I. Corporate liability deriving from criminal activity
1. Nature of the liability (criminal, administrative) and basis (crimes committed by directors or representatives in the interest or for the advantage of the company)
Based on the current state of affairs in Malaysia, there is no one consolidated legislation that provides for criminal corporate liability in its totality. Instead, there is a plethora of legislations that address different areas of criminal corporate liability.
As companies are not natural persons, criminal liability is to be imputed to companies from the acts of its directors, managers and employees. This is particularly relevant for crimes that require proof of mens rea. There are two theories as to how such an imputation may be made. These are the Identification principle and the Vicarious Liability principle.
According to the Identification principle, the requisite mens rea is to be derived from the person who is the embodiment of the company itself, that is, the company’s “directing mind and will.” Such a person’s acts are to be attributed to the company itself as his acts are deemed to be the acts of the company itself. As for the Vicarious Liability principle, if an act is committed within the scope of corporate activity by an employee, that employee’s mens rea and actus reus are to be attributed to the company.
2. Type of crimes/administrative offenses from which, according to the legislature, corporate liability may arise
As mentioned above, there are different legislations that contain provisions addressing criminal corporate liability. While some legislation states that the crime is to be committed by a “person,” a person is widely defined and will be discussed below to include a body corporate. Nonetheless, for the purposes of this section, we will cite examples where the legislation clearly states offenses to be committed by a “body corporate”:
- Accountants Act 1967
Section 27 — Falsely misrepresenting that the body corporate is a chartered accountant
- Biosafety Act 2007
Section 12 — Undertaking release activities without approval
Section 22 — Exportation, importation or use of living modified organisms
Section 53 — Refusal to comply with demand by enforcement officer to obtain samples of organisms or products
- Registration of Engineers Act 1967
Section 24 — Obtaining registration by false pretenses
- Private Healthcare Facilities and Services Act 1998
Section 5 — Operating a private healthcare facility or service without a license or registration
Section 31 — Failure of a licensed or registered private healthcare facility or service to ensure it is maintained appropriately and operated by qualified persons
Section 52 — Failure to comply with an order for the temporary closure of a private healthcare facility or service
Section 75 — Failure to comply with directions from Director General
- Allied Health Professions Act 2016
Section 36 — Employing a non-registered person to perform duties and responsibilities of an Allied Health Profession practitioner
- Pathology Laboratory Act 2007
Section 36 — Failure to close a pathology laboratory upon receiving notice
Section 44 — Failure of a licensed pathology laboratory to have the prescribed programs and activities
- Direct Sales and Pyramid Scheme Act 1993
Section 4 — Carrying out a direct sales business by an unincorporated company or without a license
Section 27B — Promoting a pyramid scheme
- Franchise Act 1998
Section 6 — Operating a franchise business or making an offer to sell the franchise without prior registration of the franchise
Section 37 — Committing fraud or deceit
- Trade Descriptions Act 2011
Section 5 — Using a false trade description for goods
Section 8 — Using a false trade description for goods in relation to a registered trademark
Section 28 —Using expressions that have been ascribed definite meanings by an order of the Minister
Section 29 — Failure to comply with an order to certify, mark or accompany foods with information
3. Identification of companies and entities to which liability may apply
If the legislation provides for it, it would cover a body corporate registered under the Malaysian Companies Act. A “body corporate” is included within the definition of a “company” and a “corporation” as defined in Sections 3 and 134 of the Companies Act 2016.
Further, a “person” as defined in the Malaysian Interpretation Act includes “a body of persons, corporate or unincorporated.”
Hence, it appears that as a general rule, legislation imputing criminal corporate liability would apply to all types of companies.
4. Corporate liability for crimes committed abroad by its representatives or subsidiaries
Generally, crimes committed outside the jurisdiction of Malaysia should be dealt with according to the laws of the jurisdiction where the crime is committed.
5. Corporate liability in the case of transactions taking place after the commission of a crime (acquisitions, mergers, demergers, etc.)
Transactions such as acquisitions, mergers and demergers are usually executed by way of an agreement between the relevant companies. There are no laws that specifically provide for this. Therefore, one would have to refer to the agreements to ascertain how the liabilities of the companies are to be distributed post-transaction.
II. Applicable sanctions
1. Type of sanctions applicable to the company
Statutory provisions in legislation provide for criminal offenses as well as the sanctions that would apply to companies upon conviction. The types of sanctions that could be imposed are as follows:
- Fines (minimum and maximum amounts to be determined according to the applicable legislation)
- Suspension of trading
2. Interim measures, cease and desist orders, bans and confiscatory measures
During the investigative phase of criminal proceedings against companies, courts may opt to make orders requiring companies to disclose their books and records or make a freezing order over the company’s assets such as bank accounts.
3. Liability of directors or managers for not having adopted (intentionally or negligently) measures for the prevention of the crime
There are no specific laws in Malaysia that impose requirements on directors or managers to actively adopt measures to prevent crime. Notwithstanding, if an act or omission of a director or manager constitutes an abetment of an offense, they could be found liable together with the company. Furthermore, if a company is found liable for a criminal offense, directors or managers who are deemed to be responsible for the management of the company may be found to be liable as well unless they have taken all reasonable precautions and exercised due diligence to prevent the offense committed by the company and similar provisions are contained within many various legislations.
III. Measures and “models” of prevention and effects of the same on corporate liability and applicable sanctions
1. Consequences of the adoption of a compliance “model” and effects on corporate liability for crimes committed by the company’s managers, directors or representatives (cases in which it is possible to obtain an exemption from liability or a mitigation of the sanction)
Companies may be given a reprieve in the form of a reduction or complete avoidance of sanctions if they take reasonable care to exert control over their directors, managers and employees who nonetheless act ultra vires in committing an offense. Examples of such actions are ensuring proper segregation of units for the offense of insider trading and ensuring non-dissemination of sensitive information to unauthorized parties for misuse of information.
To facilitate this, government arms, such as the Companies Commission of Malaysia (CCM) and Bank Negara Malaysia (BNM) (the Malaysian National Bank), have produced codes and guidelines by which companies must adhere.
2. Modality according to which a compliance “model” must be adopted in order to benefit from exemption from responsibility or mitigated punishment (codes of ethics, procedures, etc.)
As mentioned above, the CCM and BNM are government bodies that have produced compliance models for companies such as the following:
- Company director and company secretary code of ethics
- Company directors responsibilities
- Malaysian code on corporate governance
- Anti-money laundering and counter-terrorism financing awareness training material for company secretaries
- Standards and guidelines for the following areas:
- Banking & Islamic banking
- Insurance & Takaful
- Development financial institutions
- Money services business
3. Monitoring: independent person or body to control/supervise, with the purpose of verifying the correct application of the “model”; mode of operation of such person or body
Apart from laying down the compliance models for companies, the CCM and BNM are also responsible for ensuring and enforcing corporate compliance.
To this end, the CCM has established several units to effectively carry out its role as a watchdog. The Inspection Unit is tasked with conducting inspections on companies in relation to the mandatory lodgment of company documents. It may also refer cases for investigation and prosecution. On the other hand, the Compound Management Unit is responsible for managing an effective and controlled compound monitoring system. Other units such as the Corporate Report Monitoring Unit handles company financial statements, whereas the Secretary Surveillance Unit monitors company secretaries.
IV. Judicial proceedings to determine corporate liability
1. Court competent to decide the liability of and penalties applicable to the company
If a company is prosecuted for criminal liability, the trial venue would be determined according to the relevant legislation that has been breached. The relevant legislation will specifically provide for the court that is competent to preside over the trial. For instance, prosecutions under the Malaysian Anti-Corruption Commission Act 2009 will be heard by the Sessions Court (Section 59 of the Malaysian Anti-Corruption Commission Act 2009), whereas prosecutions under the Companies Act 2016 may be heard by either the Sessions Court or the Magistrates depending on the severity of the punishment (Section 589(3) of the Companies Act 2016).
2. Possibility of the application of interim measures
(Please see Part II 2)
3. Plea bargains and related effects on the corporate liability
If a company that is being prosecuted for a criminal offense enters a guilty plea before the conclusion of a trial, the court presiding over the trial will take that into consideration as a mitigating factor when deciding what sanction to impose on the company. As a rule of thumb, the earlier the guilty plea is entered, the greater weight it is given toward mitigation. The rationale for plea bargains is to prevent unnecessary cost and time from being wasted by encouraging companies to own up at the earliest opportunity.
4. Imposition of sanctions against the company
(Please see Part II 1)
5. Permanence of corporate liability if the crime is extinguished
Pursuant to Section 182A of the Criminal Procedure Code, if a court finds that the prosecution has not proven its case beyond the criminal standard of proof beyond reasonable doubt, then the court must make an order for acquittal. This would result in the prosecuted company being found not guilty and having no corporate liability on its part.
V. Corporate liability in multinational groups
1. Liability of parent companies located abroad in the case of offenses committed by directors, managers or representatives of the local company
As mentioned above, the concept of “separate legal personality” established by the case of Salomon v. Salomon & Co Ltd  AC 22 means that a company has independent rights and liabilities, as it is regarded as a legal person by the law. As such, a parent company will also have an independent legal existence from that of its subsidiary. Hence, the criminal liability of a subsidiary company will be its own and will not be attributable to its parent company, regardless of whether the parent company is located in the same jurisdiction or abroad.
2. Basis of liability and applicable sanctions
This is not applicable as there is no liability on parent companies.
VI. Significant case law concerning corporate liability arising from crimes and draft laws under discussion
1. Significant case law, if any:
- Yue Sang Cheong Sdn Bhd v. Public Prosecutor  2 MLJ 77
The Federal Court held that when a company is prosecuted for a criminal offense, the mens rea of the company is to be ascertained from those who were entrusted with the exercise of the powers of the company. This is qualified by the proposition that such persons must have been acting in the course of the company’s business. In other words, such persons act as the directing mind and will of the company. This case supports the identification principle.
- Kumpulan Wang Persaraan (Inc) v. Meridian Asset Management Sdn Bhd  9 MLJ
The High Court held in this case that a company could be held liable for the criminal acts of its employees. However, the employee must act within the control and authority of the company. This case applied the vicarious liability principle.
- Justin Milroy Narakera v. PP  2 CLJ 226
The court filled a lacuna in the Criminal Procedure Code by deciding that companies may enter pleas to charges via a company representative.
2. Proposed or contemplated new legislation
The Malaysian Anti-Corruption Commission Act 2009 will be amended to introduce provisions for corporate liability of companies whereby companies would be liable for the corrupt practices of their employees. This would give the Malaysian Anti-Corruption Commission more power to fight corruption in the private sector. These changes are expected to come into force in 2018.
 Pg 146-148, Corporate Killing for Malaysia
 6.1, Mergers and Acquisitions
 1.2 and 1.3, Criminal Liability for Companies Survey
 2.10, Criminal Liability for Companies Survey
 For example s87(4) Anti-Money Laundering, Anti-Terrorism and Proceeds of Unlawful Activities Act 2001
 2.9, Criminal Liability for Companies Survey
 2.12, Criminal Liability for Companies Survey