What Are the Penalties of Malaysian Directors?
Directors of a company are conferred with a wide range of powers. These powers come with responsibilities to supervise and manage business affairs. However, one should also know that even the highest level of the corporate food chain is still liable to penalties. If you were recently appointed as a company’s director or will be swearing-in as a director soon. In short, you need to know the offences and penalties of Malaysian directors. Keep reading to find out what sort of sanction directors will be subject to if they are found guilty of breaching their duties.
What Does the Law Say?
In recent years, the Malaysian government chose to set up the law by introducing heavier punishment, with heftier fines and longer prison terms. The Companies Act 2016 came into full effect in February 2017, replacing The Companies Act 1965. The new and improved law touched on many aspects regarding directors, their duties, and of course, the offences as well. Elements like a minimum number of directors, service, and contracts, director’s fees and benefits, directors’ indemnity, and non-cash asset transactions involving directors and substantial shareholders were revised in the Act.
Since many directors are involved with international relations, the law is inclusive of foreign directors in Malaysian companies. The local government of Malaysia welcomes and encourages foreigners to start their businesses here with the incorporation of Private Limited (Sendirian Berhad or Sdn Bhd) Companies. That is to say, just like the locals, the foreigners are to comply and meet the standards set by the Company Commission of Malaysia (CCM). Plus, both Malaysians and foreigners are subject to the same laws and offences equally.
Penalties of Malaysian Directors
Some of the offences that Malaysian directors are answerable to are as follows:
- Annual General Meeting (AGM)
Section 143 (1) of the Act states that every company must hold a general meeting yearly. The prerequisites for the AGM require that the span between two AGMs must not exceed 15 months. Apart from them, if the company was recently established, then the first AGM is allowed to take place within 18 months starting from the incorporation date. Failure to comply? A penalty of RM5000 will be imposed on the officers and directors of the company.
- Annual Return
Section 165(1) and (4) states that every company must cause an Annual Return to be lodged with CCM within a month from the AGM of the company. Failure to comply results in RM2000 of penalty.
- Audited Financial Statements
Section 169 (1) of the Act describes that directors must present the Audited Financial Statement to the company’s AGM. The presentation of statements must not be later than 18 months from the company’s incorporation, occurring once every 15 months. Further, the accounts must not be made more than six months before the annual meeting. Failure to comply will result in a fine of RM30000 and an imprisonment term of up to five years.
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