new directions in duties and liabilities of directors by lee swee seng llb(hons), llm, mba lee swee...

New Directions in Duties and Liabilities of

DirectorsBy

LEE SWEE SENGLLB(Hons) , LLM , MBALEE SWEE SENG & COMANAGING PARTNER

ADVOCATES & SOLICITORSCERTIFIED MEDIATOR

PATENT AGENTNOTARY PUBLIC

[email protected]

New Directions in Duties and Liabilities of Directors Duties and liabilities of directors under

common law Understanding the statutory duties of directors

under various legislative enactments Understanding recommendations proposed

by Finance Committee Report on Corporate Governance and Corporate Law Reform Committee

Understanding duties and liabilities under Bursa Securities Listing Requirement (BSLR), Securities Commission Act 1993 and Securities Industry Act 1983

Introduction

Malaysia’s economy depends on the drive and efficiency of the companies.

Therefore, the effectiveness of the board of directors in discharging their duties and responsibilities determines Malaysia’s competitive position.

In other words, Company directors must be free to drive their companies forward, but they have to exercise that freedom within a framework of effective accountability.

Directors in Malaysia An individual can be a director as long as he

is : A) 18 years old; B) must not be an undischarged bankrupt C) must not have been convicted of criminal

offence involving fraud or dishonesty D) must not have been imprisoned for an

offence under S132, S132A or under S303 of Companies Act

E) must consent to act as director

Corporate Governance A proper and efficient system of corporate

governance is necessary in the companies in order to regulate the directors’ duties and preventing them from abusing their powers.

Corporate Governance is the system by which business corporations are directed and controlled.

It is necessary to ensure that company directors act in the best interests of their companies as well as ensuring the observance and compliance with all laws, regulations and codes of conduct and best practices.

Finance Committee Report on Corporate Governance

In March 1998, the Honourable Minister of Finance announced the establishment of a high level committee that would look into establishing a framework for corporate governance and setting best practices for the industry.

The Finance Committee's findings, which were reported through the publication of the Finance Committee Report on Corporate

Finance Committee Report on Corporate Governance Governance in March 1999, represents the

end-product of an extensive collaborative effort between government and industry, with the implementation of key aspects of the Report which would include the recommendations on duties, obligations, rights and liabilities of the directors.

In this report, the Committee has not imposed further duties and obligations of directors but sought to clarify their duties and obligations in such a way that directors are made to take notice of and understand their obligations.

Directors under Section 4 of the Companies Act 1965

Section 4 of the Companies Act 1965 (CA) defines director as:

“any person occupying the position of director of a corporation by whatever name called and includes a person in accordance with whose directions or instructions the directors of a corporation are accustomed to act and an alternate or substitute director”

Directors’ Duties and Responsibilities

A Director’s duties can arise under:- A) common law B) Statutory duties eg. Companies Act 1965 C) Bursa Securities Listing Requirement D) Securities Commission Act 1993 E) Securities Industry Act 1983

Common law Fiduciary Duty

The fiduciary duties of a director is to act bona fide in the interest of a company.

Acting bona fide in the interest of a company is to act with good faith for the benefit of the company.

A director is under a duty to ensure that any act he undertakes is with a view to enhancing the interest of the company either by enhancing profits, reducing costs or even positive publicity of the company.

Kala Anandarajah, Corporate Governance : A Practical Approach

Duty to act bona fide in the interest of the company

Where a director is required to act bona fide in the interest of a company, he must act according to what he considers, not what a court may consider, is in the interest of the company : Re Smith and Fawcett Ltd (1942) Ch 304

The directors are the ones to determine what is best for the company.

Duty to act bona fide in the interest of the company

In Intraco Ltd v Multi-Pak Singapore Pte Ltd [1995] 1 SLR 313, the Court held that the proper test in determining whether the directors have acted bona fide was whether an honest and intelligent man in the position of a director in the whole of the existing circumstances, have reasonably believed that the transactions were for the benefit of the company.

Recommendation of the Finance Committee

Issue: Is there a need for statutory clarification of the

term “best interest of a company”?

The Committee submitted that bearing in mind of the need for flexibility, the term should not be clarified by statute.

Recommendation: The term “best interest of a company” should

not be statutorily codified.

Obligation of directors to act bona fide in the interest of the company The law imposes on directors a certain trustees-

like duties.

This duties include: To act for a proper purpose To avoid conflict of interest Not to have other interest fetter his discretion To ensure that the interest of the members of

the company is protected To use reasonable diligence in the discharge of

his duties

Duty to act for proper purpose

Directors are required to exercise powers given to them for the proper purpose of the company.

The purposes may be set out in the articles of association of the company.

Therefore, directors are prohibited from exercising its powers for any collateral purposes or any act done for an impermissible purpose.

Whitehouse & Anor v Carlton Hotel Proprietary Ltd (1987) 162 CLR 285 Mr Whitehouse as a director allotted two

class ‘B’ shares to each of the sons which had the effect of passing control of the company to them.

The company later passed a resolution that the class ‘B’ shares had never been issued by arguing that the power was exercised to achieve an impermissible purpose, namely to defeat the voting power of the existing shareholders by creating a new majority.

Whitehouse & Anor v Carlton Hotel Proprietary Ltd (1987) 162 CLR 285

The Court held that the articles of association does not authorise the exercise by Mr Whitehouse of that fiduciary duty for an impermissible and vitiating purpose.

Acting for proper purpose and in the best interest of the company It is clear that in principle, a director must act

for proper purpose and in the best interest of the company.

This principle has been subject to various argument in cases of Hogg v Cramphorn [1967] Ch 254, Teck Corp Ltd v Miller (1973) 33 DLR (3d) 288 and Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 where the directors had acted in the best interest of the company but the transaction has been motivated by some improper purpose.

Acting for proper purpose and in the best interest of the company The House of Lords in Howard Smith later

put a rest to the debate by putting the test together:

“For validity, what is required is bona fide exercise of the power in the interest of company: that once it is found that the directors were not motivated by self-interest, the matter is concluded in their favour and that court will not enquire into the validity of their reasons for making the issue.

Acting for proper purpose and in the best interest of the company On the other side, the main argument is that

the purpose for which the power is conferred is to enable capital to be raised for the company and that once it is found that the issue was not made for that purpose, invalidity follows..”

In other words, although the directors may act honestly for the benefit of the company, the directors may still be held liable if they have exercise their power for collateral purpose.


Issue: Should the fiduciary duty to act for a proper

purpose be codified?

The Committee made comparison with the position in Canada which includes the duty to act for proper purpose in the statutory formulation.


Recommendation: That Section 132(1) CA should be amended

to state explicitly the duty to act for a proper purpose.

Implementation status: In progress

No Conflict Rule

Directors must not, as a general rule, put themselves in the position where their duties to the company conflict with that of his own interest.

It is also not uncommon for a person to take on directorships in more than one company.

In doing so, the director can easily be placed in the position of being subject to conflict.

No Conflict Rule

Instances where director will be found in breach of fiduciary duties:-

A) director sets up another firm to compete for contracts with the company : Avel Consultants Sdn Bhd & Anor v Mohamed Zain Yusof & Ors [1985] 2 MLJ 209

B) director diverts a business opportunity for his own profit : Hytech Builders Pte Ltd v Tan Eng Leong & Anor [1995] 2 SLR 795

Secret Profit Rule

A director who has entered into a contract with his company in breach of his fiduciary duties still remains accountable to his company for any profit which he or she derives from the breach.

This profit rule can apply in instances where even if there is no realistic possibility of conflict between the interest and duty but where the directors have made a profit : Queenland Mines Ltd v Hudson (1978) 3 ACLR 176

Statutory Duties of Directors : Section 131 Companies Act (CA) 1965

This provision are designed to achieve a modification of the ‘no conflict rule’ by allowing a company to enter into transactions with directors provided their interest is disclosed to the board.

S131 CA provides that: “every director of a company who is in any

way, whether directly or indirectly, interested in a contract or proposed contract with the

Statutory Duties of Directors : Section 131 Companies Act (CA) 1965 company shall, as soon as practicable after

the relevant facts have come to his knowledge, declare the nature of his interest at a meeting of the directors of the company.”

In a Singapore case of Yeo Geok Seng v PP [2000] 1 SLR 195, Yong CJ held that S156 Singapore CA(S131 Malaysian CA) was not confined to situations where the directors had a personal interest that conflicts with his duty but was wide enough to impose a duty of disclosure on a director who holds directorship in another company.

Recommendation of Finance Committee Issue: Should the fiduciary duty to avoid conflict of

interest be codified?

In the report, the Committee considered that there are still gaps in the existing provisions in statute in regulating abuses such as the practice of operating business in competition with the listed entity or taking advantage of contracts belonging to the listed entity save under the category of the “duty to act honestly”.

Recommendation of Finance Committee

Although there are numerous fiduciary principles under common law, the Committee also considered it inappropriate for this matter to be left purely to case law.

Recommendation: That the common law fiduciary duty to avoid

conflict of interest should be codified


Issue: Elements of the statutory fiduciary duty to

avoid conflict of interest

The Committee does not intend to provide an exhaustive discourse on the elements but attempts to set a minimum number of rules that regulate the conduct of a director acting with an interest in matter.


Recommendations: That the statutory fiduciary duty to avoid

conflict of interest should among other things:-

A) embrace the following conflict of interest situations:-

Misuse of corporate information, property or position;

The taking of corporate opportunities; and


Engaging in business in competition with the company.

B) Set out he minimum procedures that directors should adopt in conflict of interest situations

C) Preserve the power of court to enquire into the fairness of a transaction at all times.

Statutory Duties of directors – Section 132 CA 1965 Section 132(1) CA 1965 sets out the

director’s duties to act honestly. Under S132(1), a director shall at all times act

honestly and use reasonable diligence in the discharge of the duties of his office.

Also, under S132(5), this duties are in addition to and not in derogation of any written law or rule of law relating to the duty or liability of directors or officers of a company.

Therefore, the common law and equitable rules relating to directors are still relevant.

Statutory Duties of directors – Section 132 CA 1965

In Multi-Pak Singapore Pte Ltd v Intraco Ltd [1994] 2 SLR 282, the court held that the word 'honestly' does not mean that a director would only be in breach of duty if he had acted fraudulently. It means to act bona fide in the interests of the company. In exercising their discretion, the directors should only act to promote or advance the interest of the company.

Statutory Duties of directors – Section 132 CA 1965 In the later case of Rajabali Jumabhoy & Ors

v Ameerali Jumabhoy & Ors [1997] 3 SLR 802, the court made the following observation after considering the decision of the New South Wales Supreme Court in Blackwell v Moray & Anor [1991] 5 ACSR 255:

a) a director may act in breach of his fiduciary duties even though he has acted honestly;

b) a mere general sense of honesty of purpose is not sufficient to satisfy the requirement that a director acts bona fide for the benefit of the company;

Statutory Duties of directors – Section 132 CA 1965 c) acting bona fide for the benefit of the

company requires at the least a consideration of views and/or of relevant material;

d) the abandonment of any proper consideration of relevant facts; the fact of being rushed into a meeting; ignorance and the lack of detailed explanation of the implications of the issues under consideration; the failure to exercise an independent discretion and the mere doing of what was it was thought a third party wanted cannot amount to the bona fide exerciseof a director's discretion.

Recommendations of Finance Committee Issue: Is there a need to clarify the duty to act

honestly? Recommendation: That the duty to act honestly in section 132 CA

should be re-formulated to require a director to act “bona fide in the best interest of the company

Implementation status: In Progress

Duties of Skill and care Section 132(1) CA also sets out the duty of

the director to use reasonable diligence in the exercise of the duties of his office.

The duty of skill, care and diligence to be exercised by the directors were established in the leading case of Re City Equitable Fire Insurance Co Ltd [1925] Ch 407.

A director are under the duty to exhibit a degree of skill that is reasonably expected from a person with his knowledge and experience : Re City Equitable Fire Insurance Co Ltd

Re City Equitable [1925] Ch 407

A case where the liquidators of the failed insurance co sued the directors for negligence on 3 grounds:

1) they allowed the co to lend substantial funds on an unsecured basis to its chairman and GM

2) that they made improvident investments 3) that they paid dividends out of capital


The Court held: A director need not exhibit a greater degree

of skill than may reasonably be expected from a person of his or her knowledge and experience.

A director is not bound to give continuous attention to the affairs of the co as his or her duties are of an intermittent nature to be performed at periodic board meetings.


A director may, in the absence of grounds for suspicion and having regard for the exigencies of business, be justified in trusting a person to whom a duty has been delegated, to perform such duties honestly.

DANIELS v ANDERSON (1995) 16 ACSR 607 ‘AWA CASE’.

AWA, A LARGE LISTED CO IN AUSTRALIA, EMPLOYED A YOUNG FOREIGN EXCHANGE MANAGER,ANDREW KOVAL, FOR ITS FOREIGN EXCHANGE DEALINGS

ANDREW CONCEALED LOSSES FROM MANAGEMENT AS THERE WAS NO ADEQUATE INTERNAL CONTROLS IN PLACE NOR PROPER RECORDS IN PLACE

AWA CASE

CO SUFFERED A LOSS OF A$50 MILLION CO DISMISSED KOVAL AND SUED

AUDITORS IN CONTRACT, ALLEGING NEGLIGENCE IN AUDIT

AUDITORS COUNTER-CLAIMED AGAINST CO FOR CONTRIBUTORY NEGLIGENCE ON GROUND

AWA CASE

THE COURT HELD THE AUDITORS NEGLIGENT BUT ALSO HELD THE COMPANY TO BE 20% CONTRIBUTORILY NEGLIGENT.

NONE OF THE NON-EXECUTIVE DIRECTORS WERE FOUND LIABLE ON GROUND THAT THEY WERE IGNORANT OF FAILURE TO ADHERE TO FOREIGN EXCHANGE GUIDELINES OF THE CO.

AWA CASE

DIRECTORS WERE UNDER A DUTY TO FAMILIARISE THEMSELVES WITH THE BUSINESS OF THE CO, AND TO MONITOR ITS MANAGEMENT SO AS TO BE SATISFIED THAT THE CO IS BEING PROPERLY RUN

AWA CASE

DIRECTORS ARE SUBJECT TO THE COMMON LAW DUTIES OF CARE TO THE CO WHICH REQUIRE THEM TO EXERCISE REASONABLE CARE IN THE PERFORMANCE OF THEIR OFFICE.

AWA CASE

A DIRECTOR CANNOT EXONERATE HIMSELF FROM LIABILITY ARISING FROM NEGLIGENCE BY PROCEEDING ON THE BASIS OF IGNORANCE AND A FAILURE TO INQUIRE.

DIRECTORS WERE NOT TO BE DIFFERENTIATED MERELY IN TERMS OF EITHER EXECUTIVE OR NON-EXECUTIVE DIRECTOR, AS THE LATTER IS NOT NECESSARILY SUBJECT TO A LOWER STANDARD OF CARE.

Duties of Skill and care

Director should also be held to owe objective standard of care.

However, director is not responsible for acts and omissions of his co-directors even if he did not attend board meetings : Marquis of Bute’s [1892] Ch 100.

On the other hand, even though directors are responsible for acts or omissions of his co-directors when he did not attend board meetings, he may still be liable under the duty to exercise diligence in performing his duties.

Duties of Skill and care

The position of directors not being liable for acts of his co-directors when he did not attend board meetings may not be applicable today.

In Article 72 Table A CA, a director shall vacate his office if he absents himself from meetings of directors for a period of 6 months without the leave of absence of the board.

Non-attendance of meetings

BSLR 15.05 (1) the office of a director shall become

vacant if the director:- a) becomes of unsound mind; b) becomes bankrupt c) is absent from more than 50% of the total

board of directors’ meetings held during a financial year.


Issue: Should 132(1) CA spread its net wider and

codify the requirement of skill and care

Recommendation: That Section 132(1) should be amended to

include the duties of skill and care

Implementation status: In progress

Statutory Duties of directors – Section 132 CA 1965 S132(2) CA 1965 sets out the duty not to

misuse information or position. Under S132(2), an officer or agent of a

company or officer of the Stock Exchange shall not make improper use of any information acquired by virtue of his position as an officer or agent of the company or officer of the Stock Exchange to gain directly or indirectly an advantage for himself or for any other person or to cause detriment to the company.

Hence, it is applicable to directors.

Statutory Duties of directors – Section 132 CA 1965 This provision can apply to information which

is not confidential as held in McNamara v Flavel (1988) 13 ACLR 619 but only so long as the information is of a kind which equity would protect by injunction for breach of fiduciary duty.

S132 CA is sometimes regarded as a misuse of information by insiders.

Insider trading is in effect a misuse of unpublished information of a company by anyone in possession of such information which is not generally available.

Kala Anandarajah, Corporate Governance : A Practical Approach

Insider trading under Section 89 of the Securities Industry Act (SIA) 1983 Under Section 89E SIA, an insider (clearly

includes a director) shall not, in respect of any information that is not generally available:

A) acquire or dispose of, or enter into an agreement with a view to the acquisition or disposition of such securities; or

B) procuring, directly or indirectly, an acquisition or disposal of such securities.

Insider trading under Section 89 of the Securities Industry Act (SIA) 1983 This provision would clearly includes

communication of the information to another person if he knows that the other person would tend to:

A) acquire or dispose of, or enter into an agreement with a view to the acquisition or disposition of such securities; or

B) procure a third person to acquire or dispose of, or enter into an agreement with a view to the acquisition or disposition of such securities.

Criminal liability of Section 89E of SIA

Any person who contravenes or fails to comply with the above provisions commits an offence and is liable on conviction to a fine of a less than RM1 million and to imprisonment for a term not exceeding 10 years.

Civil liability under Section 90 of SIA

S90 SIA also provides that a person who suffers loss or damages by reason of S89E may recover the loss or damages by instituting civil proceedings against the other person.

Other provisions relating to misuse of information Section 132A CA An officer, agent or employee of a corporation

or officer of the Stock Exchange who in or in relation to a dealing in securities of the corporation by himself or any other person makes improper use to gain, directly or indirectly, an advantage for himself or any other person of specific confidential information acquired by virtue of his position as such officer, agent or employee or officer of the Stock Exchange which if generally known might reasonably be expected to affect materially the price of the subject matter of the dealing on

Other provisions relating to misuse of information

a Stock Exchange shall, in addition to any penalty imposed under subsection (6), be liable to any person for loss suffered by that person by reason of the payment by him or to him of a consideration in respect of the securities greater or lesser, as the case may be, than the consideration that would have been reasonable if the information had been generally known at the time of the dealing.

Other provisions relating to misuse of information Section 132B CA Any person, who in or in relation to a dealing

in securities of a corporation, has any information which if generally known might reasonably be expected to affect materially the price of the subject matter of the dealing on a Stock Exchange and which -

(a) he holds by virtue of his official capacity or former official capacity;

(b) it would be reasonable to expect a person in his official capacity or former official

Other provisions relating to misuse of information capacity not to disclose except for the proper

performance of the functions attaching to that official capacity; and

(c) he knows is unpublished price sensitive information in relation to securities of the corporation,

shall not make improper use of such information to gain, directly or indirectly, an advantage for himself or for any other person and any person who contravenes the provision of this section shall be guilty of an offence against this Act.

Section 132C Companies Act 1965 Notwithstanding anything in a company's

memorandum or articles, the directors shall not carry into effect any proposal or execute any transaction for -

(a) the acquisition of an undertaking or property of a substantial value; or (b) the disposal of a substantial portion of the company's undertaking or property,

which would materially and adversely affect the performance or financial position of the company, unless the proposal or transaction has been approved by the company in general meeting.


Issue: Should Section 132C be amended?

Problem arises in Section 132C: A) Directors will not be prepared to say that a

transaction would adversely affect the performance of financial position of a company

B) Doubts as to whether in any one transactions, approval of a general meeting is necessary.


Recommendation: Section 132C of the CA should be amended so

that prohibition relates only to a relevant acquisition or disposal which is material and the removal of the requirement that it will adversely affect the performance or financial position of the company.

Section 132C should be amended to set out the criteria for materiality. The criteria for materiality should be formulated in the same manner as laid out in Rules 111-120 of Part 4 of the Listing Requirements (regulation of related party transactions).

Implementation status as at 31 December 2004 As at 31 December 2004, 42.5% of the

recommendations in the Finance Committee Report on Corporate Governance have been completed.

Sources from Http://www.sc.com.my

Corporate Law Reform Committee Recently, the Corporate Law Reform Committee

(CLRC) has made further reviews and recommendations to the existing framework on directors.

In preparing this paper, reference was made to international developments for comparative analysis.

Further, the CLRC referred to the High Level Finance Committee Report on Corporate Governance (1999) (the CG report) and where appropriate, draws upon and develops the views of the Finance Committee in so far as it coincides with the objectives of the Corporate Law Reform Programme.

The Aim of the CLRC

improve the legal and regulatory structure that will facilitate business in Malaysia;

protect the interest of shareholders whilst taking into account the interest of other stakeholders;

ensure the accountability of directors within a flexible regulatory framework which promotes efficient risk-taking via the codification of duties and available defences for directors;

The Aim of the CLRC

minimise the agency costs attached to the director / shareholder relationship through the disclosure obligation; and

promote an appropriate balance between the legal prescriptions and the self-regulation by the industry.

Latest Development in the Companies Act

The Companies (Amendment) Bill 2007 has been passed by the Parliament and will be gazetted soon.

This Act may be cited as the Companies (Amendment) Act 2007.

Therefore, it is important to note whether the recommendations by the Finance Committee and the CLRC will be incorporated in this new Act.

Clarifying and Reformulating the roles and functions of company directors The CLRC noted that our Companies Act

does not have any provisions specifying the roles and functions of the board because there is a need for flexibility to be maintained.

However, the CLRC also recognises that there are views that corporate governance failures are partly attributed to the lack of knowledge of what is expected of directors and board of directors.

Clarifying and Reformulating the roles and functions of company directors The roles and functions of a board may differ

from one company to another company. Example: A) private companies – board involves in day

to day management of company B) public companies – board exercises

supervisory function The CLRC is of the view that if statutory

restatement of the board’s role and functions is to be incorporated in the Companies Act, the restatement must be sufficiently flexible.

Clarifying and Reformulating the roles and functions of company directors Recommendations: The CLRC recommends that there should be

incorporated in the Companies Act, a general statement of the board’s role and function, to manage the affairs of the company.

However, the statutory restatement must : A) be couched in general terms so as to

enable the general statement to cover all possible variations in the perceived roles and functions of the board.

Clarifying and Reformulating the roles and functions of company directors

B) not impose additional duties and sanctions on directors but must have informative effect in that the statutory restatement which will have the effect of informing directors what is expected of them in respect of their roles.

Recommendations by CLRC in relation to Section 132 CA

The CLRC is of the view that the current S132 CA does not assist a director in appreciating and understanding his obligations as a company director.

Also, the requirement to act honestly in S132 is not currently defined by the Companies Act.

Hence, the CLRC is proposing to clarify and restate the directors’ fiduciary duties.

Recommendations by CLRC in relation to Section 132 CA The CLRC noted that the United Kingdom Law

Reform Bill 2005 and the New Zealand Companies Act 1993 clearly provides that there is a duty to act in the best interest of the company and to exercise power for the benefit of the company.

The CLRC agrees with the views expressed in the CG Report and recommends that the Companies Act should incorporate the recommendations of the CG report.

Recommendations by CLRC in relation to Section 132 CA

By replacing the word ‘honestly’ with the phrase ‘to act in the best interest of the company and to exercise powers for a proper purpose’, a director will be informed of the fact that the duty requires the directors to be aware that his conduct and decisions must be made in the best interest of the company and that powers conferred must be exercised for a proper purpose.

CLRC’s Recommendation – Clarifying directors’ duties to avoid conflict of interest The CLRC noted that our S132(1) CA does not

expressly cover most situations of conflict. S132(2) CA only address to one specific

‘conflict’ situation in that it deals with company directors abusing corporate information which he has acquired due by virtue of his position.

Therefore, CLRC proposes that the CA incorporates a provision which sets out in general terms what are the conflict situations which should be avoided by directors.

CLRC’s Recommendation – Clarifying directors’ duties to avoid conflict of interest

Although there were provisions like S132A and S132B which attempt to codify the misuse of information and various insider trading conduct, the CLRC is of the view that these two provisions should be deleted as the Securities Industries Act 1983 has adequate insider trading provisions.

CLRC’s Recommendation – Clarifying directors’ duties to avoid conflict of interest The CLRC also made some considerations

on the common law position and S131 CA on the duty of disclosure by directors.

There are differing views as to the appropriate organ to approve the conflict of interest transaction.

Common Law – approved by Shareholders S131 CA – approved by Board

CLRC’s Recommendation – Clarifying directors’ duties to avoid conflict of interest The CLRC also made a comparative study on

the position in UK and Australia. In UK, the matter is made by board of directors

but the approval is valid only where the interested director is not counted towards the quorum to consider the matter and the matter was decided without the interested director’s votes.

In Australia, the position is the same in UK but the Australian Corporation Act 2001 is silent as to which organ to approve transaction.

CLRC’s Recommendation – Clarifying directors’ duties to avoid conflict of interest

The CLRC is of the view that a conflict transaction should be approved by the shareholders because the conflict of interest involves directors and directors’ decision may be tainted by self-interest.

CLRC’s recommendations - Director’s duty of care and skill The CLRC noted that our Companies Act is silent

with respect to the care and skill that is expected by a director.

Therefore, the CLRC recommends that: a) the Companies Act should incorporate the

directors’ obligation to exercise care and skill; and

b) the standard of care and skill expected of directors should reflect a mixed test of subjective and objective standard of care.

CLRC’s recommendations - Director’s duty of care and skill Duty to exercise care, skill and diligence

means the care, skill and diligence that would be exercised by a reasonably diligent person with:

a) the general knowledge, skill and experience that may reasonably be expected of a director;

b) the general knowledge, skill and experience that a director has.

Companies (Amendment) Act 2007

New Sections 131A and 131B: “Subject to section 131, a director of a

company who is in any way, whether directly or indirectly, interested in a contract entered into or proposed to be entered into by the company, unless the interest is one that need not be disclosed under section 131, shall be counted only to make the quorum at the board meeting but shall not participate in any


discussion while the contract or proposed contract is being considered at the board meeting and shall not vote on the contract or proposed contract.”

S131B provides that the directors have the power to manage or supervise the affairs of the company.


Amendment of Section 132 (1) A director of a company shall at all times

exercise his powers for a proper purpose and in good faith in the best interest of the company.

(1A) A director of a company shall exercise reasonable care, skill and diligence with –

(a) the knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities; and


(b) any additional knowledge, skill and experience which the director in fact has.

Business judgment (1B) A director who makes a business

judgment is deemed to meet the requirements of the duty under subsection (1A) and the equivalent duties under the common law and in equity if the director


(a) makes the business judgment in good faith for a proper purpose;

(b) does not have a material personal interest in the subject matter of the business judgment;

(c) is informed about the subject matter of the business judgment to the extent the director reasonably believes to be appropriate under the circumstances; and


(d) reasonably believes that the business judgment is in the best interest of the company.

Prohibition against improper use of company's property, position, corporate opportunity or competing with the company

(2) A director or officer of a company shall not, without the consent or ratification of a general meeting-


(a) use the property of the company; (b) use any information acquired by virtue of

his position as a director or officer of the company;

(c) use his position as such director or officer; (d) use any opportunity of the company which

he became aware of, in the performance of his functions as the director or officer of the company; or


(e) engage in business which is in competition with the company, to gain directly or indirectly, a benefit for himself or any other person, or cause detriment to the company.";

and (d) in subsection (6), by inserting after the

definition of "agent" the following definitions:


' "business judgment" means any decision on whether or not to take action in respect of a matter relevant to the business of the company;

"director" includes the chief executive officer, the chief operating officer, the chief financial controller or any other person primarily responsible for the operations or financial management of a company, by whatever name called;'.


Deletion of section 132A The principal Act is amended by deleting

section 132A. Deletion of section 132B The principal Act is amended by deleting

section 132B.

Other statutory obligations

Obligation to keep registers To make documents available for inspection Keeping minutes of meetings Keeping accounting records and books To hold AGM To lodge changes in particulars of the

company, directors and secretaries To record and note interests of and disclosure

by directors or chief executives, their spouses, children or parents of their interest in securities of a company

New Section 167A on system of Internal control

S167A provides: Except as otherwise provided for in the listing

requirement of a stock exchange in relation to companies whose share are listed for quotation on the stock exchange, the directors of a public company or a subsidiary of a public company shall have in place a system of internal control that will provide a reasonable assurance that:

New Section 167A on system of Internal control A) assets of the company are safeguarded

against loss from unauthorised use or disposition; and

B) all transaction are properly authorised and that they are recorded as necessary to enable the preparation of true and fair profit and loss account and balance sheets and to give a proper account of the assets.

Penalty: Imprisonment of 6 months or RM10,000 or both

UK Company Act 2006

Received Royal Assent on 8th November 2006 and all parts of the Act will be commenced by October 2008.

UK Company Act 2006

S170 provides the scope and nature of general duties owed by a director of a company to a company.

The general duties : S171 - Duty to act within powers S172 - Duty to promote the success of the

company S173 - Duty to exercise independent

judgment

UK Company Act 2006

S174 - Duty to exercise reasonable care, skill and diligence

S175 - Duty to avoid conflict of interest S176 - Duty not to accept benefits from third

parties S177 - Duty to declare interest in proposed

transaction or arrangement

S172 UK CA 2006 1) A director of a company must act in the way he

considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to-

(a) the likely consequences of any decision in the long term,

(b) the interests of the company's employees (c) the need to foster the company's business

relationships with suppliers, customers and others,

(d) the impact of the company's operations on the community and the environment,

S172 UK CA 2006

(e) the desirability of the company maintaining a reputation for high standards of business conduct, and

(f) the need to act fairly as between members of the company.

(2) Where or to the extent that the purposes of the company consist of or include purposes other than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the company for the benefit of its members were to achieving those purposes

S172 UK CA 2006

(3) The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company.

S173 UK CA 2006

(1) A director of a company must exercise independent judgment.(2) This duty is not infringed by his acting-

(a) in accordance with an agreement duly entered into by the company that restricts the future exercise of discretion by its directors, or

(b) in a way authorised by the company's constitution.

S174 UK CA 2006 (1) A director of a company must exercise

reasonable care, skill and diligence.(2) This means the care, skill and diligence that would be exercised by a reasonably diligent person with-

(a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company, and

(b) the general knowledge, skill and experience that the director has.

Directors’ duties under BSLR - Directors’ Training

Para 15.09 LR 1) A director of a listed issuer must ensure

that he attends such training programmes as may be prescribe by the Exchange from time to time

2) The Board of directors must disclose in the annual report of the listed issuer whether its directors have attended training for the financial year. Where one of its directors have not attended the training for the financial year, the board of directors must state the reasons in the annual report.

Directors’ duties under BSLR - Corporate Governance Disclosure Para 15.26 Disclosure pursuant to the

Code A listed issuer must ensure that its board of

directors makes the following statements in relation to its compliance with the Malaysian Code on Corporate Governance in its annual report:-

A) a narrative statement of how its listed company has applied the principles set out in Part 1 of the Malaysian Code on Corporate Governance to their particular circumstances; and

Directors’ duties under BSLR - Corporate Governance Disclosure B) a statement on the extent of compliance

with the Best Practice of Corporate Governance set out in Part 2 of the Malaysian Code on Corporate Governance which statement shall specifically identify and give reasons for any area of non-compliance with Part 2 and the alternatives to the Best Practices adopted by the listed issuer if any.

Directors’ duties under BSLR - Corporate Governance Disclosure Para 15.27 Additional statements by the

board of directors A listed issuer must ensure that its board of

directors makes the following additional statement in its annual report:-

A) a statement explaining the board of directors’ responsibility for preparing the annual audited accounts; and

B) a statement about the state of internal controls of the listed issuer as a group.

Contents of Internal Controls

In making the internal control statement, a listed issuer is required to address the Principles and best Practices in the Code, namely:

A) Principle D II in Part 1 of the Code which reads as follows:

“the Board should maintain a sound system of internal control to safeguard shareholders’ investments and company’s assets.”

Practice Note No.9/2001 Disclosure in relation to Malaysian Code on Corporate Governance and the state on internal control

Contents of Internal Controls B) Best Practice AAI in Part 2 of the Code

which read as follows: “the Board should explicitly assume the

following specific responsibilities, which facilitate the discharge of board’s stewardship responsibilities:-

Identify principal risks and ensure implementation of appropriate system to manage risks


Contents of Internal Controls

Reviewing the adequacy and integrity of the company internal control system and management information system, including system for compliance with applicable laws, regulations, rules, directives and guidelines


Non-compliance of the BSLR

Section 11 of the Securities Industry Act 1983 provides that :

Where any person fails to comply the rules of stock exchange, that person has committed a breach.

If a person has committed a breach, the Securities Commission may take one or more of the following actions:

A) direct the person to comply with, observe, enforce or give effect to those rules;

Non-compliance of the BSLR

B) impose a penalty in proportion to the severity or gravity of the breach but not exceeding RM1 million

C) reprimand the person in breach D) require the person in breach to take steps

as the Commission direct to remedy the breach.

BREACH OF BSLR

PARA 16.16 BSLR IN THE EVENT OF BREACH OF LR BY A

LISTED ISSUER OR ITS DIRECTORS, THE BSLR MAY, AFTER CONSULTATION WITH SC, TAKE OR IMPOSE SUCH ACTIONS OR PENALTIES AS IT CONSIDER APPROPRIATE.

ACTIONS OR PENALTIES IN RELATION TO DIRECTORS

PARA 16.17(1)(b) ISSUANCE OF PUBLIC REPRIMAND IMPOSITION OF A FINE NOT EXCEEDING

RM1 MILLION PROHIBITION OF DEALINGS IN

SECURITIES

COMMON BREACHES OF BSLR

LATE SUBMISSION OF QUARTERLY REPORT

LATE SUBMISSION OF ANNUAL AUDITED ACCOUNTS TOGETHER WITH AUDITORS’ AND DIRECTORS’ REPORT

FAILURE TO MAKE IMMEDIATE ANNOUNCEMENTS IN RESPECT OF WINDING-UP PETITION

COMMON OFFENCES AND PENALTIES

OUT OF THE 326 INVESTIGATION CASES INITIATED AND CARRIED OUT ON PUBLIC LISTED COMPANIES DURING THE FINANCIAL YEAR ENDED 31/12/2003, 169 (51.8%) WERE DUE TO FAILURE IN COMPLYING WITH DISCLOSURE REQUIREMENTS.

Investigation Cases initiated during the FYE 31/12/2003

48%

40%

1%

3% 5% 2%1%

Failure to comply w ith the policy on Response to Unusual Market Activity/Failure to promptly provide information ordocuments to the ExchangeFailure to comply w ith requirements on Corporate Disclosure Policy and Immediate Announcements

Failure to comply w ith Approved Accounting Standards

Failure to release Quarterly Reports on time

Failure to furnish Annual Audited Accounts on time

Failure to furnish Annual Reports on time

Others

Bursa Securities Annual Report 2003

COMMON OFFENCES AND PENALTIES

BURSA SECURITIES ISSUED 44 PUBLIC REPRIMANDS IN 2006 FOR VARIOUS BREACHES OF THE LISTING REQUIREMENTS.

ALMOST ALL OFFENCES WERE A RESULT OF BREACHING CHAPTER 9 CONTINUING REQUIREMENTS.

28 OUT OF THE 44 REPRIMANDS INCLUDED PENALTIES WHICH INVOLVED FINES THAT RANGED FROM RM3,000 TO RM400,000.

PUBLIC REPRIMANDS WITH PENALTIES BY BURSA SECURITIES IN 2004

Public Reprimands with Penalties by Bursa Securities in 2004

01234567

9.22(1) 9.23(b) 9.03(1) 9.23(a) 9.04(f) 9.04(l) 9.16(1) PN1/2001para

2.1(d)

PN1/2001para

2.1(e)

9.11(1)

Offence - breach of

Fre

quen

cy

Offences (Year 2004)– breach ofFrequency

Listing Requirement Section

9.22(1) Quarterly Report Periodic Disclosure 6

9.23(b)Submission of Annual Audited Accounts and Annual Report

Periodic Disclosure 6

9.03(1) Disclosure of Material InformationImmediate Disclosure of Material Information

4

9.23(a)Submission of Annual Audited Accounts and Annual Report

Periodic Disclosure 3

9.04(f)Examples of Events which Require Immediate Disclosure

Immediate Disclosure ofMaterial Information

2

9.04(l)Examples of Events which Require Immediate Disclosure

Immediate Disclosure of Material Information

2

9.16(1)Content of Press or Other PublicAnnouncement

Preparation of Announcements 2

PN 1/2001 para 2.1(d)

(affects 9.03 & 9.04)Immediate Disclosure of Material Information

2

PN 1/2001 para 2.1(e)

(affects 9.03 & 9.04) Immediate Disclosure of Material Information

2

9.11(1) Unusual Market ActivityResponse to Unusual MarketActivity

1

Total number of separate offences 26

Actions taken for breaches of BSLR – As at 31 Dec 2005

0

5

10

15

20

25

Para9.11

Chapter9 except

9.11

Chapter8

Para16.11

Para9.22(1)

Para9.23(a)

Para9.23(b)

Public reprimand & fines

Offences for Year 2005

Sanctions imposed for 12 months ended 31 Dec 2005

Type of casesPublic Reprimand & Fine

Failure to comply with the policy on Response to Unusual Market

Activity/Failure to promptly provide information or documents to the Exchange - Part F of Chapter 9 of the LR 1

Failure to comply with requirements on Corporate Disclosure Policy and immediate Announcement - Chapter 9 (except for Part F, Para 9.22-9.26 of the LRD) 8

Failure to comply with Continuing Listing Obligations - chapter 8 of LR 4

Breach of Directors for causing, aiding or abetting; or permitting a breach of LR by Listed Issuer - Para 16.11 of LR 12

Failure to release Quarterly reports on time - Para 9.22(1) of LR 18

Failure to furnish Annual Reports on time - Para 9.23(a) of LR 12

Failure to furnish Annual Audited Accounts on time - Para 9.23(b) of LR 20

TOTAL 75

PUBLIC REPRIMAND BY BURSA ON COMPANIES & DIRECTORS

BURSA MALAYSIA SECURITIES BERHAD (BURSA SECURITIES) PUBLICLY REPRIMANDED THE PRINCIPAL OFFICERS OF MULTI VEST RESOURCES BERHAD (“MVEST”), i.e. MR. K. SELVESWARAN A/L KANAGARATNAM (SENIOR VICE PRESIDENT- GROUP OPERATIONS DIVISION AT THE MATERIAL TIME) AND MR TANG YOW SAN (VICE PRESIDENT, GROUP FINANCE DIVISION/JOINT COMPANY SECRETARY AT THE MATERIAL TIME) FOR BREACH OF PARAGRAPH 14.05 OF THE LISTING REQUIREMENTS OF BURSA SECURITIES.

8.3.2006

PUBLIC REPRIMAND BY BURSA ON COMPANIES & DIRECTORS

BURSA MALAYSIA SECURITIES BERHAD HAS PUBLICLY REPRIMANDED MR. SABJIT SINGH S/O SARBAN SINGH, THE FORMER DIRECTOR OF QSR AND KFC FOR BREACH OF PARAGRAPHS 2.17(3) OF THE LISTING REQUIREMENTS OF BURSA SECURITIES (“BURSA SECURITIES LR”).

8.3.2006

FINES IMPOSED BY BURSA ON COMPANIES & DIRECTORS

BURSA MALAYSIA SECURITIES BERHAD (BURSA SECURITIES) PUBLICLY REPRIMANDED AND IMPOSED A TOTAL FINE OF RM700,000 ON YCS CORPORATION BERHAD FOR BREACH OF PARAGRAPH 9.23 OF THE LISTING REQUIREMENTS OF BURSA SECURITIES (BURSA SECURITIES LR)

9 Aug 2005


BESIDES, THE FORMER MANAGING DIRECTOR OF YCS CORPORATION BERHAD, YAP KWEE HUAT WAS BEING REPRIMANDED AND IMPOSED A FINE OF RM100,000 FOR BREACH OF PARAGRAPH 16.11(a) OF THE BURSA SECURITIES LR FOR CAUSING THE COMPANY TO BREACH PARAGRAPH 9.23 OF THE BURSA SECURITIES LR IN RESPECT OF THE FAILURE TO SUBMIT THE ANNUAL REPORT 2001 AND ANNUAL AUDITED ACCOUNT 2001 WITHIN THE STIPULATED TIMEFRAMES.

9 Aug 2005


BURSA MALAYSIA SECURITIES BERHAD HAS PUBLICLY REPRIMANDED AND IMPOSED A FINE OF RM100,000 ON EACH OF THE DIRECTORS OF TANAMAS FOR BREACH OF PARAGRAPH 16.11(a) OF THE LISTING REQUIREMENTS OF BURSA SECURITIES (BURSA SCURITIES LR)

9 Aug 2005


BESIDES, BURSA SECURITIES ALSO PUBLICLY REPRIMANDED THE FORMER EXECUTIVE DIRECTOR OF TANAMAS, NAMELY DATO’ HAMZAH BIN ZAINUDIN FOR BREACH OF PARAGRAPH 16.11(b) OF THE BURSA SECURITIES LR.

9 Aug 2005

FINES IMPOSED BY BURSA ON COMPANIES & DIRECTORS Bursa Securities has publicly reprimanded Dceil

International Berhad for failure to make immediate announcements in respect of various defaults in payment of credit facilities by subsidiaries of the company.

Bursa has also taken enforcement action against the executive directors of the company, namely Dato’ Dr Tan Seng An and Datin Tan Bee Lian to be in breach of Para 16.11 and Para 14.05 of the LR.

20 Dec 2006

FINES IMPOSED BY BURSA ON COMPANIES & DIRECTORS Penalties imposed under Para 16.11: Public Reprimand and a fine of RM25,000

Penalties imposed under Para 14.05: Public Reprimand and a fine of RM500,000

Directors’ duties under SC Policies and Guidelines on Issue/Offer of Securities The guidelines of the SC sets out the

requirements which have to be met before embarking a corporate proposal set out in S32 of the Securities Commission Act 1993.

Para 4.07 Each director concerned is required to give a

declaration in the form stipulated in the Schedule of this guidelines as to his/her fitness and competence to act as directors.

Directors’ duties under SC Policies and Guidelines on Issue/Offer of Securities Para 6.20 No material conflict of interest between the

company and its directors or substantial shareholders should exist.

Where conflict of interest exists, the company is required to declare the nature, character and extent of the relationship and the conflict of interest to the SC.

Securities Fraud

Yip Yee Foo and Chung Wai Meng, directors of Cold Storage (Malaysia) Bhd (CSM), were charged on 24 Sept 2004 for defrauding CSM by transferring RM185 million of CSM’s funds to pay for the purchase of CSM shares by Fulham Finance and Trade Ltd and Excoplex Sdn Bhd

They were both charged in the alternative for CBT of the said RM185 million.

Source: www.sc.com.my

False or Misleading Statements under Securities Commission Act 1993

Section 32B, where any statements or information is required to be submitted to the Commission in relation to or in connection with any proposal submitted pursuant to section 32

(a) an applicant, any of its officers or associates (b) financial adviser or an expert; or (c) any other person, shall not


(aa) submit or cause to be submitted any statement or information that is false or misleading;

(bb) Submit or cause to be submitted any statement or information from which there is a material omission; or

(cc) Engage in or aid or abet conduct that he knows to be misleading or deceptive or is likely to mislead or deceive the Commission.


Punishment(4) Fine not exceeding three million ringgit or

imprisonment for a term not exceeding ten years or both.

Section 138(2), ... Any person who was a director, a chief executive officer, an officer, an employee, a representative or the secretary of the body corporate …shall be deemed to have committed that offence unless he proves that the offence was committed without his consent.


Yap Kim Seng the Managing Director of Pasaraya Hiong Kong Sdn Bhd was charged for causing to be submitted to the SC false information. The false information was submitted in connection with Ocean Capital Berhad’s application to SC for its proposed corporate restructuring exercise, which included the proposed acquisition of PHK. PHK’s Financial Statements for the year ended 31.3.2003 contained fictitious sales totaling RM7,786,665 which had the effect of increasing PHK’s profit before tax to RM13,073,565.


Had the fictitious transactions not been captured in the accounting records of PHK, it would have recorded a profit before tax of RM5,286.900. This would have resulted in PHK reporting an after tax profit of well below the minimum RM8,000,000 required for a listing on the Main Board of the Kuala Lumpur Stock Exchange.


The Sessions Court sentenced Yap Kim Seng to two years’ imprisonment after taking into consideration the potential loss that could have occurred had the restructuring proposal been implemented.

Securities Commission Press Release : 16.1.2006

Profile of Offences Prosecuted by the Securities Commission (1999-August 2004)

Fraud (5.7%) (3 cases,11 individuals) Short selling & licensing related offences (32%)

(17 cases, 18 individuals * Corporate Governance (45.3%) (24 cases, 40

individuals) Futures industry Offences (17%) (9 cases, 17

individuals)

Source: Paper presented by Nik Ramlah Mahmood at The 6th Asian Roundtable on Corporate Governance 2-3 Nov 2004

Profile of Offences Prosecuted by the Securities Commission (1999-August 2004)

* Corporate Governance offences include: Providing false or misleading info on

proposals/dealings in securities or affairs of company

Fraud involving directors or management Mis-utilisation of public issue proceeds Breach of condition of SC’s approval Trading offences involving directors or

management

Common Offences committed by directors

s55(1)(a) of the Securities Commission Act 1993

No person shall authorise or cause the issue of a prospectus which contains- (a) any statement or information that is

false or misleading; or (b) any statement or information from which

there is a material omission.


122B. False reports to Commission, stock exchange or recognised clearing house.

A person who- (a) with intent to deceive, makes or furnishes; or (b) knowingly authorises or permits the making or

furnishing of,

any false or misleading statement or report to the Commission, a stock exchange or a recognised clearing house relating to-


(aa) dealings in securities; (bb) the affairs of a listed corporation; (cc) any matter or thing required by the

Commission for the due administration of this Act; or

(dd) the enforcement of the rules of a stock exchange or the rules of a recognised clearing house,


commits an offence and is liable on conviction to a fine not exceeding three million ringgit or to imprisonment for a term not exceeding ten years or to both.

Common Offences committed by directors s364(2) CA Every person who in any return, report, certificate,

balance sheet or other document required by or for the purposes of this Act makes or authorizes the making of a statement false or misleading in any material particular knowing it to be false or misleading or intentionally omits or authorizes the omission or accession of any matter or thing thereby making the document misleading in a material respect shall be guilty of an offence against this Act

Press Release from SC

SC charges three persons for submitting false information in NasionCom case - 28 May 2007

This is in relation to NasionCom Holdings Bhd (NasionCom) financial statements for the year ended 31 December 2005 and NasionCom Prospectus for listing on the MESDAQ Market.

http://www.sc.com.my


Offences committed by the directors: A) under s55(1)(a) of the Securities

Commission Act 1993 (SCA) for causing the issuance of NasionCom Prospectus for listing on the MESDAQ Market, which contained misleading information. This offence is punishable under s55(3) of the SCA which carries a maximum penalty of RM3 million fine or 10 years imprisonment or both;


B) under s122B(a)(bb) Securities Industry Act 1983 (SIA) read together with s122 of the same Act , in his capacity as a director, is deemed to have submitted false information to the SC contained in the 2005 Annual Report of NasionCom, in particular, its revenue for the FYE 31 December 2005. This offence is punishable under s122B of the SIA, which carries a maximum fine of RM3 million or imprisonment not exceeding 10 years or both; and

Press Release from SC C) under s364(2) of the Companies Act 1965

for authorising the making of false statements in the documents of NasionCom Sdn Bhd which are required to be kept under s167(1) of the Companies Act 1965. These false statements were used for the preparation of NasionCom's Financial Statement for the FYE 31 December 2005. This offence is punishable under s364(2) of the Companies Act 1965 which carries a maximum imprisonment of 10 years or RM250,000 fine.

Press Release from SC SC charges Tan Siok Wan and Lee Sin Teck for

falsifying information in GP Ocean listing proposal - 18 April 2007

Tan Siok Wan, co-founder and Executive Director/Chief Operating Officer of GP Ocean, and Lee Sin Teck, co-founder and Managing Director/Executive Vice Chairman of GP Ocean, were charged for submitting misleading information to the SC in connection with GP Ocean’s proposal for listing on the Main Board of Bursa Malaysia Securities Berhad.

Press Release from SC Following the SC’s investigation, it was

revealed that the misleading information submitted was contained in:a) the GP Ocean’s ‘Directors’ Report and Audited Financial Statements 31 January 2006’ at page nine and 25; andb) the list titled ‘GP Ocean Food Berhad Top Ten Customer’.


Tan Siok Wan and Lee Sin Teck are charged for an offence under section 32B(1)(a)(aa) of the Securities Commission Act 1993 (SCA) read together with section 138(2) of the SCA.


SC charges two more directors of GP Ocean for submitting misleading information in GP Ocean listing proposal - 22 May 2007

The directors were charged for submitting misleading information to the SC in connection with GP Ocean's proposal for listing on the Main Board of Bursa Malaysia Securities Berhad.

http://www.sc.com.my


GP Ocean submitted its listing proposal to the SC on 23 August 2005. They later revised the proposal and resubmitted to the SC on 15 February 2006.

The SC's investigation revealed the submission of misleading information pertaining to revenue figures for financial statements for the year ended 31 January 2006 amounting to:


RM142,452,400 for Gropoint Fisheries Sdn Bhd and RM38,009,652 for Gropoint Seafood Industries; and

RM180,462,052 for GP Ocean. The directors are charged for an offence

under section 32B(1)(a)(aa) of the Securities Commission Act 1993 (SCA) read together with section 138(2) of the SCA.

Conclusion

It appears that the task of clarifying and reformulating directors’ duties so as to promote accountability is not an easy one but it has to be done so as to ensure that our corporate law framework remains effective and can facilitate business.

The confidence of the investors should not be derogated by poor performance of the directors

Conclusion

Although the Companies (Amendment) Act 2007 has incorporated major changes to directors’ duties especially in S132, it can be seen that the recommendations of the CLRC has not completely found its way to the Act.

Contributions from Sum Wai Hoe, LLB (Leeds), CLP

The End

Thank you

new directions in duties and liabilities of directors by lee swee seng llb(hons), llm, mba lee swee...

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