SEction 17A - Corporate liability provision : the burden of proof

How the burden of proof has shifted

In the new Corporate Liability provision in Section 17A of the MACC Amendment Act 2018, the burden of proof has shifted to the company and its Directors and Top Management.

The new Corporate Liability provision in Section 17A of the MACC Amendment Act 2018 comes into force on 1 June 2020. Employers are put on notice that the actions of their employees which have corruptly benefited their organisation will impact the company, its directors and senior management personally. The company faces a minimum fine of RM1 million or20 years imprisonment of directors and senior management who were in charge of the affairs of the company at the time the offence was committed.

Burden of Proof

In the new law, the burden of proof rests with the company, its Directors and Top Management. The onus now is on the company and its Directors and Top brass to prove:

i) That the company had put in place procedures, including anti-corruption policies and procedures, which are adequate to prevent such corrupt actions from being committed by their employees, suppliers and subcontractors and

ii) That the Directors and Top Management did not know of the offence and had done all they could to prevent such an offence from being perpetrated.

Employers On Notice

The Corporate Liability provision specifically targets commercial organisations and their directors and officers. The culpability of companies in the new regulation makes it necessary for businesses to take cognizance of the actions of all levels of employees with respect to committing corrupt acts for the benefit or advantage of the business. Company Directors and Senior Management will be personally liable for the actions of their employees who corruptly gives or offers any gratification in this regard.

It has become all the more necessary for businesses incorporated under the Companies Act 2016 of Malaysia, partnerships and foreign incorporated companies carrying on business in the country, to be aware of the seriousness of the new law. Employers need to be conscious that when their employees have secured a project or a business deal through corrupt means, the liability escalates all the way to the Board room. It will not be sufficient for a company to merely state that they, as a business, do not condone corruption.

Adequate Procedures

Procedures which are considered adequate enough to mitigate the Corporate Liability provision depends on several factors including the size, complexity and type of industry the business operates in. Ministerial Guidelines on adequate procedures issued in December 2018 provide 5 principles on which these procedures hinge. These 5 principles are commonly referred to as T.R.U.S.T. The implementation of these principles in practice can be encapsulated in an anti-corruption compliance program which both defends business integrity and is suited to the level of operations of the business.

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