Holding company directors and officers to account

UNDER Section 218 of the Companies Act 2016, directors and company officers who misuse their positions to benefit themselves or others, or to harm the company, may face up to five years’ imprisonment, a fine of up to RM3mil, or both.

Abuse of power, however, is not limited to taking company money. It can also involve awarding contracts to friends or relatives, hiding personal interests, manipulating financial records, submitting false invoices or misusing confidential company information.

The Malaysian Anti-Corruption Commission (MACC) reported approximately RM520mil in corruption involving private entities in 2025, including listed companies (RM124mil), non-listed companies (RM383mil) and sole proprietorships (RM11mil).

Several laws protect companies and shareholders against such misconduct. Section 213 of the Companies Act 2016 requires directors to act honestly, exercise reasonable care, skill and diligence, and make decisions in the company’s best interests.

Section 218 specifically addresses the misuse of a director’s or officer’s position, company property, information or business opportunities for personal benefit or to harm the company.

The MACC Act 2009 also applies when bribery is involved. Sections 16 and 17 cover giving, offering, soliciting and receiving bribes. Section 17A provides for corporate liability when an associated person commits bribery to benefit a commercial organisation.

The Penal Code covers other offences, including criminal breach of trust, cheating, forgery and falsification of company accounts.

Meanwhile, the Capital Markets and Services Act 2007 addresses offences such as market manipulation, false statements and insider trading.

Importantly, a poor business decision is not automatically a criminal offence. Directors may make decisions that result in financial losses, but this does not necessarily mean they have broken the law. The situation is different when there is deliberate dishonesty, fraud, bribery or misappropriation of company funds.

Ultimately, laws alone cannot prevent corporate abuse. Companies need strong leadership, a clear tone at the top, effective internal controls and a genuine commitment to integrity.

DATUK SERI DR AKHBAR SATAR

Professor and director

Institute of Criminology and Criminal Justice

HELP University