Controllers or officers of commercial organisations can be liable for corruption

THE Malaysian Anti-Corruption Commission (Amendment) Act 2018 represents an achievement for Datuk Paul Low, the Minister in the Prime Minister's Department in charge of the Jabatan Integriti dan Tadbir Urus Negara (JITN) in its efforts to fashion laws to combat corrupt practices.

The purpose of the new law "is to introduce a new section 17A which provides that a commercial organisation commits an offence if any person associated with the commercial organisation commits a corruption in order to obtain or retain business or advantage for the commercial organisation".

The aim of this law is " to encourage business and commercial activities being carried out in an environment which is free from corruption ā€¦ and " to take adequate measures to prevent corruption in their organisations. (See Explanatory Statement to the Bill )".

The existing section 17 of the MACC Act has provided for the offence of giving or accepting gratification by an agent.

The existing law of companies shields officers of such entities from being charged for the offence of corruption.

The law now provides that where an offence is committed by a commercial organisation, a person who is a director, controller, officer or partner or who is concerned in the management of its affairs at the time of the commission of the offence is deemed to have committed the offence .

To escape liability the person will have to prove that he did not give his consent or connived to the commission of the offence. He may also demonstrate that he has exercised due diligence to prevent to commission of the offence as he ought to have exercised having regard to the nature of his function in the organisation and to the circumstances.

Who is caught in this legal net? Section 17A (8) provides that "commercial organisations" includes companies incorporated in Malaysia or wherever and which carries on a business or part of their business in Malaysia or elsewhere. Partnerships whether in LLP form or wherever formed and which carries on a business or part of the business in Malaysia are also caught in this new law.

Who can be considered a person who is associated with the commercial organisation? The law provides that he "is a person who performs services for and on behalf of the commercial organisation".

What the penalties? If convicted the commercial organisation and or the officer or controller is liable for a fine of not less than ten times the sum and value of the gratification or one million ringgit whichever is higher. A prison term not exceeding twenty years can also be imposed.

All commercial organisations now must take steps to implement internal control procedures and whistleblowing mechanism which satisfy the statutory defence under section 17A (4) where it may "prove that the commercial organization had in place adequate procedures to prevent persons associated with the commercial organisation from undertaking such conduct".

By this law Malaysia has a further step to join many jurisdictions (e.g. the UK) to holding persons connected with the commercial world to be diligent and vigilant in creating a culture of zero tolerance on corrupt practices.

Philip TN Koh is an Advocate & Solicitor, High Court Of Malaya who enjoys writing on corporate and public law