PENANG: It is inappropriate for sleeping partners or silent directors of companies to try to escape from being held accountable for Employees Provident Fund (EPF) contributions, a High Court judge said.
Justice Dr R. K. Nathan said this in dismissing an appeal by lawyer Dr Jagjit Singh Sidhu against a High Court senior assistant registrars (SAR) decision that he and eight other directors of Adorna RMIT Sdn Bhd had to pay RM309,867 in EPF contributions.
The contributions were for some 50-odd lecturers and staff of the Adorna Institute of Technology in Jawi, owned by Adorna RMIT, a joint-venture company.
Directors are the alter ego of a company. It is not appropriate for a company director to attempt to escape culpability by pleading that he is a sleeping partner or director, or a silent director, or a non-active director, said Justice Nathan in his judgment yesterday.
The EPF Board had sued Adorna RMIT as the employer and also named the nine directors as defendants for the companys failure to remit contributions amounting to RM309,867 from October 1998 to July 2000.
The other directors are Datuk Fong Wa Tan, Datin Ooi Hoay Lan, Tunku Dr Ismail Tunku Mohamad Jewa, Datuk Ahmad Fuad Md Ali, Zainal Abdul Ghani, Fatimah Abdullah, Mohd Anuar Hashim and Ng Kwan Thye.
On April 23, the then SAR Ainul Shahrin Mohamad granted the EPF Board summary judgment against all the defendants for the sum, as well as for dividends and interests as provided for under the EPF Act in the event that an employer failed to pay the due contributions within the stipulated time.
Dr Jagjit Singh had appealed against the decision on grounds that he was appointed informally as a director for the sole purpose of re-negotiating a joint-venture agreement.
He also contended that he held neither shares nor equity in the company, was not involved in its day-to-day running, and had not received any remuneration.
The judge viewed that Section 46 of the Act was sufficient to include the directors liability, which was joint and several, in the event that companies failed to pay the EPF dues.
This is a unique section peculiar to this Act. It is a sensible section, which ensures that directors owe a duty to see to it that the employees compulsory savings are protected.