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Companies Commission issues Code of Ethics for Company Director and Company Secretary

26 September 2023

The Companies Commission of Malaysia (“CCM”) issued the Code of Ethics for Company Director and Company Secretary (“New Code”) on 11 September 2023.
 
The New Code supersedes the Code of Ethics – Company Director / Company Secretary (“Superseded Code”) that was issued previously by the CCM.
 
As in the case of the Superseded Code, the New Code is divided into two parts, namely Part A which sets out the Code of Ethics for Company Director and Part B, the Code of Ethics for Company Secretary.
 
Objectives of the Code of Ethics for Company Director
 
The Code of Ethics for Company Director is formulated to enhance the standard of corporate governance and corporate behaviour with a view to achieving the following intended objectives: 
  1. To establish standards of ethical conduct for company directors based on acceptable belief and values one upholds; 

  2. To uphold the spirit of accountability and transparency in line with the legislation, regulations and guidelines governing a company; and 

  3. To promote the sustainability of a company by pursuing “Environmental, Social, and Governance” (ESG) strategies in its business. 
Objectives of the Code of Ethics for Company Secretary
 
The Code of Ethics for Company Secretary is formulated to raise the standard of corporate governance and to inculcate good corporate behaviour to achieve the following objectives: 
  1. To instil professionalism among company secretaries within the tenets of morality, efficiency and administrative effectiveness; and 

  2. To uphold the spirit of accountability, transparency, integrity and effective governance in line with the legislation, regulations, good corporate governance practices and guidelines governing a company. 
Main updates
 
The main updates under the New Code are as follows: 
  1. new requirement for company directors relating to corporate liability under section 17A of the Malaysian Anti-Corruption Commission Act 2009 – see section (d) of Part A of the New Code; 

  2. new requirement 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 Part A of the New Code; 

  3. new requirement for company directors and company secretaries pertaining to the anti-money laundering and counter financing of terrorism (AML/CFT) obligations – see section (e) of Part A and section (d) of Part B of the New Code; 

  4. expanding the existing requirement for a director to immediately disclose all contractual interest, whether directly or indirectly, with the company to include a requirement for full disclosure  – see paragraph (ix) of section (a) of Part A of the New Code; 

  5. expanding the existing requirement for a director to, inter alia, devote time and effort to attend meetings to include a requirement to participate at meetings – see paragraph (ii) of section (a) of Part A of the New Code; 

  6. new requirement for company directors and company secretaries relating to attendance at continuous professional development programmes to keep abreast with corporate governance developments and other relevant statutory / regulatory requirements affecting companies - see paragraph (xiii) of section (a) of Part A and paragraph (iv) of section (b) of Part B of the New Code; 

  7. expanding the existing requirement for a director to be conscious of the interest of shareholders, employees, creditors and customers of the company to include the interest of suppliers of the company – see paragraph (i) of section (b) of Part A of the New Code; 

  8. new requirement for company directors to ensure that employees fully understand and appreciate the value of good corporate governance practices and procedures through ongoing training, awareness programmes and robust communication – see paragraph (ii) of section (b) of Part A of the New Code; 

  9. new requirement for company secretaries to facilitate communication among board members, the board and management, the chairman and the chief executive officer, the company and its shareholders, and the company and its stakeholders - see paragraph (vii) of section (c) of Part B of the New Code; 

  10. new requirement for company secretaries to ensure compliance with relevant legislation, regulations, procedures, rules and guidelines governing the company - see paragraph (i) of section (a) of Part B of the New Code; and 

  11. new requirement for company secretaries to keep abreast with the practising certificate requirements under section 241 of the Companies Act 2016 – see paragraph (ii) of section (a) of Part B of the New Code. 
Other noteworthy updates
 
Who is a ‘director’?
 
The definition of a ‘director’ in the “Definition” section of Part A of the New Code is substantially similar to the corresponding definition in Part D of the Superseded Code save that the description of a shadow director in the New 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 the Superseded Code. The definition under the Superseded Code follows the definition of a director in the repealed Companies Act 1965 while the definition in the New Code accords with the definition in the Companies Act 2016.
 
For greater clarity, the “Definition” section of Part A of the New Code states that some companies do not use the designation ‘director’. The section further 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.
 
Rearrangement of Requirements relating to Company Secretaries
 
The Superseded Code listed the 15 requirements relating to company secretaries in successive paragraphs. The New Code reorganises these requirements into four sections, namely Professionalism, Corporate Governance, Relationship with Directors and Shareholders, and Obligations of Reporting Institutions under the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.
 
Comments
 
The New Code is a timely update of the Superseded Code as it codifies concerns that have arisen in recent years, such as corporate liability, money laundering and terrorism financing and environmental, social and governance requirements.
 
Apart from the updates highlighted above, most of the provisions of the New Code have been carried over from the Superseded 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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