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There’s a new law against corruption - Here's how it affects companies and their directors

about 4 years ago Jonathan Khaw





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by Jonathan Khaw | CHERN & CO.


The Malaysian Anti-Corruption Commission (MACC) (Amendment) Act 2018 introduces a new Section 17A to the MACC Act 2009 which will come into effect on 1st June 2020. This new provision will impact businesses of all shapes and sizes regardless of the industry in which you operate. It will present heightened liability risks not only for companies engaging in corrupt practices, but it also imposes personal liability on directors and corporate officers of that company.

Hence, if you think your business will not be affected by this new provision, it’s time to think again.


What is the new “Corporate Liability Provision”?

The new Section 17A expressly provides that a commercial organisation commits a criminal offence, if it is found that its employees or its associates corruptly gives, offers or promises any gratification to any persons for the benefit of the said commercial organisation.

As we speak, the term “commercial organisation” under the new provision is loosely defined to include not only Malaysian companies but also companies incorporated overseas that carry on a business in Malaysia. Hence, a local branch office with its head office in Beijing, for instance, is likely to be caught under the new provision.  

Moreover, the offence under the new provision is one of strict liability. This means that it would be enough to prove that the company committed the corrupt practice, and the question of whether or not the company’s director knew, or intended it to happen is not relevant.

From this perspective, the new provision also imposes personal criminal liability on directors and corporate officers to align them with corporate faults. In simpler terms, if your company is found guilty for the offence, then it should be borne in mind that the directors, controllers, officers, partners, and other senior key personnel of that company would also be deemed to have committed the same offence. Unless you or the relevant individuals can prove that the said offence is committed without your consent, or you have conducted all of the required due diligence you ought to have exercised in your capacity in the company to prevent the said offence from being carried out. Importantly, ignorance of this new provision, or merely lousy practice can never be a defence. 

Upon convicted under this new provision, a commercial organisation shall be liable to a fine of no less than 10 times the value of the gratification, or RM1 million, whichever is higher, or be subjected to a prison term of not exceeding 20 years, or both.

In this context, as one can see, the new provision pins responsibility firmly on senior decision-makers within the business, making them personally liable. Hence, it makes it more critical than ever before for senior key personnel of a company to ensure proper anti-corruption policies and mechanisms are in place, and everyone in the company strictly follows such procedures.


Your organisation should start implementing “adequate procedures” to prevent corruptions

The only Defence that can shield a commercial organisation from prosecution for the strict liability offence of failing to prevent corrupt practices is to demonstrate and prove that it had in place “adequate procedures” and controls to prevent bribery and corruption.

The MACC Act does not define “adequate procedures”, but the MACC has published the “Guidelines on Adequate Procedures” about procedures that commercial organisations can put into place to prevent corrupt practices.

Notably, the guidelines are not authoritative. However, we highly recommend a company to use them as a reference point when designing or fortifying their internal procedures and policies, or corruption risk management to establish “Adequate Procedures” as a compliance defence in the event of being implicated in accusations of corrupt practices. We reproduce these T.R.U.S.T principles as follows:

  • Top-Level Commitment
  • Risk Assessment
  • Undertake Control Measures
  • Systematic, Review, Monitoring And Enforcement
  • Training and Communication

Bearing the above in mind, the internal controls programme and the steps of action that we recommend for your company will be proportionate to the risks you face and the size of your business. Particular attention should be given if your company is operating in one of the following industries:

  • Entertainment
  • Construction
  • Government contracting company
  • Retail & Financial services
  • Logging
  • Plantation


Here are some sample steps to guide you

There are some steps that your business can take to protect yourself from being caught under the new provision. Here are 5 stages that you can follow as a guidance in setting up a procedure for your company:

  • 1st Stage: Perform Risk Analysis to determine the areas in which potential risks of corruption lie.
  • 2nd Stage: Conduct/Implement Robust Internal Controls to address “gaps” found in Stage 1.
  • 3rd Stage: Staff Training & Raise Awareness concerning the prevention controls and detection processes in Stage 2.
  • 4th Stage: Testing and Evaluating the application and effectiveness of the internal controls.
  • 5th Stage: Periodic Follow up to test your compliance programme and conduct consistent training sessions to key personnel.

In short, it is important for commercial organisations to take appropriate and consistent steps to make sure that their businesses do not involve in corrupt activities. While companies that have their internal legal team can come up with their own framework, other companies, particularly small and medium-sized enterprise (SMEs), can engage firms with experience in Commercial Law to help them.


Jonathan Khaw is the principal lawyer of CHERN & CO. – A Commercial law firm specializing in all aspects of corporate & commercial laws. Jonathan was a foreign consultant at Tilleke & Gibbins, a leading international law firm in Bangkok, Thailand before setting up CHERN & CO. He can be reached at


section 17a
macc act 2009
corporate liability provision
malaysian anti-corruption commission (macc) (amendment) act 2018