercial Organisation or management of the Commercial Organisation must prove that the offence was committed without his consent or connivance; AND that he has exercised due diligence to prevent the commission of the offence.

Unlike the Guidelines above mentioned, there are no guideline in respect of the defence for personal liability of S.17A.

Key Takeaways

Persons Associated

Commercial Organisation ought to be aware of their business partners and agreements with its services providers and its stance against anti-corruption should also be effectively communicated in public documents and provide for contractual safeguards regarding unlawful activity or other bribery prevention measures of counterparties/employees.

Adequate Procedures

Having “adequate procedures” in place provide Commercial Organisations a defence should they be investigated or charged under section 17A. It is prudent for Commercial Organisations to take immediate steps to establish “adequate procedures” in compliance with the TRUST Guidelines if they have not already done so.

Corporate and Personal Liability

With the implementation of two-fold liability, if the Commercial Organisation is found liable and cannot rely on the adequate procedures defence, the top management or senior officer of the Commercial Organisation is found liable and cannot rely on the adequate procedures defence, the top management or senior officer of the Commercial Organisation will also be automatically liable.

The burden is placed on the directors and senior management to prove the statutory defence. It is therefore of utmost importance that the Copmmercial Orhanisation implements and the deemed personal liability on the said directors and senior management to take effect.

Extra Territorial Effect

The corporate liability will extend to Malaysian Commersial Organisations, whether carrying on business in Malaysia or in foreign jurisdictions. In addition, liability would also extend to foreign Commercial Organisations carrying on a business or part of a business in Malaysia.

All Commercial Organisation should :

  • Implement Adequate Procedures
  • Prepare anti-bribery & anti-corruption policies and procedures
  • Conduct Corruption Risk Gap Analysis
  • `Conduct trainings for management, employees and services providers.
This Articles was written by RDJLaw for educational purposes only.
Messrs. Ramesh Dipendra Jeremiah Law
Advocates & Solicitors

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