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Corporate Liability under Section 17A of MACC Act: Are You Prepared for It?

- Advertisement -Corporate Liability under Section 17A of MACC Act: Are You Prepared for It?

The Government has been relentless in its pursuit to eradicate corruption, especially since May 2018.

Several high-profile cases, including those linked to the infamous 1MDB scandal, SRC International, Felda, Felcra among others and subsequent slew of charges laid against several politicians are well known to the public today.

What exactly is Corruption? The definition and various acts of corruption are well defined in the MACC (Malaysian Anti-Corruption Commission) Act 2009.

Looking back, in PP v Datuk Hj. Harun bin Hj. Idris (No 2) (1977), 1 MLJ 15, the Court explained that corruption as “doing an act knowing that the act done is wrong, doing so with evil feelings and evil intentions”.

“Corrupt” is a question of intention. If the circumstances show that what a person has done or has omitted to do was moved by an evil intention or a guilty mind, then he is liable, it was held.

According to Transparency International, Corruption cost Malaysia 4% of its GDP value each year since 2013. This amounts to RM212.3 billion since 2013! For 2017 alone, the figure was RM46.9 billion.

The government’s tough stand since 2018 has been fruitful, as seen in Transparency International’s Corruption Perceptions Index (CPI) 2019, whereby Malaysia’s ranking jumped 10 places to 51 compared to the previous year.

It scored 53 points compared to 47 points in the 2018 index when it was ranked 61 out of 180 countries surveyed. A higher score indicates better public perception.

Among the steps taken to rid the nation of the corruption scourge is the introduction of a new Section 17A or Corporate Liability Provision in the MACC Act, which comes into force on June 1, 2020.

The Malaysian Anti-Corruption Commission (Amendment) Bill 2018) amended the Malaysian Anti-Corruption Act 2009. It was tabled in Parliament and passed on 4th April 2018. Royal assent was given on 27th April 2018.

This is a completely new section that relates to offences committed by a person associated with a Commercial Organisation”, and modelled after the UK Bribery Act 2010.

Section 17A is a strict liability offence for failing to prevent bribery by a commercial organisation. Simply put, it places a burden on those covered by it to proof they have adequate procedures in place to prevent bribery.

The aim is to foster the growth of a business environment that is free of corruption, and to encourage commercial organizations to take reasonable and proportionate measures to ensure their businesses do not participate in corrupt activities for their advantage or benefit.

What is meant by a Commercial Organisation?

A ‘commercial organisation’ covered by Section 17A is widely defined as:

  • A company incorporated under the Companies Act 2016 and carries on a business in Malaysia and elsewhere;
  • A company wherever incorporated and carries on a business or part of a business in Malaysia;
  • A partnership under the Partnership Act 1961 or a limited liability partnership under the Limited Liability Partnerships Act 2012 and which carries on a business in Malaysia or elsewhere; or
  • A partnership wherever formed and carries on a business in Malaysia or elsewhere

The Act defines a person is associated with the commercial organisation if:

He is the commercial organisation’s director, partner, employee or agent of the commercial organisation; or he performs services for or on behalf of the commercial organisation.

The new Section 17A goes further than Section 7 of the UK Bribery Act 2010 in one material respect.

Section 17A(3) provides that where an offence under the Section is committed by a commercial organisation, the director, controller, officer, partner and persons managing its affairs at the time of commission of the offence is deemed to have committed the offence of failing to prevent corruption.

This individual will have to prove that the offence was committed without his consent or connivance and that he had exercised due diligence to prevent it

What Defences Do You Have and What Are Adequate Procedures?

It is not a defence to the corporate liability offence if the commercial organisation is not aware of the actions of the associated person.

However, if a commercial organisation is charged for the offence, it is a defence for it to prove that it had in place adequate procedures to prevent persons associated with it from undertaking such conduct.

To mitigate any charge, as contained in the Ministerial Guidelines issued by the Government in 2018, Section 17A places a burden on those covered to show evidence that they have implemented adequate procedures in place to prevent bribery in their organisation.

Employers will now be expected to have in place Policies and Procedures aimed at preventing commission of bribery offences by their employees.

Thus, Section 17A not only imposes liability on companies but also imputes strict personal liability on their officers and members of senior management.

Section 17A (5) provides that the Minister shall issue guidelines as to what constitutes adequate procedures. The Prime Minister’s Department has already issued the Guidelines on Adequate Procedures (GAP) pursuant to Section 17A(5) of the MACC Act.

Who Decides If Adequate Procedures Have Been Complied With?

The Court will ultimately decide this issue based on evidence adduced.

When deciding, the prosecution or court may take into consideration the particular

facts and circumstances of the case, such as the existence of an organisation’s anti-corruption policies.

For now, all commercial organisations need to ensure core principles or T.R.U.S.T. and anti-corruption plans are being put in place within their framework.

Among them could be the implementation of the ISO 37001:2016 Anti-Bribery Management System (ABMS), as one of the steps to comply with this new Section 17A. This also complies with the five principles in the prevention, detection, response and investigation of bribery towards the whole objective of Section 17A.

* The Author is an Accredited Chief Integrity Officer (AceIO) with the Malaysian Anti-Corruption Academy (MACA). He was also the Accredited Chief Integrity Officer and Head of Legal and Secretarial of the Iskandar Regional Development Authority. For more information and advice, the writer can be contacted at jeceeb@yahoo.com

** The views expressed are opinions of the writer and do not necessarily reflect the stand of the newspaper’s owners and editorial board.


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