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Companies Commission issues Consultative Document on Company Director and Company Secretary Code of Ethics

12 April 2023

The Companies Commission of Malaysia issued a Consultative Document on 27 March 2023 seeking comments on the Proposed Updates on the Company Director and Company Secretary Code of Ethics. An Exposure Draft of the updated Company Director and Company Secretary Code of Ethics (‘Updated Code’) has been annexed to the Consultative Document.
 
Main updates
 
The main updates to be made to the existing Company Director and Company Secretary Code of Ethics Booklet (‘Existing Code’) under the Updated Code are the introduction of: 
  1. new ethical principles for company directors relating to corporate liability under section 17A of the Malaysian Anti-Corruption Commission Act 2009 – see section (d) of paragraph 13 of Part A of the Updated Code; 

  2. new ethical principles for company directors to encourage sustainable business practices; and the replacement of ‘corporate social responsibility’ principles with ‘sustainability’ to be aligned with current “Environmental, Social and Governance” (ESG) principles - see section (c) of paragraph 13 of Part A of the Updated Code; 

  3. new ethical principles for company directors and company secretaries relating to attendance at continuous professional development programmes - see paragraph (xiii) of section (a) of paragraph 13 of Part A and paragraph (iv) of section (b) of paragraph 18 of Part B of the Updated Code; 

  4. new ethical principles for company directors to ensure that employees understand and appreciate the value of good corporate governance, processes and procedures through training, awareness programmes and robust communications – see paragraph (ii) of section (b) of paragraph 13 of Part A of the Updated Code; 

  5. new ethical principles for company directors and company secretaries pertaining to the anti-money laundering and counter financing of terrorism (AML/CFT) obligations – see section (e) of paragraph 13 of Part A and section (d) of paragraph 18 of Part B of the Updated Code; and 

  6. new ethical practices for company secretaries relating to compliance with the law, regulations and procedures and practising certificate requirements – see paragraphs (i) and (ii) of section (a) of paragraph 18 of Part B of the Updated Code. 
Other noteworthy updates
 
Who is a ‘director’?
 
The definition of a ‘director’ in Paragraph 11 of Part A of the Updated Code is substantially similar to the corresponding definition in Part D of the Company Director’s Code of Ethics Section of the Existing Code save that the description of a shadow director in the Updated Code refers to ‘a person in accordance with whose directions and instructions the majority of directors of a corporation are accustomed to act’ instead of ‘a person in accordance with whose directions and instructions the directors of a corporation are accustomed to act’ under Part D of the Existing Code. The definition under the Existing Code follows the definition of a director in the now repealed Companies Act 1965 while the definition in the Updated Code accords with the definition in the Companies Act 2016.
 
For greater clarity, paragraph 11 of the Updated Code states that some companies do not use the designation ‘director’, while paragraph 12 states that a company limited by guarantee may describe their directors as ‘governors’ or ‘trustees’ and that such persons are directors of a company if they occupy the position of a director or carry out such functions including being primarily responsible for the management of the company.
 
Attendance and participation at meetings
 
The ethical principle in paragraph 1.2 of Part E of the Company Director’s Code of Ethics Section of the Existing Code for a director to, inter alia, devote time and effort to attend meetings has been expanded to include a requirement to participate at meetings under paragraph (ii) of section (a) of paragraph 13 of Part A of the Updated Code.
 
Deadline for feedback
 
Comments on the Updated Code should be submitted to the Companies Commission of Malaysia by 26 April 2023.
 
Comments
 
Apart from the updates highlighted above, most of the provisions of the Updated Code have been carried over from the Existing Code albeit with drafting amendments in several provisions.
 
Alert by Kok Chee Kheong (Partner) of the Corporate Practice of Skrine.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.

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