KUALA LUMPUR (May 6): The Malaysian Institute of Corporate Governance (MICG) today urged the Government to reject any proposal to defer implementation of the corporate liability provisions in the MACC (Amendment) 2018 Act, which is set to come into force on June 1 this year.

MICG president Datuk Yusli Mohd Yusoff said the case for a postponement — that companies are ill-prepared and do not have enough time to get ready due to the COVID-19 pandemic — is “not well-founded” and warned that a deferment could injure Malaysia’s international standing in terms of corporate governance.

“The likely negative impact on future foreign investment in the country would make recovery from the current economic downturn even more difficult,” he said in a statement.

Yusli was referring to the implementation of Section 4, which covers corporate liability, and Section 17(A), which provides a defence for a company and its directors and senior management by introducing “adequate procedures” to guard against the commission of corrupt acts.

He also said that a portion of MICG’s Transparency in Corporate Reporting (TRAC 2019) report saying that only 54% of Malaysia’s top 100 listed companies have prepared for the implementation of the amended Act — which was used to argue for a postponement — “can be, and appears to have been, misconstrued”.

“The 2019 TRAC report was designed to establish the status of the anti-corruption practices of the country’s top 100 listed companies based on information available in the public domain.

“The benchmark used was the market capitalisation of the companies at 31 December 2018, as stated by Bursa Malaysia.

“This means the 54% readiness figure dates back 17 months, a considerably longer timeline than the six months that has elapsed since the 2019 TRAC report was launched last November,” he said.

He added that the Act was passed and gazetted on May 4, 2018, and came into operation on Oct 1, 2018 — except for Section 4 of the Act, which is due to take effect on June 1.

“That means companies have had 25 months to prepare to ensure compliance with the Act.

“The loss of 10 weeks to COVID-19, should the Movement Control Order (MCO) continue to the end of May 2020, is of little significance in such a timeline,” he said, adding that most companies that were unprepared prior to the MCO would have remained so in any case.

“In times of economic stress, there is always a temptation to 'do what it takes' even if it means cutting corners. Postponing the enforcement of corporate liability will appear to be enabling the very behaviour the Act seeks to forbid. Weakening the definitions of what constitutes a corrupt act will be similarly regarded,” he said.

He called upon the boards and senior management of Malaysia’s leading companies to stand firm as “champions of business integrity and ethics”, instead of seeking a way out of the Act’s implementation.

“In current times we should not abandon our principles, but act with firmness and sensitivity,” said Yusli.

He added that allowance should only be given to companies that have consistently upheld the principles of corporate governance, but lapsed during the current crisis, “inadvertently allowing dubious acts to pass undetected, or were not alert to third parties or agents doing so”.

He said in such cases, the MACC should be allowed to negotiate a deferred prosecution agreement (DPA), where the company admits liability but agrees to adopt adequate processes and procedures within a specified timeline to prevent future occurrences and rectify the situation.

“The quid pro quo would be reduced fines or other punishments, and performance of the company’s obligations under the DPA would be adjudicated by the courts,” he added.

On May 2, Malaysian Association of Certified Fraud Examiners president Datuk Seri Akhbar Satar said the Government should defer the enforcement of Section 17(A) of the MACC amendment to June 1, 2021 so that companies would have enough time to put the proper procedures in place.

This is because many of them are currently fighting for survival amid the COVID-19 pandemic, resulting in economic losses, he said in a statement.