Regulatory Background

On 1st June 2020, Section 17A of the Malaysian Anti-Corruption Commission Act 2009 (“MACCA”) came into force. Section 17A introduces an offence by commercial organizations, which has its sights aimed squarely at the private sector. In 2021, the Malaysian Anti-Corruption Commission brought charges under section 17A for the very first time, against a local company and its director.

Under Section 17A, a commercial organization can be charged with a criminal offence if an associated person (e.g. employees, directors, partners, external service providers etc.) commits an act of bribery or corruption for the benefit of the commercial organization, even if the bribe was not authorized by the commercial organization.

Furthermore, directors or other persons concerned with the management of the commercial organization at the time of commission of the offence will also be deemed liable.

The introduction of Section 17A has significantly increased the risks to commercial organizations and their management:

  1. Under the previous law, when an employee of a commercial organization gave a bribe to another entity to secure an advantage (e.g. to secure business/contract or obtain a permit or licence), the employee giving the bribe and the other employee of the entity receiving the bribe could be prosecuted under the MACCA. It would be difficult to prosecute the commercial organization itself and the directors/management, if they did not authorize the bribe or have any knowledge of it.
  2. With the introduction of Section 17A, there are significant ramifications on the liability of commercial organizations and the directors/management. Section 17A introduces the strict liability concept of ‘Corporate Liability’. This effectively means that in the example above:

(a)        The commercial organization itself is now deemed to have committed the bribery offence;

(b)        The directors/management is also now deemed to have committed the bribery offence.

Even if the company or directors/management did not authorize the bribe nor had any knowledge of it, such a defence is insufficient, by itself, to absolve them of liability.

In order for the company to be absolved from liability, it must be proven that the company had ‘adequate procedures’ to prevent ‘persons associated’ with the company from undertaking such conduct.

Similarly for the directors/management to defend themselves from prosecution, they need to prove BOTH of the following:

(a)        the bribe was committed without their knowledge or connivance; AND

(b)        they had exercised due diligence to prevent the commission of such an offence.

“Persons associated” to a commercial organization could mean directors, partners, employees and persons who perform services on behalf of the commercial organization.  This means that non-employees such as service providers who engage in bribery could also implicate the commercial organization under the concept of Corporate Liability.  Hence, the risk of rogue employees or service providers giving bribes could now easily implicate the commercial organization itself and/or the directors/management.

The penalty under section 17A of the MACC Act is very severe, being:

(a)        A minimum fine of RM1m or 10 times the amount of the bribe (whichever is the higher); and/or

(b)        Imprisonment for up to 20 years.

Due to the above, the directors and management of many commercial organizations must now take active steps to ensure that the commercial organization has ‘adequate procedures’ to prevent bribery. This would then provide a defence to the commercial organization and the directors/management in the case of a rogue employee/service provider committing a corruption offence. The Guidelines on Adequate Procedures published by the Prime Minister’s Department of Malaysia provide further clarity on what adequate procedures are.  ‘Adequate Procedures’ vary from organization to organization, and depend on many factors including the type of business it is in and the risk profile of the organization.

Very recently, Donovan & Ho was entrusted to conduct an MACC compliance exercise for a regional manufacturing powerhouse. This article will give readers some of the highlights the exercise.

Laying the Groundwork for Adequate Procedures

To make recommendations on how to improve the client’s practices, we first needed to understand the client’s existing practices, procedures, and internal guidelines with respect to anti-corruption and bribery.

To start off, we conducted an introductory training session to provide the respondents a foundational understanding on the regulatory background necessitating the exercise and the important role each of them play in protecting their organization and themselves free from corporate liability.

We circulated questionnaires and conducted interviews with key departments and personnel. Their responses were then incorporated into our Risk Assessment Matrix which gave management a practical bird’s eye view of the potential corruption risks within the organization.

Concurrently, we reviewed the client’s existing documentation, client and vendor onboarding procedures, employee handbook, and operational agreements, and identified several opportunities to enhance them with bribery risk mitigation and anti-corruption measures.

We drafted an Anti-Bribery and Corruption Policy, containing a Whistle Blowing policy and gift policy. Written communications were prepared for top management to circulate to both internal and external stakeholders, primarily to notify them of its anti-bribery stance.

Our recommendations on enhancing their existing policies with anti-bribery procedures were made based on internationally accepted standards set by the OECD and Transparency International. In conducting the MACC compliance exercise, we were mindful to ensure proportionality and practicability, balancing its legal compliance obligations with recommendations which will not hamper the client’s ability to do business effectively.

We concluded the Section 17A MACC compliance exercise with an online training session for the entire organization which addressed:

  • the MACC regulatory framework and the “TRUST principles”;
  • our findings and recommendations; and
  • examples of practical Do’s and Don’ts with respect to anti-corruption and bribery

In conclusion, this was a fruitful exercise knowing that the client is now equipped with Adequate Procedures based on the TRUST principles to defend itself against any incidence of corruption or corporate liability under the section 17A MACCA.


This article was written by Shawn Ho (Partner) & Ian Liew (Associate) from the corporate practice group of Donovan & Ho.  Shawn leads the corporate practice group of Donovan & Ho, and has been recognised as a Notable Practitioner, whilst the firm has been recognised as a Notable Firm for Corporate and M&A by Asialaw Profiles 2020 and 2021.  We are also ranked as a Recommended Firm by IFLR1000 2020 and 2021.

Our corporate practice group advises on corporate acquisitions, restructuring exercises, joint venture arrangements, shareholder agreements, employee share options and franchise businesses, Malaysia start-up founders and can assist with venture capital funds in Seed, Series A & B funding rounds. Feel free to contact us if you have any queries.


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