While it has taken numerous discussions and proposals for its enforcement, the concept of corporate liability has now made its way into Malaysia’s legal platform. Despite the many attempts of delaying and extending its arrival, the monumental change is here to keep these corporate organizations in check. Many would agree that this may cause an additional concern to corporate bodies that are already hammered with the current economic restriction caused by the Covid 19, however as the saying goes, “If you have nothing to hide, you have nothing to fear,”.
CORPORATE LIABILITY
The term has been circling around the nation long enough for it to be given the proper introduction and definition. Understanding corporate liability is to know that corporate organizations nowadays would be made answerable and accountable to actions committed by their top management, employees and associated persons. We will dive into a clearer view of associated persons a little later on. One thing that commercial organizations would have to take into strict account would be the fact that although the action of bribery is not done by the organization in its entirety, they might still be liable for such misconduct.
Section 17A provides the following:-
A COMMERCIAL ORGANIZATION commits an offence if a person associated with the commercial organization corruptly gives, agrees to give, promises or offers to any person any gratification with an intention:-
a) To obtain or retain business for the commercial organization
b) To obtain or retain an advantage in the conduct of business for the commercial organization
COMMERCIAL ORGANIZATIONS
The first thing that would be of importance to understand the newly added provision would be to know to whom would this provision be applicable to. Reading through the provision, it has been clearly stated that this provision is applicable to commercial organizations but it is pertinent to know who are these commercial organizations.
Section 17A(8) has listed down the criteria for a body to be considered as a commercial organization. In simple words, commercial organizations would include organizations that are established under the Companies Act 2016, Local Partnerships established under the Partnership Act 1961 and Limited Liability Partnership Act 2012, together with the Foreign Companies and Partnerships carrying out businesses in Malaysia.
An issue that has been raised for discussion is whether Statutory Bodies would be considered as one of the commercial organizations liable under this provision. Since the provision has clearly listed out the criteria for a commercial organization, one being that it has to be established under the Companies Act 2016, a Statutory Body would not be of relevance as it would have been established under its own Act. Therefore, the simple answer to this matter is that Statutory Bodies would not be applicable under this newly amended provision.
ASSOCIATED PERSONS
One of the most frequently asked question as regards to Section 17A of the MACC (Amendment) Act 2018, would definitely be the definition of these associated persons. Although it has been clearly provided in the provision itself, the explanation is still open to a questionable interpretation. Section 17A(6) has mentioned that these associated persons would include the director, partner, employee and those who performs services for or on behalf of the commercial organization. Although directors, partners and employees are clear and direct definitions, service providers might be a position open to multiple interpretations.
Therefore, it has been elaborated that these service providers would include agents, and is determined by relevant circumstances instead of the nature of the relationship allowing that there would be no need for a formal Agency Agreement or Service Agreement. The relationship would be determined by the surrounding circumstances of the offence.
MISCONDUCTS LEADING TO OFFENCE
Pursuant to understanding the bodies or organizations that would be liable under this provision, and whose action would cause a trigger, it is now crucial for them to know what are the actions that might lead them towards such a liability. The provision has kept it simple by providing that the commercial organization would be held liable if an associated person, corruptly gives, agrees to give, promises or offers to any person any gratification with the intentions of procuring and/or retaining their businesses. However, in order to fully grasp the mechanism of this provision, one would have to know what are these gratifications and why it is not smart to take the term lightly.
Going back to the original Malaysia Anti Corruption Committee Act 2009, the definition of gratification extends to a whole list of potentials. It has provided that gratifications are not money and property as it is popularly known, it also includes any discount or rebate amounting to valuable considerations, any release of monetary liability, any service or favour, release of liability towards any loan taken, office and employment. It is extremely important for commercial organizations to be cautious because not only does gratification means all that are listed above, it also includes any offer or promises in providing all that are listed above.
The provision would be activated upon committing such actions by associated persons when it is proven that such actions are done to retain and/or procure your businesses.
PENALTIES AND PUNISHMENTS
As entertaining as it is to talk about the mechanism of triggering the provision, the fun would stop when you start talking about the penalties that come with it. Section 17A(2) provides that the penalty for an offence under Section 17A shall be a fine of not less than ten times the value of the gratification in question or RM 1 million (US$247,300), whichever is higher, or imprisonment for not more than 20 years, or both. If you are familiar with the MACC Act 2009, we would believe your jaw might have dropped to the floor. The financial penalty provided in this provision is a lot heavier than the existing financial penalty for the offence of bribery. This shows a clear statement by our lawmakers taking the offence of corporate liability with a stricter view.
A confusing punishment for corporate liability would be the term of imprisonment. Understanding that the liability would fall on the commercial organization, it would be a relevant question to ask who would be imprisoned? The new provision has now introduced the concept of parallel liability whereby Section 17A(3) of the MACC (Amendment) Act 2018 provides that senior personnel, such as a director, controller, officer, partner or person who is concerned with the management of a commercial organisation found to be liable for corruption under Section 17A at the time of the commission of the offence, shall be deemed to have also committed the same offence.
Despite the widely familiar concept of Corporate Veil, this is one of the circumstances that would lift the corporate veil and have the senior personnel accountable to the offence almost as if they have committed it themselves.
But, hold on to your seats gentlemen, with every offence, comes an available defence.
DEFENCE FOR COMMERCIAL ORGANIZATIONS
Section 17A(4) of the MACC (Amendment) Act 2018 states that a commercial organisation shall be acquitted of a charge under Section 17A if it proves that it “had in place adequate procedures designed to prevent persons associated with the commercial organization from undertaking such conduct.” The defence would be in the form of the commercial organization proving that they have implemented Adequate Procedures to prevent such mishap. The Government has also provided a guideline to assist commercial organizations in drafting up their Adequate Procedures. Although it is not a legal obligation for commercial organizations to apply as according to the guideline, the Court would make use of such guideline to decide whether your commercial organization has taken the right steps in composing Adequate Procedures to be implemented throughout your organization.
DEFENCE FOR SENIOR PERSONNEL OF COMMERCIAL ORGANIZATION
The personal liability of the senior personnel in these commercial organizations can be prevented or defended by ensuring that he or she has exercised due diligence to prevent the commission of the offence as he ought to have exercised, having regard to the nature of his function in that capacity and to the circumstances and to prove that the misconduct was done without his or her consent.
As simple as it sounds, both defences would compliment each other whereby the senior personnel would have a solid defence if the commercial organization implements the Adequate Procedure. An additional effort on his or her part, the senior personnel would also have to prove that such misconduct was not under his or her direction and is done without consent.
CONCLUSION
The new provision has brought a giant responsibility to be placed on top of corporate organizations thriving in our country. Although it is deemed to be a heavy responsibility, there is no doubt that its necessity would claim higher heights. Despite the painful penalties that is provided with the offence, it is high time that the nation takes strict actions in combatting corruption in this country. Such an offence should not be tolerated and the nation should be prepared and on the lookout for a clean economic slate.
We at IIM, would recommend that commercial organizations should digest this new provision with utmost cautious. With no precedence to refer, no organizations should take this matter lightly. Defences are available and we recommend that you take them as soon as possible. At IIM, we provide multiple products and services to keep you ready and prepared with a solid defence against the offence such as our Anti Bribery Management System and our Organizational Anti Corruption Plan. We welcome your inquiries and questions both on this matter and the products and services we offer. Together with you, we’ll help you construct a powerful defence for an unexpected future.