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The Commercial & Industrial Accountant2016 Year End Issue ◙ KDN PP 12087/05/2013 (032457)

Inside:

Auditor’s Independence Tan Sri Lau Ban Tin

The Future of CFOs in Malaysia Dominic Shum

Companies Act – Old & New Compared Tan, TL & Lau WY

Benefits of Being an ICIA member

New ICIA Website

The Official Annual Journal of the Institute of Commercial and Industrial Accountants, Malaysia

Inside:

Auditor’s Independence Tan Sri Lau Ban Tin

The Future of CFOs in Malaysia Dominic Shum

Companies Act – Old & New Compared Tan, TL & Lau WY

Benefits of Being an ICIA member

New ICIA Website

The Institute of Commercial and Industrial Accountants, Malaysia

(Registration No. PPM-018-14-09091980)

VisionICIA shall strive to be the 2ⁿd largest accountancy body in Malaysia and a respectable accountancy institute by 2020.

MissionICIA shall represent, promote, advance and protect the interest of all commercial and industrial accountants through the pursuit of excellence and integrity in all spheres of activity undertaken by the Institute and to create value for its members by:

• Establishing a forum for discussion and representation, on all issues affecting the members.

• Enhancing the skills and knowledge of members through CPD and provision of an alternative and a flexible avenue for advancement.

• Enhancing the profile and recognition of its members’ capacity and ability in all disciplines of accounting, finance, taxation and corporate administration.

• Creating qualifications that are valued and recognized.

• Core Values

o Integrity

o Continuing education and training

o Ethical conduct and discipline

ObjectiveTo provide an organization for accountants and to support and advance the status and interest and protect the character of the accountancy profession and to execute professional supervision over the members of the Institute and to frame and establish rules for observance in matters pertaining to professional conduct

www.icia.asia

The Commercial and Industrial Accountant

© 2016 Institute of Commercial and Industrial Accountants, Malaysia2

Editorial The Editorial Board

Dear Readers,

The Institute of Commercial and Industrial Accountants of Malaysia has been operating for 36years and this year we have finally come of age. Members can now avail themselves of membership of two IFAC members bodies which have recognised our qualifications as their equivalent. This is due to Mr. Lee Tiong Kheng who has been instrumental in the signing of a Mutual Recognition agreement (MRA) with IPA which indirectly included IFA when the two bodies became partners. Special thanks also to the education and acredition committee led by M. Tharmaseelan for his efforts to improve the quality of our qualifications and acreditation arrangements with many institutions of higher learning. The year 2016 has been an eventful year for the Institute with many ground breaking activities and it is our intention to close the year with a completely revamped and improved Yearly Journal.

A professional body’s reputation and effectiveness is mainly earned from the quality of its qualification and the acceptance of the institution by the business community. As a professional body for commercial and industrial accountants, it is important therefore for the institute to highlight to the public the quality of our members and the Council that manages it. This journal is one way of achieving the above by communicating to the public the activities that we have and the intellectual prowess of our members. We have also updated the website to continue to communicate better with members and the public in general and our facebook page has been very active.

Finally, I am grateful to the Council for allowing me this opportunity to manage the publication of the journal and I would also like to thank Mr. Kenny Ong, a senior member of the council for his dedication, hardwork and assistance in publishing this journal. This year we have also invited two distinguished academicians to be guest editors for the articles thus achieving another first for the institute as this is the first time our articles have been externally and professionally peer reviewed. We thank Dr. Lau and Dr. Ong for their time and advice in this respect. Finally, thank you all for reading this Journal and I hope you will enjoy it.

Dominic Shum, FICA, MBA, BBA

Managing Editor

Kenny Ong, FICA

Editor

Guest Editors

Dr. Lau Wee Yeap CA(M), CPA, PhD, MEc, MFE, MAppStats, MAcc

Senior Lecturer, UM

Dr. Ong Seng Fook PHD, MBA, BBA

Assistant Professor, UTAR

Front Cover Image Courtesy of Tan Kok Guan

Happy Reading and a Happy New Year 2017 to all readers!

Dominic ShumManaging Editor24 December 2016


© 2016 Institute of Commercial and Industrial Accountants, Malaysia 3

Contents

A front page view of ICIA’s new website

PageVision & Mission 1Editorial 2Contents 3Foreward by Patron 4Patron’s Profile 5President’s Message & Profile 6New Certified Commercial Accountants 7Collaboration with MAHSA University 8Accounting Profession Talk at Lincoln University College 9The New ICIA’s Website 10Benefits of Being an ICIA Member 11Results of the 2016/17 AGM Election 12ICIA’s Extraordinary General Meeting 13Special Article – Auditors’ Independence 15The Future of CFOs in Malaysia 19Comparison Between Companies Act 1965 23and Companies Act 2016 Understanding the Whistleblower Protection Act 30Institute’s News and Announcements 35The Institute’s Council 37



Foreword by Patron

My fellow Certified Commercial and Industrial Accountants,

1. ICIA was formed 36 years ago to house practising professional accountants in the commerce and industries. It is the only professional accountancy body that cater for the private sectors. Our members are financial controllers, financial accountants, cost accountants or simply accountants in corporations big or small.

2. It has always been an issue of what is a competent accountant. The universities/academics have always propounded the idea that it is the research and teachings by the academic staff that shape the content and direction of the accountancy profession. In their ivory towers, they believe that they are the nerve centres expounding new ideas and concept that mould accounting and related subject. They hold debates, discussion and brain storming session. Their researchers research into new angles and new ideas and unto books and thesis that become the latest Financial Reporting Standard. They are Einstein and Newton of accounting profession. We hear them. But in the real world, there are thousands of universities. From the mediocre universities to prestigious one like Cambridge and Oxford, we can assess the truly competency level of our accounting graduates. Hence, the formation of professional bodies in various countries to regulate the accounting profession. Except for UK (the evolution of profession is earlier than legislation). Malaysia formed Malaysian Institute of Accountants (MIA) to regulate the accounting profession in Malaysia.

3. To regulate, MIA must regulate judicially. The aim of MIA must be regulating the profession to produce competent accountants and highly independent auditors. Does MIA achieve that? Except for QE, MIA does not have its own formal examination unlike ICAE&W, ACCA, AIA, CAA&NZ, etc … So MIA has a short-cut of a list of recognised qualifications under Schedule II of the Accountants Act. To ensure that accountants are registered with MIA, MIA has wrongly invoked Section 22 and 23 of the Accountants Act to say that it is illegal to hold out as accountant if you are not a MIA member. If you look carefully at the Act, the words are “adopt, … like description in such circumstances as to indicate or to be likely to lead persons to infer that he is a Chartered Accountant”. You will note that there is no full-stop at the end of the word “like description”. This means, if you are not a MIA member, and DO NOT “indicate or to be likely to lead person …. A Chartered Accountant”, then it is OK to use the title accountant. For example Cost Accountant (non-MIA member). In this way, nobody will “infer …”. I believe CSAP will look into this confusion. While, the professional bodies claim that they regulate and uphold professional standard and competency level of their members, there is still the ultimate group to decide the true competency level. The users or employers. It is commerce and industry who employ these accountants that decide final level of competency. They gauge the accountants proficiency by giving them the time value of their worth in the form of salaries and perks. For this, please listen to the SMI and SME bosses praying for holders of LCCI Advanced Diploma to work for them. With the advent of ICT, accounting administration has taken into a new dimension. Thus, the 3 champions (who claim the decider of profession) which are the academics (universities), professional bodies and the users (commerce and industry) will continue to debate until cows come home. We rely on CSAP to find a conclusion.

4. In 1992, I have proposed a new direction for the accounting profession in MIT (now UiTM). I proposed that there should be a 3-tiered sub-institutes within MIA (Surprising Mike Harvey of ACCA thought that I copied from him as he also presented the same idea in one African Conference until I showed him the acknowledgement date of my paper presented to MIT which was one year earlier than his conference date). Please read this new direction in my separate article.

5. Year end is here again. Have a great holiday.

Regards

YB Tan Sri Dr. Lau Ban Tin.



♦♦♦♦♦♦♦♦ About our Patron ♦♦♦♦♦♦♦♦

PROFILE OF A CERTIFIED COMMERCIAL AND INDUSTRIAL ACCOUNTANT

Tan Sri Dato’ Sri Dr. Lau Ban Tin PSM, SSAP, DSSA, JP, CA(M), FCTIM, FCMA, CGMA, FAIA, FCPA (Aust.) FICA, MBA, DBA (SCU), Justice of the Peace

Y. Bhg Tan Sri Dato’ Sri Dr. Lau Ban Tin, aged 59, is a Chartered Accountant and a Consultant Economist by profession. He is a member of the Malaysian Institute of Accountants, a fellow member of the Chartered Tax Institute of Malaysia, the Chartered Institute of Management Accountants, UK, CPA Australia, Association of International Accountants, UK and the Institute of Commercial and Industrial Accountants, Malaysia. Tan Sri Lau obtained his MBA and Doctorate degrees in Economics (DBA) from the Southern Cross University, an Australian public university. He was also awarded a postgraduate certificate in commercial law by the University of Derby, UK. He is a member of the Young President Organisation - Gold, the International Real Estate Federation (FIABCI Malaysian Chapter), Malaysian Economic Association, the Klang Chinese Chamber of Commerce and Industries (adviser), Chairman of Klang Hin Ann Association (2008-2014) and

Committee member of Klang Hokkien Association. He was a former Vice-President of the Malaysian Institute of Corporate Governance, Council member of MIA and Chairman of Klang Red Cresent Society. He is also a Justice of the Peace since 1999. Tan Sri Lau was conferred the Chivalry Order of “DSSA” in year 1993 by HRH Sultan Selangor, “PSM” in year 2000 by HM the King of Malaysia and “SSAP” in 2015 by HRH Sultan Pahang.

Since 1994 (22 years ago), Tan Sri Lau operates a handicapped children home known as Persatuan Penjagaan Kanak-Kanak Cacat Klang where he is taking care of 68 handicapped and Down-Syndrome children. He is an honorary member of Rotary Club, Bandar Utama. Tan Sri Lau has also set up a student loan fund in Universiti Tunku Abdul Rahman known as “Tan Sri Lau Ban Tin Student Loan Fund”. He also set up a body called the Malaysian Centre of Entrepreneurs whose aim is to promote entrepreneurship in Malaysia. Tan Sri Lau wrote and published a book titled ‘Capital Control and The Malaysian Economy’ 2005 (ISBN 967-978-862-8). Tan Sri Lau started working at the age of 7 as a roadside peddler selling ice-cream, agar-agar and tikam. He helped out in his family’s hawker stall, bicycle shop and construction company. His right hand was severely injured in a noodle factory when he was 10 years old. Tan Sri Lau started his career as a Project Analyst with Newacres Sdn Bhd (a member of Metroplex Bhd) and was also a Management Accounting lecturer in SBTC [now called Segi University]. Tan Sri Lau was the pioneer in setting up Tawakal Hospital in Kuala Lumpur and was a finance consultant to the Bandar Tun Razak Projek under Kuala Lumpur City Hall.

At present, Tan Sri Lau is the Chairman of B.I.G. industries Bhd, a public listed company listed in Bursa Malaysia. He is also a partner in Bantin & Associates, a Chartered Accountants firm. Tan Sri Lau is also currently developing a number of housing and township projects in Shah Alam and Klang, Selangor and Johor.



President’s MessageIt is with great pleasure that I welcome you to our yearly Journal, the Commercial and Industrial Accountant. The editorial team has promised an extraordinary issue this year and from what I have seen, I think you will like it too. This is the first time that we have external editors for the journals and their input into the journal articles will be much appreciated as it will raise the journal’s standard to a higher level. I wish to record my thanks to the Editorial team, led by Mr. Dominic Shum who has done a good job.

The Institute has had an eventful year and the next year would be even more exciting with the launch of our revamped ICIA program with Online Examinations. This year also saw the revamping of our website under a new URL www.icia.asia which promises to be more interactive and easier to update with the blog section. The Institute has also been invited by a few institutes of higher learning to conduct talks to students and lecturers on accounting topics and to have discussions on how the Institute can work together with them to further our cause and to recruit more members.

We are proud to have achieved a milestone in early 2016 with the acceptance of our Certified Membership (CICA) by the Institute of Public Accountants, Australia (IPA) as qualification to full membership of IPA at MIPA grade. The CICA level is equivalent to an honours degree in accounting.

On a more serious note, the Institute has also been monitoring the developments in the accounting profession and the recommendations of the Committee for Strengthening the Accounting Profession (CSAP). The Council is actively taking steps to ensure that if and when the opportunity arises for recognition, we will be ready.

Amjath Jamal

President’s Profile

President Amjath Jamal Bin Shaik Abdul Kader CICA

Amjath has a MBA (Finance) from International Islamic University Malaysia (IIUM) and a graduate of RMIT University ,Australia (BBA) . He is also a Member of the institute of Public Accountants (IPA) Australia and an Associate of the Institute of Financial Accountants (IFA), UK. He has 30 years of experience in industry mainly in Accounting and Business Management. He is currently a Financial Consultant and a lecturer with Malaysian University of Science & Technology. He has completed coursework requirement of a Doctorate in Business Administration from IIUM . He also has his own management company in Kelana Jaya, Selangor



NEWLY CERTIFIED COMMERCIAL ACCOUNTANTSThe Institute has an eventful year in 2016 with its expansion program to propel the Institute into the forefront in the local accounting scene. Besides going into collaborations with local private universities, colleges and training providers, it took the first initiative to promote to its Associates to upgrade to full membership as Certified Member (CICA). The response from the Associates was encouraging and 30 members in two batches attended the examinations which covered the subjects of Advanced Financial Accounting & Reporting and Advanced Corporate Finance. The duration of the examination was 3 hours.

The successful Associates were upgraded to Certified Membership (CICA). They are vested with the rights to have these designatory letters after their names. The successful Associates by batches were:

1st Batch held on 11th June 2016-10-08 2nd Batch held on 25th June 2016-10-08

1. Chung Chee Wah 1. Adi Seyon

2. Chung Cheng Hoe 2. Amy Siak

3. Chu Chai Yin 3. Ang Yue Leong

4. Koay Hean Kee @ Luah Hean Kee 4. Arriffin Mansor

5. Lee Cheng Woo 5. Chan Kok Kong

6. Lin Kuw Ming 6. Chee Hun Pin

7. Lu Yew Siong 7. Diong Giong Fong, Amy

8. Ng Wan Weng, Vincent 8. Eric Balan a/l Jayabalan

9. Puah Soon Kiat 9. Izhar Kahar

10. Sarawanan Krishnan 10. Leong Cheng Hann

11. Sundramoorthi a/l S.Karuppiah 11. Low Han Men, Aric

12. Tan Keok Lay 12. Narinder Singh a/l Chacha Singh

13. Tan Kok Tee 13. Ramasamy a/l M.Vengatasalan

14. Ungku Shamir b. Ungku Hamzah 14. Thanabalan a/l M. Krishnasamy

15. Vincent Arokiasamy

16. Yap Kok Chung

The Institute congratulates them for their perseverance to gain full membership CICA for them to enhance their knowledge and to gain employability in the accounting professional. The Institute is focussed on the SME sector and its members can play an important accounting role as Company Accountant to provide management and accounting support. The Institute hopes that these newly Certified Members will promote the Institute to their friends, employers and business associates and encourage them to join the ranks of ICIA. Members shall create awareness of the Institute at all levels in the accounting market place to help project the Institute as a preferred accounting qualification.



COLLABORATION WITH MAHSA UNIVERSITY

Council member Mr. Tharmaseelan in action.

MAHSA University, 15 July 2016- A senior delegation from the Institute visited MAHSA University for discussions on possible collaborations between ICIA and MAHSA in the future. Council member Mr. Tharmaseelan, who is our Education and Training committee’s chairman, also presented a talk to accounting students of the university on the Realities of Being an Accountant. His talk was well received by the students who were very attentive and asked a lot of questions. The ICIA brochures which have a brief write up on the Institute, its membership and its examinations were handed to the students.

Membership application forms were also distributed to those who wish to enroll as student or Associate members. The Council will continue to engage with Institutes of higher learning to increase our membership base and to collaborate with them on matters which are mutually beneficial. This includes accreditation of the colleges’ or universities’ accounting qualifications for membership purposes, joint seminars, joint education award programs and other activities.

The reputation and popularity of professional bodies like ICIA depends on the acceptance of the bodies by the public especially institutions of higher learning where potential future members are being developed. This will enhance our reputation in the market and increase our membership base.-DS

Our President En. Amjath and Council Member Tharmaseelan in discussion with Dr. Balan of MAHSA University.

Online Learning and Exams- The next step forward!The Institute is embarking on a journey to improve our offerings to members while improving our efficiency. We are now in final stages of discussion to bring online learning and examinations to the institute. This is important as it will harmonize examinations for all our learning platforms (online or face to face) so that the industry will take notice of the quality of certifications we provide. Online learning will also be cheaper for students and can be done within the comforts of home any time of the day.

To this end we have teamed up with Corporate Learning Consortium Sdn. Bhd. (CLC) and final discussion on the collaboration is now being ironed out. CLC has much experience to offer in this partnership and they have an impressive client list in the financial services industry. Corporate Learning Consortium (CLC) offers end-to-end fully integrated learning solutions that enables the financial sector to manage their entire training – using best practices, proven successes and an eco-system of subject-matter-experts. CLC offers learning programs, provides consultancy on learning strategies and implements learning technologies. CLC has an extensive collection of learning courses and resources dedicated to the financial sector is a potential and valuable resource for the Institute. DS



Accounting Profession Talk at Lincoln University College

Lincoln University College, 22 September 2016- The Institute was invited to give a career talk to students and staff of Lincoln University College in Petaling Jaya on the 22nd of September 2016. Mr. Kenny Ong and Dominic Shum represented ICIA on that day. Mr. Shum gave a one hour talk on the topic of Transcending New Expectations for Accountants to an audience of around 60 students and staff of the university college. He explained the job of the accountant of finance managers have evolved tremendously over the years.

Mr. Shum highlighted that due to various new developments like globalization and computerization, the expectations of accountants from management and stakeholders have evolved as well. Accountants must now be skilled in information technology, international business and general management in addition to their traditional technical skills. They should be prepared to move into general management positions as well as accountants are much sought after for non-accounting senior positions.

Mr. Shum also highlighted that in the future, management would require more strategic management and thinking skills from the accountants and finance professionals due to globalization and the ever changing environment. Such professionals must familiarize themselves with strategic analytical tools and develop strategic thinking capabilities in order to do well in the furture.

In addition to speaking on what is expected by industry of future accountants or finance managers Mr. Shum also introduced the Institute to all present including details on the Institute’s MRA with IPA. He spelt out the membership requirements of the Institute and after the talk, Dr. Ghosh, who is Dean of Business Faculty in Lincoln, expressed his thanks to the Institute and informed that some lecturers have indicated that they would like to join the Institute as members. DS

The Institute’s Vice President, Mr. Dominic Shum giving a talk at Lincoln University College to lecturers and students

The Institute of Commercial and Industrial Accountants of Malaysia.

Training and Equiping Accounting and Finance Professionals for the future!



The New ICIA’s Websiteby Dominic Shum

The Institute launched its new website at www.icia.asia in July 2016 to replace the old site, which was difficult to maintain. Our new website is more user friendly an is now internally managed by the Publication committee. The latest website now has social media sharing buttons for each page so that members can share information on the webpage to friends and colleagues to promote ICIA further. The website now has a blog section which is under the updates menu that publishes the latest happenings in ICIA and other important information that may be used by members. In fact most of the contents in this newsletter have already been published in the blog section. On the right hand panel of the website, the Institute also included direct feeds of news items from BBC and IFAC’s websites to enable members to avail themselves to such news easily at a single location. More feeds will be introduced at a later date when available. DS



Benefits of Being an ICIA MemberThe following are membership benefits of the institute.

• Associate Members and higher are eligible to enroll for the ICIA Program leading to full membership as Certified Industrial & Commercial Accountants (CICA).

• All members are eligible to attend valuable CPD seminars to update themselves on various legislations, accounting standards and other useful topics. Members will be given special pricing for such events.

• The Institute has a Mutual Recognition Agreement (MRA) with Institute of Public Accountants of Australia. Members can get the same membership level in IPA and discounted fees if they join IPA under the MRA.

• Members who qualify under ICIA’s MRA with IPA (which is an IFAC Full Member body) and joins IPA may be Signatories of Listed Companies’ Statutory Accounts* and Act as Audit Committee Members in companies listed in Bursa Malaysia. This is pursuant to Practice Note 13 issued by Bursa Malaysia under Subsection 7.1 (b)** and with reference to section 9.27 and 15.09(1)(c)(iii) of the Listing Requirements of Bursa Malaysia.

• Suitably qualified members of the Institute will be eligible to undertake further studies in any one of our Masters level equvalent specialized certification programs including CMAC (Certified Management Accounting Consultants), CFMC (Certified Financial Management Consultants), CPCC (Certified Professional Corporate Consultants), and CIFC (Certified Islamic Financial Consultants).

• Other benefits include discounts on training by training partners, event partners and other commercial establishments from time to time.

• Recognition by industry- Members can use the relevant post nominal such as AICA, CICA or FICA to promote their professionalism and marketability.

• Free talks and forums by industry based partners on accounting, tax, GST, IT and other products.

• Certified Members may qualify to enroll for EMBA or other Masters Level Programs with certain local universities and colleges. (Terms and conditions may apply)

• Access to our Annual Journal, The Commercial and Industrial Accountant.

• Join us now for a rewarding career in commercial accounting and finance. Email to [email protected] for more information.

* Pursuant to paragraph 9.27 of the Listing Requirements, the director or person primarily responsible for the financial management of the listed issuer, as the case may be, who signs the statutory declaration pursuant to section 169(16) of the Companies Act 1965 (“signatory”) must satisfy the requirements prescribed in that paragraph 9.27 ( “requisite qualifications”).

** PRACTICE NOTE 13: Requirements for Directors & Signatory of Statutory Declaration for Accounts. (BURSA MALAYSIA As at 13 July 2015)



Results of 2016/17 AGM ElectionsPetaling Jaya 14th May 2016- The institute held its annual general meeting at IPA’s office at BU8. Below is the confirmation of the election results and the office-bearers elected immediately after the conclusion of the 36th AGM:

President and Hon. Secretary conducting the 36th AGM.

Line-up of Office-bearers and council members after the 36th AGM on 14th May 2016 were as follows

1) President: En Amjath Jamal Sheik Kader (re-elected on 14/5/ 2016)

2) Vice President: Shum Ying Loon (elected on 14 /5/ 2016) Resigned October 2016

3) Hon Secretary: Lee Tiong Kheng (co-opted on 14 /5/ 2016)

4) Hon Treasurer: Arriffin Mansor (co-opted on 14/5/2016)

5) Council member: Kenny Ong

6) Council member: Lee Ah Heng

7) Council member: T. Tharmaseelen (re-elected on 14 /5/ 2016)

8) Council member: Tan Yen Wooi (co-opted on 14 /5/2016)

9) Council member: Noraizwa Shariff (co-opted effective from 4/6/2016)

We welcome and congratulate the new Council and hope that they will bring us to greater heights. Several committees were set up by the new Council to move the Institute forward and higher. The names of the committees and chairpersons are listed below.

• Education & Accreditation - Mr T. Tharmaseelan

• Membership - Mr Kenny Ong

• Publication – Dominic Shum (Resigned and replaced by Lee TK)

• CPD & Seminar - Mr T. Tharmaseelan

• Disciplinary - Mr Tan Yen Wooi

• Examination Board - En. Amjath Jamal Bin Shaik Abdul Kader

ICIA’S EXTRAORDINARY GENERAL MEETING



ICIA Members listening attentively to the Chairman during the EGM.

Bandar Utama, 6th of August 2016- the Institute of Commercial and Industrial Accountants Malaysia held an Extraordinary General Meeting for members to approve changes in the constitution which will help streamline the Institute operations and position ourselves for the future. The following resolutions were proposed and duly resolved with the requisite 2/3 majority.

• Proposal to change of registered and postal addresses.

• Proposed changes to Constitution which include major and minor amendments were as follows;

o The change of the Institute’s name to Institute of Corporate Accountants (ICA) and the change of logo accordingly

o Amendments of the prerequisite clause for associateship to include holders of accredited diploma and accredited degrees.

o Amending the clause for notification to the Hon. Secretary from 40 days to 30 days with regards to the inclusion of deletions or additions of Clauses in AGM or EGM together with the names of the proposers and seconders.

o Other minor mistakes with regards to language and typing errors.

• Proposal to apply for internet banking facilities with Malayan Banking Berhad to enhance the efficiency handling receipts of the Institute and printing of statements.

Members who attended the EGM posing for a selfie during the fellowship lunch at nearby Zam Zam Restaurant

President and honorary Secretary leading the meeting which was concluded successful.

Results of 2016/17 AGM ElectionsPetaling Jaya 14th May 2016- The institute held its annual general meeting at IPA’s office at BU8. Below is the confirmation of the election results and the office-bearers elected immediately after the conclusion of the 36th AGM:

President and Hon. Secretary conducting the 36th AGM.

Line-up of Office-bearers and council members after the 36th AGM on 14th May 2016 were as follows

1) President: En Amjath Jamal Sheik Kader (re-elected on 14/5/ 2016)

2) Vice President: Shum Ying Loon (elected on 14 /5/ 2016) Resigned October 2016

3) Hon Secretary: Lee Tiong Kheng (co-opted on 14 /5/ 2016)

4) Hon Treasurer: Arriffin Mansor (co-opted on 14/5/2016)

5) Council member: Kenny Ong

6) Council member: Lee Ah Heng

7) Council member: T. Tharmaseelen (re-elected on 14 /5/ 2016)

8) Council member: Tan Yen Wooi (co-opted on 14 /5/2016)

9) Council member: Noraizwa Shariff (co-opted effective from 4/6/2016)

We welcome and congratulate the new Council and hope that they will bring us to greater heights. Several committees were set up by the new Council to move the Institute forward and higher. The names of the committees and chairpersons are listed below.

• Education & Accreditation - Mr T. Tharmaseelan

• Membership - Mr Kenny Ong

• Publication – Dominic Shum (Resigned and replaced by Lee TK)

• CPD & Seminar - Mr T. Tharmaseelan

• Disciplinary - Mr Tan Yen Wooi

• Examination Board - En. Amjath Jamal Bin Shaik Abdul Kader

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Auditor Independence By Tan Sri Dato’ Sri Dr. Lau Ban Tin

We are indeed living in a time of change. About 100 years ago, external audit was the only way to oversee corporate

organisations. In the UK, the Companies Act 1879 made it compulsory for all banks to be externally audited. By 1900,

almost all types of organisations, including institutions, companies, hospitals, trade unions and political societies, needed

to be subjected to an annual audit. By 1948, under the Companies Act 1948, statutory audit could only be carried out

by professionally qualified accountants. More recently in the UK, the Companies Act 1989 specifically stated that only

members of Recognised Qualifying Bodies could become registered auditors. Over the space of a hundred years, the

public, as well as commerce and industry, accepted the auditor’s reports as trusted and reliable statements to certify

that the records of audited companies showed a true and fair view of their affairs. However, during this period there

were no standardised guides for auditing procedures. Only in the last 40 years were there ‘Statements on Auditing’

issued by the Institute of chartered Accountants of England and Wales in the UK, of course now we have the Malaysian

Approved Standards of Auditing.

In the past, the integrity of auditors was equal to that of court judges. Auditor independence was never questioned. It

was an accepted maxim that professionals of integrity should be regulated by fellow-brothers of the same profession.

After all, it was expected that no other people could have better integrity than the auditors themselves to evaluate

the integrity of other auditors. Hence, the principle of self-regulation through the professional institutes developed.

Despite so many audit scandals surfacing over the last 30 years, auditors were still able to hold the trust of the investing

public, possibly because there was no better alternative system of impartial reporting other than the auditors. The



professional bodies responded in 1976 by forming the Auditing Practices Committee (APC) in the UK. That was 40 years

ago. Only now, in 2016 are the Malaysian Institute of Accountants (MIA) and the Malaysian Institute of Certified Public

Accountants (MICPA) spearheading the establishment of an Audit Practice Board in Malaysia. Will it work? The APC has

not prevented further audit scandals from surfacing since its foundation.

Auditor independence became a confused issue with the emergence of the expectation gap in the 1980’s, following

criticism by the shareholders of banks in the UK. It is the directors’ responsibility to prepare the annual financial statement

and the auditors’ to give an opinion that these statements are true and fair, not true and accurate. The auditors’ role

is as a ‘watchdog’ and not as a ‘bloodhound’. But the investing public expects the watchdogs to be independent and

to cast a reliable opinion on the affairs of companies and not be engulfed by frequent audit scandals. The new format

of audit reports removed a great deal of the misunderstanding that caused the expectation gap. Again, even with the

new format, public confidence was shaken when suddenly 10 percent of Malaysian Public Listed Companies came under

Practice Note 4/2001 of the Kuala Lumpur Stock Exchange (KLSE) Listing Requirements (P/N 4) despite being given

clean certificates previously. Even in the recession, in the mid 1980’s, almost all of the auditors’ reports of companies

were ‘going concerns’ although suddenly about 30 percent were actually ‘going, going’ gone’. The statistics highlighted

the discrepancies between auditors’ reports and the actual financial situations of companies. History repeats itself,

public confidence continued to be tested.

But this time around, the scandals are huge in proportion and they have happened in the very country that has accused

others of not practising “good enough” corporate governance. The Enron and WorldCom cases caught many people

by surprise, namely as it involved one of the, then, Big Five auditing firms and reports now show that 74 percent of the

US public believe that there are more scandals yet to surface. In Malaysia, in response to this, the MIA has proposed the

rotation of audit partners and the formation of the Audit Practices Board. I thought that by rotating audit firms, auditor

independence would be enhanced. In an audit firm, it is usually the senior auditors and audit executives who do most of

the audit work; the partners usually review their work before signing the reports. There can be a situation where audit

partners are rotated, but the actual work is still being carried out by the same audit executives. Therefore, what is the

purpose of rotating the partners? Where is the assurance of increasing auditor independence?

The rapid growth in consultancy services have resulted in many major firms seeing an increase in income from non-audit

work, while income from auditing services continues to shrink. Concentration of audits have also increased with the,

now, Big Four in Malaysia. In 2002, three out of the four firms audit some 63 percent of the 856 Public Listed Companies

in the KLSE, which constitutes 83 percent of the total market capitalisation. These firms have diversified into other fields

ranging from project consultancy, ICT, personnel recruitment, accounting work as well as taxation. In the WorldCom

case, it is now noted that the non-audit fee was so large that the auditors’ independence was impaired. Under the

existing rules of the MIA, Revised By-laws (on Professional Conduct and Ethics), the professional independence is

deemed impaired if the total fees arising from the provision of the non-audit services to a client is 20 percent or more

of the audit firm’s total annual fees received for two or more consecutive years. But, does the MIA have records of

its practising members with audit licence on the total fees receivable and the portions of audit and non-audit service

arising there from? Of course, the MIA will act against its own members if they breach this professional ethical rule,

but how can they act if they do not have the details? The MIA normally acts from complaints made by the public, but

then again the public cannot complain because they too do not have the information. The auditors need not disclose

information to anyone else, as they are either sole proprietors or in partnership. Who then audits the auditors and

prevents audit scandals occurring? Will the MIA be transparent enough to disclose the ratio?



The appointment of auditors by shareholders in the Annual General Meeting (AGM) is another concern. In most cases,

the shareholders that attend the AGM are not interested in the appointment of auditors. Therefore, in the majority of

cases the appointment of auditors is virtually left to the management and directors of the company. The shareholder

can however, sue the auditors; in Malaysia, the shareholders of CSM are in the process of suing the auditors. The MIA

investigation and Disciplinary Committee will act against those members who breach professional ethics. In the past,

most investigations have involved minor cases such as client pinching, partners quarrelling and advertising. However,

serious cases involving breaching professional ethics usually end up in court where the companies or shareholders sue

the auditors.

Once the case is in court, the disciplinary committee of the MIA cannot proceed, as its actions would prejudice the court.

Again, as in most court cases involving auditor negligence, settling out of court is the current trend, with a proviso that

the plaintiff cannot commence a complaint or a case with the professional body. Thus, it can result in a situation that

seriously breaches auditor independence by totally escaping the disciplinary committee under the principle of self-

regulation.

On the 3 July 2002, in a speech on auditor independence organised by the Securities Commission, I made the following

suggestions:

a) The formation of three bodies within the Malaysian Institute of Accountants, i.e.

I. Malaysian Institute of Auditors

II. Malaysian Institute of Chartered Public Accountants

III. Malaysian Institute of Chartered Corporate Accountants

b) All auditors must be members of the Malaysian Institute of Auditors. All the auditors of Public Listed Companies

must be appointed and paid by the KLSE. It is up to the KLSE to decide on the rotation of audit firms or audit

partners in Public Listed Companies and also collects the audit fees from the respective companies.

c) All non-audit services received by Public Listed Companies can only be sourced from members of the Malaysian

Institute of Chartered Public Accountants. This will avoid the potential conflict of interests for audit firms and

diminish the need to exercise a controversial and subjective debate on auditors exercising their own judgement

and whether the provision of non-audit services would threaten their independence, integrity and objectivity.

With no disclosure of non-audit fees, nobody including the MIA knows whether this ethical judgement was in fact

exercised by the auditors.

d) The existing restrictions on employment, financial and family relationships involving the auditor and audit client

is adequate.

e) All the proposals of the MIA on self-regulation should be maintained except those that are in conflict with my

earlier proposals.

The members of the MIA must choose one on the three institutes within it and specialise in that area, just like the

medical profession where there are heart specialists, brain specialists and so forth. With this method members of the

MIA who chose to specialise in auditing can be truly independent and avoid being subjected to speculation by the public.



By the end of July, the above proposals were indirectly adopted by the Sarbanes-Oxley Act, which was passed by the

United States Congress. The self-regulation principle was abolished and a new Board within the SEC takes over the

regulation of accountants. The US has totally removed non-audit services by auditors. Due to the extreme stance that

the US has taken, it is like that there will be pressure for the rest of the world to follow its lead. The US practice is likely to

be taken up globally. In fact, my proposals would still allow self-regulation and will be helpful in improving transparency

and integrity amongst auditors. It would boost auditor independence and all parties including directors, management

and company secretaries will practise good corporate governance in the most voluntary and natural way.

All published accounts by Public Listed Companies should disclose the total audit and non-audit services fees although

non-audit services may be carried out by the auditors’ ‘associated company’. There should be a statutory declaration that

the firm providing non-audit services is not related or linked to the form. Similarly, all auditors must disclose the same

to the MIA. As such, with my proposal, there will be greater public confidence in auditors’ reports, good governance

practises by management and the Board of Public Listed Companies. With specialisation by the three separate bodies,

the Capital Market Master Plan of Malaysia will work and Malaysia will attract a lot of foreign investors. We need the

conviction of our actions to make radical changes. It is better than adopting a strategy of damage limitation once

the harm is already done. It is not good enough to introduce an audit practice board when 26 years ago the auditing

practices committee (similar in structure) was formed in the UK. Repeating a proven ineffective measure is not the

solution. I appeal for the Securities Commission, Kuala Lumpur Stock Exchange, Companies Commission of Malaysia and

the Ministry of Finance in Malaysia to adopt my proposals, which fall somewhere between the extreme Sarbanes-Oxley

Act and the defunct Audit Practices Committee. It upholds and improves auditor independence and at the same time

allows self-regulation amongst fellow accountants. ♦

About the Author

Tan Sri Dato’ Sri Dr. Lau is the Patron of the Institute of Commercial and Industrial Accountants, Malaysia. He is a

respected corporate figure and a chartered accountant as well. Tan Sri’s full profile can be viewed on page 5.



The Future of CFOs In MalaysiaNavigating the Challenges along the way –Dominic Shum

The Chief Financial Officer (CFO) is one of the toughest but respected roles in any industry because of the technical and managerial skills required and depth of experience it demands. The position is critical to the well-being of any organization in any industry. In recent times, the position has taken on the strategic cloak as well due to CFO’s understanding of the business and financial information which is the language of business. The position is usually among the top 3 positions in a large corporation and part of the “C-Suite” of appointments. The position of CFO requires the incumbent to manage large swaths of funds and is normally staffed by a financial professional with high level of integrity and honor. The day to day responsibilities of a CFO are extremely varied, and can include sourcing and managing funds, performance measurement, management accounting, decision support and financial reporting1.

The position of CFO may be confused with that of the Financial Controller (FC) as the job is essentially the same. The difference is in the scope of responsibilities where financial controllers are mostly in charge of one or two entities whereas CFOs typically has control of the entirely group of companies. In multinationals, the position of CFOs are normally reserved for those in overseas headquarters and those heading financial

1 Cited from “The Role: Chief Financial Officer (CFO)”. http://yourfuture.accaglobal.com/global/en/ your-career/sectors-industries-roles/chief-financial-officer.html



functions in MNCs here are called FC or Finance Manager or GM/Director of Finance depending on the management preference and seniority of the incumbent. Some permutations are highlighted below in Figure 1, 2 & 3.

Figure 1: Typical Single Entity or Subsidiary Finance Structure

Figure 2: Typical Financial executives in a Group of companies or MNCs

Figure 3: CFO in large Entity with multiple product lines.

A financial controller is a person who supervises financial reporting and financial management within an organization and although the CFO does similar work, the CFO operates at a higher level and typically spends more time with senior management than their own staff. For the purpose of our discussion, we will not make any distinction between the FC and the CFO as the challenges confronting them both are similar.



In a report some time back, Ernst & Young LLP (2008) highlighted the challenges in the future for FCs and provided some answers as to what should FCs do to be ready for the challenges. The challenges they highlighted then were;

• Finding and Developing Talent

• Improving reporting and adding value to the business

• Getting the basics right

• Improving efficiency

Looking at the financial management environment today in Malaysia, these challenges still exist and will continue to haunt FCs/CFOs even as new challenges arise. For example; hiring financial/accounting staff with talent and developing them today is still a challenge. Although many graduated yearly with accounting degrees from both private and public universities the number of qualified accountants has remained low. This is especially so in Malaysia as the number of chartered accountants with MIA2 is only around 30,000 compared to about 200,000 in Australia with similar population. This is exacerbated by the fact that graduates in accounting are opting for other career choices and some internationally recognized professional accounting qualifications are not recognized by MIA to qualify to be Chartered Accountants in Malaysia.

Another challenge for CFOs is to ensure that their staff get the basics right and this challenge has been made more daunting with the introduction of the Goods and Services Tax (GST) in Malaysia since April 2015. Penalties for wrongful reporting during monthly or quarterly reporting periods include hefty fines of up to RM 30,0003, whether or not the mistakes were made intentionally or innocently. The CFO has to ensure that the very basic entries and coding in the point of sales and accounting systems are spot on, otherwise it would be exposed to penalties by the Customs department. Such challenges will be encountered on the income tax front as well as the government seeks to tightens its grip on tax revenues amidst lower oil prices which has drastically reduced government’s revenue. In fact, before thinking about achieving better efficiency, the CFO will be better served by looking into effectiveness first. That is how to ensure all the new requirements are taken care of.

The CFO however, has to balance the priorities of getting the basics right with supporting management with timely and accurate information that adds value to the business at hand. This will be easier said than done, due to the challenge of getting the number of staff required and the type of quality needed. This is made more difficult, in my opinion, when the requirements in reporting in business today are extremely demanding with constant changes in the environment due to astonishing number of events globally that affects the business environment. We have just witnessed how recent political changes in the United States affect the livelihood of local businesses and the economic effect of Britain’s referendum on leaving the European Union. Let’s not forget also the drop in oil prices that has turned economics in many countries upside down and the socio-economic problems caused by unrest in the Middle East and terrorism which resulted from it.

Therefore it is clear that the job of the CFO is changing rapidly with new tasks being added in addition to the basic functional responsibilities such as costing, corporate governance, credit management, enterprise resource planning, risk management, compliance issues and other mundane matters. Some of the new task may be more strategic in nature like looking into opportunities to enhance shareholders value,

2 MIA is the only major accounting body recognized under the Accountant’s Act of Malaysia. MICPA is recognized but has negligible number of members.3 Source: https://eduspiral.com/pathway_chartered_accountant/



preparing for new financial and legislative chances in the economy, technological needs, cost structures, plant relocations to better tax and operating regimes, synergistic mergers and acquisitions and other more strategic tasks. The tasks are not entirely new technically but the pace and regularity of it in the current business environment can be overwhelming for some CFOs. It is clear the present and future requires the CFO to be strategically inclined or skilled and Deloitte4 added that today’s environment requires a CFO to be not just a strategist, but a pragmatic strategist. CFOs working in listed corporations are expected to be scrutinized more as well, especially with the current state of corporate governance in Malaysia.

We end this article with a quote5 from Dr Nurmazilah Dato’ Mahzan, Chief Executive Officer at the Malaysian Institute of Accountants;

“We must have the courage to move out of our comfort zone. If previously we focused on backward-looking historical financials and compliance, we now have to become forward-looking, holistic, integrated thinkers who are focused on analytics, advisory and adding value to our stakeholders”

Bibliography

ACCA, 2011. Role: Chief Financial Officer (CFO). [Online] Available at: http://yourfuture.accaglobal.com/global/en/your-career/sectors-industries-roles/chief-financial-officer.html [Accessed 17 Novem-ber 2016].

Deloitte Development LLC, 2013. Are you a Strategic CFO? Seven Questions. [Online]

Available at: https://www2.deloitte.com/content/dam/Deloitte/in/Documents/strategy/In-strate-gy-cfo-insights-noexp.pdf [Accessed 25 November 2016].

Ernst & Young LLP, 2008. The Changing Roles of the Financial Controller. [Online] Available at: http://www.ey.com/Publication/vwLUAssets/Changing_role_of_the_financial_controller/$FILE/EY_Financial_controller_changing_role.pdf [Accessed 3rd November 2016].

Mahzan, N., 2016. News: Welcome remarks for Conference. [Online] Available at: http://www.mia.org.my/v1/highlights/content_display.aspx?ID=124 [Accessed 27 November 2016].

About the Author

Dominic Shum is currently a management consultant and registered trainer specializing in management development and financial literacy for executives. He has trained and mentored finance professionals throughout his career and has spoken on the above topics at public seminars and talks. He also lends this expertise to colleges and associations by serving in various appointments such as industrial advisory panel members, lecturer, council member and honorary auditor. He is currently Vice President of the Institute of Public Accountants of Australia’s Malaysian division in Kuala Lumpur. He is a fellow member of the Institute of Financial Accountants (UK), the Institute of Leadership and Management (UK), Institute of Public Accountants Australia and the Institute of Commercial and Industrial Accountants Malaysia. Dominic is also a Certified Member of the Malaysian Association of Company Secretaries. Dominic is also life member of the Malaysia Economic Association, the Malaysia Finance Association and the Qualitative Research Association of Malaysia. He has co-authored books, written for journals, magazines and blogs on topics in management, finance and other topics. He also teaches Financial Management topics for EMBA programs and is a registered HRDF trainer.

4 Source: Are you a Strategic CFO? Seven Questions at https://www2.deloitte.com/content/dam/ Deloitte/ in/Documents/strategy/In-strategy-cfo-insights-noexp.pdf5 Source: Text of Speech of Dr Nurmazilah Dato’ Mahzan Chief Executive Officer Malaysian Institute

Of Accountants at the Mia International Accountants Conference 2016 9.00 A.M. Tuesday, 15 November 2016. http://www.mia.org.my/v1/highlights/content_display.aspx?ID=124



Comparison Between Companies Act 1965and Companies Act 2016.What will be the impact of the new Act on Malaysian firms?

Tan Thiam Lee and Lau Wee Yeap

After a long-awaited period, the new Companies Act 2016 (CA 2016) which was passed in Parliament last year has finally came into effect. The new act will be implemented in stages according to the Companies Commission of Malaysia (CCM). Among others, the provisions which came into effect from 31st January 2017 are as follows1;

(i) any newly issued shares will no longer be tied to the nominal value when the company was incorporated. A company may issue shares at a price depending on the factors affecting the current circumstances and needs of the company;

(ii) a company has the option to have a common seal. Execution of documents must comply with the procedures outlined under Division 9 of Part II including situations when a company decides to have a common seal;

(iii) all private companies are no longer required to hold annual general meetings. Instead, decisions of private companies can be fully made through circular resolutions.

The changes in the new Companies Act 2016 are part of the long history of changes in the history of Companies regulation in Malaysia. It started with the adoption of the Indian Companies Act 1866, derived from the English company law, by the Straits Settlements during English rule. However, this legislation ceased to be in force with the Introduction of Companies Ordinance 1889 of which was replaced by two ordinances, namely Companies Ordinances 1923 and Companies Ordinance 1940. Subsequently, the Companies Ordinance 1940 was replaced by the previous Companies Act 1965.

Malaysian Companies Act 1965 (CA1965) was first enacted in 1965 (Act No. 79 of 1965) and came into operation throughout Malaysia on 15 April 1966. The CA1965 was modelled after the United Kingdom Companies Act 1948 and the Australian Uniform Companies Act 1961 (Cheah, 2006). Over the years, numerous amendments have been incorporated to ensure that the Malaysian company legislation keeps up with the changes in the business environment.

Purpose of the Act

The purpose of a regulation or legislation is to provide guidance on what can be done and what should not be done. Example: how directors and shareholders can exercise their rights and how their responsibilities can be accounted for. Hence, the CA1965 was designed to govern and administer the formation of new companies as well as how these companies should function.

The CA1965 was meant to be a comprehensive legislation to cover both companies that are incorporated in Malaysia and also foreign companies which are incorporated outside Malaysia. These foreign entities are required to be registered in Malaysia to enable them to carry out their business activities in Malaysia.



Amendments to Companies Act 1965

In December 2003, the Companies Commission of Malaysia SSM started its Corporate Law Reform Programme (CLRP) when SSM initiated a review of the CA1965 as part of SSM strategic direction to facilitate the development of a more conducive and dynamic business and regulatory environment in Malaysia.

The Corporate Law Reform Committee (CLRC) was established with the following objectives: -

(i) To create a legal and regulatory structure that will facilitate business; and

(ii) To promote accountability and protection of corporate directors and members taking into account the interest of other stakeholders, in line with international standards.

Among the factors that were taken by the CLRC when reviewing and recommending changes to CA1965:

(i) To modernize the law by taking into consideration the existing Information and Communication Technology (ICT) environment;

(ii) To reduce the cost of compliance;

(iii) To reduce duplications and conflicts that exist between various regulatory

bodies;

(iv) To simplify the operational processes of a company; and

(v) To simplify the current legislative language used in the CA1965

The CA1965 had been updated through 35 amendments and the most recent being the Companies (Amendment) Act 2007. These amendments aimed to ensure that level of corporate governance complies with international practice so that foreign investors have higher confidence in doing business in Malaysia. These changes came at the right time after the 1997 Asian financial crisis where there was a need to enhance effectiveness and strengthen the capabilities of company directors as per the findings by the High-Level Committee for Corporate Governance. The following are some of the landmark amendments: -

(i) Introduction of mandatory obligation upon auditors of a public company for reporting any fraud and dishonesty committed by any officer of the company;

(i) Notification on cessation of auditor’s office

(ii) Whistle-blowing protection to officers

(iii) Minimum standard of reasonable care, skill and diligence of the directors and directors are expecting to perform their duties according to their actual skill and experience

(iv) Disclosure of directors’ interest in contract and abstaining from voting on the resolution in relation thereto

(v) Rights of minority shareholder

(vi) Provision made on document that was filed or lodged electronically and any issuance of documents electronically from the SSM



(vii) Repealing Section 132G of the CA1965 – acquisition of shares or assets from director or shareholder who has a substantial shareholding

(viii) Meeting venue for general meeting of the company can be held within Malaysia ( the previous provision is only can be held within the state of its incorporation)

The abovementioned amendments were the result of changes in the regulatory structure while others are meant to address the weaknesses and inadequacies of the provision in the CA1965 and practices at that time. All the 35 amendments as mentioned above were done on a piece-meal basis where the amendments lacked systematic and coherent review. Hence, in order to better equip the companies officers with future changes and challenges, CLRC has taken into consideration some of the practices by other jurisdictions including the practices within Commonwealth countries.

The first CLRC report contained 188 recommendations which reflected the modern business practices and aimed to simplify the laws and procedures so as to facilitate business creativity and operations in Malaysia while still ensuring that the accountability of corporate management and decision making is still intact. (Refer Corporate Law Reform Committee 2007)

Subsequently, after the enactment of the Companies (Amendment) Act 2007, the CLRC had on 2nd July 2013 issued a consultation document on the proposed Companies Bill 2015 (formerly known as Companies Bill 2013) and sought feedback from the public on the same. On 25th April 2016, the Dewan Rakyat passed the Companies Bill 2015 (CB15). The intention of CB15 was to improve internal controls, governance and corporate responsibility2. The following were the 10 key points of CB15: -

1. Easier incorporation with only one director and one shareholder required

2. Abolishment of the convening of annual general meeting for private companies

3. Members’ circular resolution will no longer be required to be unanimous. It can be passed by the same majority as required at the general meetings

4. Abolishment of the concept of par value on the share

5. Abolishment of the concept of Memorandum and Articles of Association

6. No court order is required for capital reduction exercises, it will be based on solvency test

7. Liberalization of financial assistance procedure

8. Share buyback regime being refined

9. Increased sanctions on directors for breaches under the CB15

10. Corporate Rescue mechanisms: Corporate Voluntary Arrangement and Judicial Management to assist financially distressed companies to remain as a going concern and to avoid winding-up

Based on the recent legislation, we have made the comparison between CA1965 and CA 2016 as follows in Table 1.



Table 1: Comparison between Companies Act 1965 (CA1965) and Companies Act 2016 (CA2016)

Clauses CA 1965 CA2016Type of Entity Private Company Private CompanyFormation Requirement 1. Minimum 2 members

2. Minimum 2 local direc-tors

3. Minimum 2 shares

1. Minimum 1 member

2. Minimum 1 director*

3. Minimum 1 share

Company’s Name - Must not be undesir-able or unacceptable

- Name once approved will be reserved for 3 months

- Cannot be similar to an existing company or com-pany registered in overseas

- Name once approved will be reserved for 30 days

- A declaration is needed from the applicant that the name is not copied from any existing company

Requirement of Memoran-dum and Articles of Asso-ciation

Required Optional

Issuance of Certificate of Incorporation

Will be issued by the Com-pany Registry

- Notice of registration from company registry is conclusive evidence of registration

- Certificate issuance is on application with pre-scribed fee only

Usual authorised share capital RM400,000.00 Abolished

Par Value of Share RM 1 AbolishedMinimum paid up share capital RM2 RM1

Display of Company Name 1. At the registered office with the words “Pejabat Yang Didaftarkan”; and

2. shall paint or affix and keep painted or affixed on the outside of every office or place in which its business is carried on

1. At the registered office

2. Every place where its business is carried on; and

3. Every place where its books are kept

Common Seal Required OptionalMemberMinimum number of member 2 during incorporation 1 during incorporation



Location of member meetings Malaysia Malaysia

Requirement to have Annual General Meeting Yes, physical meeting

Provision made for Public Company only

Passing of Circular Resolution Must be signed by ALL

members

Passed when the required majority of eligible members have signified their agreement

Issuance of Share Certificate Compulsory On application by member

DirectorMinimum number of director 2 1

Local director required Yes, 2 local directors 1 director3

Circular Resolution According to the provision in the Articles of Association

Signed by ALL Directors for the time being

Company SecretaryCompany Secretary Requirement

Minimum 1 to be appointed during incorporation

Minimum 1 to be appointed within 30 days of registration

Local or qualified company secretary required Yes Yes

OthersFiling requirement for changes in officer of the company

Within 1 month Within 14 days

Annual Return Filing Within 1 month from date of Annual General Meeting

Within 30 days from company’s anniversary date

Solvency Test for: -

a. Redemption of preference shares

b. Reduction of share capital

c. Financial Assistance

Share Buyback

No provision for Solvency Test

Need to satisfy the solvency test as provided in the Act

d. Declaration of Dividend

To be declared out of prof-its only

- To be declared out of profits if the company is solvent

Solvent: the company shall be able to pay its debts as and when the debts become due within 12 months immediately after the distribution is made



Conclusion

The Companies Act serves as a guide for businessman and professional corporate services provider on the rules and regulations of running a business of an incorporated entity in Malaysia. Countries like Singapore and Hong Kong have updated their Companies legislation much earlier with comprehensive provisions to make it easier to do business in their respective country. It can be seen that changes provided on the CA2016 makes it more attractive for businesses to operate in Malaysia with the removal of many rigid compliance issues. However, consideration needs to be taken on SSM’s infrastructure (SSM’s system), as to whether it is adequately in place to implement the changes effectively; i.e. switching from the existing MyCoID to a new interface whereby everything will be done online as envisioned in the new Act. Would the new Act encourage more FDI inflow or it would actually be the other way round? Will the changes be for the better and improves Malaysia’s business competitiveness? Only time will tell.

References

• SSM (2007), Amendments To Companies Act Marks New Era In Corporate Governance In Malaysia, Suruhanjaya Syarikat Malaysia. Kuala Lumpur. 5.

• Cheah Foo Seong. (2006). Guide To Company Law & Secretarial Practice, Malaysia. Kuala Lumpur: CCH Asia Pte Limited.

• Corporate Law Reform Committee. (2007), Review Of The Companies Act 1965 - Final Report. The report, Suruhanjaya Syarikat Malaysia.

• Mark Yeandle (2016) Global Financial Centres Index 19. Index, Z/Yen Group Limited.

• Department Of Statistics (2015), Statistics Of Foreign Direct Investment In Malaysia, 2014. Statistics, Department Of Statistics Malaysia.

• Tie Fatt Hee (2002) “Modernisation And Reform Of Corporate Law Amidst The Influence Of Globalisation And Development In Information Technology.” Journal Of Malaysian And Comparative Law 159-176. Accessed August 23, 2016.

• Mark Yeandle (2016) Global Financial Centres Index 19. Index, Z/Yen Group Limited.

• Department Of Statistics (2015), Statistics Of Foreign Direct Investment In Malaysia, 2014. Statistics, Department Of Statistics Malaysia.

• Tie Fatt Hee (2002) “Modernisation And Reform Of Corporate Law Amidst The Influence Of Globalisation And Development In Information Technology.” Journal Of Malaysian And Comparative Law 159-176. Accessed August 23, 2016.



Endnotes

Refer http://www.thestar.com.my/business/business-news/2017/02/01/phase-one-of-companies-act-2016-comes-in-

to-effect/. Accessed on 1 Feb 2017.

2 Refer to BERNAMA. 2016. Dewan Rakyat passes Companies Bill 2015 with the amendment. News, Kuala Lumpur:

New Straits Times Online, Accessed on 1 December 2016..

3 shall ordinarily reside in Malaysia by having a principal place of residence in Malaysia

About the authors

TAN THIAM LEE CA (M), AIA

Catherine Tan Thiam Lee currently works as Regional Business Consultant in the international corporate secretarial division of Indah Group of companies. Catherine has been a Licensed Secretary from the Companies Commission of Malaysia since 2001 and further completed the professional qualification by the AIA in 2003. She has been a member of Malaysian Institute of Accountants since 2010.

Catherine has more than 16 years of experience in Malaysia secretarial practices in the area of corporate restructuring, corporate secretarial and business advisory. In recent years, she has been providing regional business advisory, international corporate business and secretarial support to clients who intend to expand their businesses in different international jurisdiction such as Hong Kong, Labuan, China, Thailand, Vietnam, Bermuda and Seychelles.

DR. LAU WEE YEAP PhD (Osaka), CPA (Aust), CA (M)

Dr Lau is currently a Senior Lecturer at the Faculty of Economics & Administration (FEA), University of Malaya. He was with commercial banks in credit and trade finance for a number of years before being awarded the Monbusho Scholarship for further studies in Osaka University, Japan. He joined University of Malaya in 2006 and was formerly the Head, Department of Applied Statistics from June 2013 to July 2014. He has been a Visiting Scholar to Risk Management Institute at the National University of Singapore in 2012-13. At present, Dr Lau serves as the Honorary Secretary to Malaysian Finance Association (2015-16) and Honorary Treasurer to Malaysian Economic Association (2016-18). In research, he has worked and published in the area of financial economics, econometrics, statistics and capital market. To date, 5 of his PhD students have graduated.



Understandng The WhistleblowerProtection Act 2010

By Tan Pei Meng

The detection of corporate misbehaviour is more often than not due to whistle-blowing, especially by employees.6 This would include employees responsible for the preparation and monitoring of financial documents or records of the company. This is not surprising as employees in this capacity have sufficient knowledge to determine the propriety of the transaction in question.7 However, not many employees who are in possession of such incriminating information would come forward to expose their employer’s or the latter’s client’s wrongdoing. The fear of the detrimental impact of whistle-blowing on the career, personal and family safety of the one who blows the whistle acts as a strong stifling factor to discourage any disclosure of information relating to any corporate wrongdoing. In order to eradicate this fear of would be whistleblowers, the Malaysian Parliament

6 This can be seen from the whistle-blowing efforts by Herve Falciani, an iT worker at HSBC’s Swiss private banking arm which had been helping its clients across the world to evade taxes assessed from http://www.expatica.com/uk/news/SwissLeaks-whistleblowers-tale-worthy-of-a-spy-novel_448746.html. 7 Closer to home, it was widely reported in the local newspaper that Dr Syed Omar Agil, a former CEO of Institut Profesional Baitulmal Sdn Bhd was seeking protection under the Whistleblower Protection Act 2010 for exposing alleged financial improprieties of his colleagues assessed from http://www.thestar.com.my/news/nation/2017/01/04/former-ceo-seeks-protection-my-client- qualifies-as-a-whistleblower-lawyer-tells-court/



has enacted the Whistleblower Protection Act 2010 (Act 711) (‘WPA 2010’) which takes effect on 15 December 2010. This piece of legislation applies to disclosure of information relating to any corruption, fraud, or any other wrongdoing in both the public sector and private sector.8 The purpose of this article is to examine the impact of some of the major provisions of the WPA 2010 on protecting whistleblowers in the accounting profession.

Section 6 WPA 2010 states that a person may disclose any information relating to any improper conduct to an enforcement agency which based on his reasonable belief, that any person has engaged, is engaging or preparing to engage in improper conduct. Any disclosure of information relating to improper conduct occurred before the commencement of the WPA 2010 is covered. Section 6 does not permit disclosure of information if there is any law which specifically prohibits such disclosure of information. This applies where the information sought to be disclosed is an official secret under the Official Secrets Act 1972. Before going further on the discussion, it is necessary to determine the meaning of the two key phrases in s.6 i.e ‘improper conduct’ and ‘enforcement agency’. Section 2 WPA 2010 lays down the definition of the various words or phrases found in the Act. ‘Improper conduct’ is defined broadly as including ‘any conduct which if proved, constitutes a disciplinary offence or a criminal offence’. A ‘disciplinary offence’ means ‘any action or omission which constitutes a breach of discipline in a public body or private body as provided by law or in a code of conduct, a code of ethics or circulars or a contract of employment, as the case may be’.

An ‘enforcement agency’ refers to the following:

(a) any ministry, department, agency or other body set up by the Federal Government, State Government or local government including a unit, section, division, department or agency of such ministry, department, agency or body, conferred with investigation and enforcement functions by any written law or having investigation and enforcement powers;

(b) a body established by a Federal law or State law which is conferred with investigation and enforcement functions by that Federal law or State law or any other written law; or

(c) a unit, section, division, department or agency of a body established by a Federal law or State law having investigation and enforcement functions.

The key enforcement agencies identified are the police, Customes, Road Transport Department, the Immigration department and the Malaysian Anti-Corruption Commission (MACC).9 Based on the definition of ‘enforcement agency’ in s.2, it is arguable that the Companies Commission of Malaysia, Securities Commission in Malaysia and Bursa Malaysia are considered to be an enforcement agency for the purposes of the WPA 2010. However, since the WPA 2010 does not designate the claims to be handled by which enforcement agency, the whistleblower would have to decide for himself as to which enforcement agency to go to. It does not matter that the whistleblower goes to an inappropriate enforcement agency as the Act adopts a ‘no wrong

8 Prior to this Act, the Malaysian Parliament provides protection to whistleblowers on an adhoc basis in various Acts such as the Capital Markets and Services Act 2007 (Act 671) and the Companies Act 2016 (Act 777).9 ‘No protection for glory seekers, says MACC’ in The Star, 11 January 2011.



door policy’.10 The enforcement agency which receives the information from the whistleblower would forward it to the relevant enforcement agency.11 Disclosure of information to an authorized officer of an enforcement agency can be made orally or in writing. From the reading of the WPA 2010, it may not be possible to disclose information anonymously, yet the WPA 2010 is not very clear as to the amount of information required to begin an investigation of the alleged improper conduct. The enforcement agency is under a duty to investigate any claim made by a whistleblower pursuant to s.6.

Section 7 WPA 2010 provides that any person who discloses information in accordance to s.6 would receive protection as follows:

(i) protection of confidential information;

(ii) immunity from civil and criminal action; and

(iii) protection against detrimental action.

Any information disclosed by the whistleblower relating to himself or the alleged improper conduct must be kept confidential. No criminal charge or legal action can be taken against the whistleblower as a result of the disclosure of information. For instance, the whistleblower is immune to claims for breach of duty of confidence to his employer or for defamation. The whistleblower and anyone related or associated to him are also protected from any detrimental action taken against him due to his act of whistle-blowing. Section 2 WPA 2010 provides that ‘detrimental action’ includes the following:

(a) action causing injury, loss or damage;

(b) intimidation or harassment;

(c) interference with the lawful employment or livelihood of any person, including discrimination, discharge, demotion, suspension, disadvantage, termination or adverse treatment in relation to a person’s employment, career, profession, trade or business or the taking of disciplinary action; and

(d) a threat to take any of the actions referred to in paragraphs (a) to (c).

Thus, an employee whistleblower cannot be subject to any disciplinary action or harassment by his employer, his immediate superior or his fellow colleagues.12 In addition, to protect independent contractors,13 no person should terminate a contract, withhold payment or refuse to enter into a subsequent contract due to disclosure of information under s.6.14 Section 10 WPA allows a

10 ‘Informers have faith in Whistleblower Protection Act’ in The Star, 11 January 2011.11 Nonetheless, the Malaysian government did mull over the move to amend the WPA 2010 to enhance the protection given to whistleblowers. One such proposal is to require the members of the public to lodge their reports to the Integrity Enforcement Agency Commission (Siap) which would protect their identities; ‘Government mulls enhanced protection for whistleblowers’ in The Star, 16 June 2015. However, hitherto, no amendment is made to the WPA 2010.12 Section 10(1) WPA 2010.13 This would apply where an accounting firm provides any consultancy services to their clients.14 Section 10(5) WPA 2010.



whistleblower to lodge a complaint with an enforcement agency if he or anyone related or associated with him has suffered from any detrimental action. In any proceedings, the burden lies with the defendant to prove that the detrimental action is not taken as a result of the disclosure of information. However, the plaintiff (whistleblower) still has to prove that detrimental action has in fact taken against him. But the WPA 2010 is silent as to the time limit in which the whistleblower can complain to the enforcement agency as to the ‘detrimental action’ that he suffers.

The enforcement agency has a duty to investigate the whistleblower’s complaint of detrimental action and refer the outcome of the investigation to him. Within three months after the whistleblower receives a report from the enforcement agency confirming that ‘detrimental action’ has taken against him, he can request the enforcement agency to seek remedies from the court. He can also initiate a legal action on his own for the same purpose. The WPA 2010 grants the courts very wide discretion as to the kind of remedies to be awarded to a whistleblower. These remedies include damages, injunction, reinstatement, order for costs (attorneys’ fees and any other reasonable cost incurred in bringing the legal action) and any other relief that the court thinks fit. Damages include loss for injury to feelings which is as a general rule not recoverable under the law of contract. Hence, a whistleblower who suffers loss of reputation as result of any detrimental action taken against him would be able to sue for damages for loss of reputation.

Besides to strengthen the protection of whistleblowers, the WPA 2010 provides that any term in a contract of employment which seeks to preclude disclosure of information is void. Any person who commits a ‘detrimental action’ against a whistleblower is liable for an offence. The whistleblower can also request the enforcement agency to apply to the former’s employer for himself or anyone related or associated to him to be relocated to a new place of employment. Section 26 WPA 2010 also introduces a bounty system to reward the whistleblower for his disclosure of information.

From the discussion above, the enactment of the WPA 2010 does indeed bring new cheer to the area of whistleblower protection. However, any would be whistleblower should be cautioned on two matters. First, the WPA 2010 only applies to disclosure of information to an enforcement agency. This goes to say that any whistleblower who resorts to the internal mechanism of whistle-blowing set up by his employer would not be entitled to any protection under the WPA 2010. Besides, the WPA 2010 also does not apply to any disclosure of information made by the whistleblower in the course of obtaining legal advice. The restricted protection offered by the WPA 2010 is regrettable, particularly, lay person on the street may not understand the provisions and the effects of WPA 2010. In order to ensure that any disclosure of information that they made would be protected, it seems rational for the whistleblower to seek legal advice. It is also ironical that companies are encouraged to introduce whistle-blowing mechanism and policy for their staff or members of the public to provide information but yet, these disclosure of information are not protected by the WPA 2010. In such circumstances, the protection of whistleblowers would be dependent on the terms of employment between the whistleblower and his employer.15

Secondly, section 11 WPA provides that a whistleblower may lose his legal protection under the WPA 2010 due to the following reasons:

15 Section 10(4) WPA 2010 does not preclude the protection afforded to the whistleblower in other areas of law such as employment law.



(a) the whistleblower himself has participated in the improper conduct disclosed;

(b) the whistleblower wilfully made in his disclosure of improper conduct a material statement which he knew or believed to be false or did not believe to be true;

(c) the disclosure of improper conduct is frivolous or vexatious;

(d) the disclosure of improper conduct principally involves questioning the merits of government policy, including policy of a public body;

(e) the disclosure of improper conduct is made solely or substantially with the motive of avoiding dismissal or other disciplinary action; or

(f) the whistleblower, in the course of making the disclosure or providing further information, commits an offence under this Act.

The determination of the issue as to whether the whistleblower’s complaint is frivolous or vexatious can be subjective depending on a particular individual whistleblower. It is hoped that the enforcement agency and the courts would be slow in determining that the disclosure of improper conduct is frivolous or vexations. Furthermore, the whistleblower must also ensure that once he provides the information to an enforcement agency, he should not inform anyone else, particularly the media on the details of his disclosure of information. As such, not all whistleblowers who seek protection under the WPA 2010 are successful in doing so. Based on the statistic provided by the government as reported in ’50,000 apply, 400 whistleblowers given protection’, The Star, 15 April 2016, out of 55,287 whistleblowers had applied for protection under the WPA 2010, only 392 of them were given protection. Two reasons were given for rejecting these applications. First, the WPA 2010 does not protect accomplice to the wrongdoing. Secondly, protection were not given to those who made frivolous reports against their colleagues.

In conclusion, the enactment of the WPA 2010 shows that the Malaysian government is serious in eradicating corruption and fraud. With this new weapon in hand, it is hoped that more people especially the white collar professionals with incriminating information about the misconduct of corporations would come forward and share it with the respective enforcement agency. This would definitely assist the government’s drive in improving the governance and management of corporations.

About the Author

Dr Tan Pei Meng holds a law degree (LLB, Hons) (London), an advanced law degree (LLM) (Malaya) and PhD (Law) (Malaya). She is an Assistant Professor at University Tunku Abdul Rahman in the Faculty of Accounting and Management. Her PhD thesis investigated the adequacy of the present legal principles in dealing with contracts made for the benefits of third party. She has over five years of experience in both lecturing and researching law related issues in Malaysia and Singapore. She is a legal authority in contract, administrative and whistleblower protection laws. At present she is preparing a postgraduate module entitled “Enhancing consulting skills among postgraduate students: A real life consulting approach” with her colleagues.



Institute News & Announcements

1. Accreditation of Advanced stage of ICIA Program by IPA

The Institute of Public Accountants, Australia (IPA), an IFAC member body, has approved the Advanced stage of the ICIA Program on 18 February 2016 as meeting IPA membership requirements for Member Status. IPA professional program of postgraduate standard is conducted by the University of New England, Australia (UNE) and its subjects are embedded in UNE Master of Commerce (Professional Accounting).

The accreditation for the Advanced stage (final stage) of our program as meeting IPA full membership status is testimony of the acceptable standard of our qualification. The entry requirement for our Associate membership (ACIA) is an accredited degree in accounting or passing our Professional stage examination, which is a pre-requisite for Associate to pursue the Advanced stage of our program for Certified membership with post nominal of CICA. IPA is one of the three recognised professional accounting bodies in Australia.

2. Best Ever Performance in Membership Growth and Income in 2016

The Institute is pleased to report on its best ever performance, in terms of membership growth and income since its formation in 1980, in spite of facing many challenges. This year the Institute has registered a membership growth of 48% and an increase of its income by more than 200% (y-o-y) from RM9,135 to RM31,000 (unaudited). Details of the Institute’s financial results and membership will be reported to members in the 2016 Annual Report to be released soon. In appreciation of members’ support and financial contributions we have produced the best ever annual journal for members this year.

3. Revised ICIA Program

The Council has approved the Professional and Advanced stages of the ICIA program and may soon launch the Consultant stage examination or sponsor the formation of our proposed Institute of Financial and Management Consultants (IFMC) to differentiate our Institute from the others through our offerings of specialized postgraduate equivalent qualifications on certification of IFMC and on other programs later, to provide opportunities for our members to acquire advanced and specialized knowledge.



ROUTE TO THE TOP AS FINANCIAL & MANAGEMENT CONSULTANT

Professional Stage Advanced Stage Consultant Stage

• for award of Associate membership

• pre-requisite to sit the examination: An accredited diploma in accounting

• for award of Certified membership

• pre-requisite to sit the examination: An accredited degree in accounting or passing the Professional Stage examination

• for award to be proposed when this stage is launched

• pre-requisite to sit the examination: Passing the Advanced stage of ICIA program or possessing statutory-recognised professional qualification

SUBJECTS

• Internal Audit

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• Management Accounting

• Financial Accounting

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SUBJECTS

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• Advanced Corporate Finance

• Business & Corporate Law

• Management Accounting Strategy

SUBJECTS

• Professional Ethics & Corporate Governance

• Corporate & Business strategy

• Performance Management

• Risk Management

• Consulting

4. Awards of Life Membership

We congratulate our senior members Mr Winson Han Mean Kwong, Mr Mike Ng Kim Mooy, Mr Lim Yew Seng (founder member) and Mr Lim Jit Liang (founder member) for being elected as Life members by the Council in 2016 for their past services to the Institute.



The Institute of Commercial and Industrial Accountants, MalaysiaCouncil 2016 / 2017 OFFICE BEARERS

President

Encik Amjath Jamal bin Shaik Abdul Kader

Honorary Secretary

Mr Lee Tiong Kheng

Honorary Treasurer

Encik Arriffin Mansor

COUNCIL MEMBERS

Encik Izhar Kahar

Mr Kenny Ong

Mr Lee Ah Heng

Mr T. Tharmaseelan

Mr Tan Yen Wooi

CONTACT:

Registered Address and Administrative Office: No. 50 C-3, Kelana Mall, Jalan SS 6/14, Kelana Jaya, 47301 Petaling Jaya, Selangor, Malaysia

Tel: +603-7803 5575 Fax: +603-7803 5595 Email: [email protected]

URL: www.icia.asia



Although every reasonable care has been taken to ensure the accuracy and objectivity of the information contained in this publication, neither the Institute, editors, agents and contractors can be held liable for any errors, inaccuracies, and/or ommissions howsoever caused. The views expressed in this publication may not be views of the institute or publisher and the Insittute takes no responsibility for any actions taken based on the views expressed, or information provided within this publication. You should always seek your own professional advice from the appropriate advisor, professional or institutions ◙ Publication Committee Chairman, Institute of Commercial and Industrial Accountants, Malaysia

This Journal was published by Authorpreneur.Asia for the Institute of Commercial and Industrial Accountants, Malaysia.

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