This article first appeared in Forum, The Edge Malaysia Weekly on July 27, 2026 - August 2, 2026

The Malaysian Anti-Corruption Commission Act 2009 (MACC Act 2009) was amended by the Malaysian Anti-Corruption Commission (Amendment) Act 2018 to include Section 17A, which came into effect on June 1, 2020.

Under Section 17A(1), a “commercial organisation” commits an offence if a “person associated with the commercial organisation corruptly gives, agrees to give, promises or offers to any person any gratification whether for the benefit of that person or another person” with an intention to:

● obtain or retain business for the “commercial organisation”; or

● obtain or retain an advantage in the conduct of business for the “commercial organisation”.

Under Section 17A(8), a “commercial organisation” is defined as:

● a company incorporated under the Companies Act 2016, and carries on a business in Malaysia or elsewhere;

● a company wherever incorporated, and carries on a business or part of a business in Malaysia;

● a partnership under the Partnership Act 1961, and carries on a business in Malaysia or elsewhere;

● a partnership which is a limited liability partnership registered under the Limited Liability Partnerships Act 2012, and carries on a business in Malaysia or elsewhere; or

● a partnership wherever formed, and carries on a business or part of a business in Malaysia.

A “person associated with the commercial organisation” is broadly defined under Section 17A(6) in that it not only covers direct members of a “commercial organisation” such as directors, partners or employees, but includes a person who “performs services for or on behalf of the commercial organisation”.

Section 17A(3) provides that if a “commercial organisation” commits an offence under Section 17A(1), the director, controller, officer or partner or a person who is “concerned in the management of its affairs” would be deemed to have committed that offence.

Under Section 17A(2), the penalty for an offence under Section 17A is:

● a fine not less than 10 times the sum or value of the gratification, or RM1 million, whichever is the higher; and/or

● imprisonment for a term not exceeding 20 years.

If a “commercial organisation” is charged with an offence under Section 17A(1), the “commercial organisation” may establish in its defence that “adequate procedures” had been put in place to prevent a “person associated with the commercial organisation” from undertaking the conduct set out in Section 17A(1).

This is worth stating plainly, because it is frequently misunderstood. What the statute confers is a defence — a complete answer to the charge — and not a mitigating factor to be urged after conviction.

In 2018, the Prime Minister’s Department issued Guidelines on Adequate Procedures pursuant to Section 17A(5) to assist “commercial organisations” and their “top level management” in understanding the “adequate procedures”, which ought to be implemented to prevent the occurrence of “corrupt practices” in relation to their business activities.

“Top level management” is defined in the guidelines as a director, controller, officer or partner of a “commercial organisation” or any person “concerned in the management of its affairs”, that is, the persons deemed under Section 17A(3) to have committed the offence which the “commercial organisation” has committed under Section 17A(1).

The guidelines are premised on the following five principles (TRUST), which may be taken into consideration by “commercial organisations” when establishing the “adequate procedures” as envisaged under Section 17A:

● T: Top-level commitment

● R: Risk assessment

● U: Undertake control measures

● S: Systematic review, monitoring and enforcement

● T: Training and communication

From our experience with corporations in sectors ranging from financial institutions to real estate investment trusts (REITs), we can see that the policies, mechanisms and/or procedures adopted to address bribery and/or corruption include, inter alia, the following: 

● conducting due diligence and risk management in the engagement of external associate parties, such as suppliers and vendors, and compelling them to execute due diligence papers, which require them to provide relevant information on anti-bribery and corruption matters;

● implementing “no gift” policies and notifying their associate parties of the same;

● circulating the relevant anti-bribery and corruption policies internally within the corporation and externally to their associate parties to increase awareness of the same;

● informing their associate parties of reporting channels and/or whistleblowing mechanisms to allow them to raise any concerns or complaints on bribery and corruption; and

● stating in their correspondence their corporate stance on a “zero-tolerance” approach towards bribery and corruption.

We are given to understand that certain corporations, in a bid to tackle bribery and corruption, would require their employees to attend courses and refresher briefings on anti-bribery and corruption to ensure that they are familiar with the policies undertaken by the company, the different kinds of conduct that may constitute bribery and corruption, the risks and consequences involved and so on.

According to the Guidelines on Adequate Procedures, if there is an occurrence of a “corruption incident”, it is for the courts to decide whether the “commercial organisation” had “truly established” the necessary safeguards to prevent the occurrence of the same. It is also stated that the courts, in making a decision, are “likely” to take into consideration the facts and circumstances of any given case, including the policies and procedures put in place by the “commercial organisation” and the manner in which they are implemented.

Not necessarily. Under Section 17A(3), directors and officers may establish that:

● the offence was committed without his/her consent or connivance; and

● that he/she had exercised “due diligence” to prevent the commission of the offence as he/she ought to have exercised, having regard to the “nature of his function in that capacity and to the circumstances”.

It is interesting to note that Section 17A(3) has shifted the burden of proof to the directors and officers in that they are presumed to have committed an offence under Section 17A, unless they can establish that the offence had been committed without their consent and that they had exercised “due diligence” to prevent the commission of the same.

From our experience, and having reviewed the practices adopted locally and overseas, we find that the “due diligence” undertaken by directors and officers includes, inter alia, the following:

● ensuring adequate resources and expertise are available to formulate and implement the anti-bribery and corruption policies;

● endorsing and cultivating a “zero-tolerance” culture against bribery and corruption;

● ensuring that any objections to conduct that may be construed as bribery and corruption are properly documented; and

● reporting any breaches of anti-bribery and corruption policies via the internal reporting mechanism and/or to the relevant authorities.

On March 18, 2021, it was reported in the papers that a former director of an offshore vessel support company, namely Pristine Offshore Sdn Bhd was charged in court under Section 16(b)(A) of the MACC Act 2009 for allegedly offering bribes amounting to RM321,350 to Deleum Primera Sdn Bhd to secure a subcontract from PETRONAS Carigali Sdn Bhd.

Pristine was charged in court under Section 17A in respect of the alleged conduct on the part of their former director, marking the first charge made against a company under that provision.

Pristine’s present and sole director attended court on its behalf and pleaded not guilty to the charge under Section 17A(1) and bail was granted at RM200,000 with one surety. Pristine’s former director also pleaded not guilty to the charge under Section 16(b)(A) and bail was granted at RM150,000, with his passport surrendered to the court.

What followed is a study in how slowly a landmark can move. In 2023, Pristine and its former director applied to transfer the proceedings to the High Court, contending that “adequate procedures” raised novel questions of law on which no Malaysian court had yet ruled. The application was dismissed.

Then, in May 2026, the case collapsed, without the defence ever being tested. The Sessions Court, upholding a preliminary objection, struck out the charges against both the company and its former director on the ground that they were vague and defective, the court having been informed that the accused had earlier been given a discharge not amounting to an acquittal, and then charged afresh. Whether the prosecution appeals, or charges again, remains to be seen.

The position, therefore, is this. Six years after Section 17A came into force, the first case brought under it has ended, for now, without any court ruling on the provision at all. No commercial organisation has been convicted, and no court has said what “adequate” means. The defence on which every compliance programme in the country is built remains untested.

Pristine has not remained the only case. A second commercial organisation and its director face charges under the provision in connection with an alleged bribe offered to secure a major concession. Their application to transfer the proceedings to the High Court was allowed in May 2026, and trial dates have been fixed for early 2027. It is there, perhaps, that the first judicial guidance on the defence will come.

Separately, the MACC has announced that amendments to the MACC Act 2009, expected to be tabled in parliament, will introduce Deferred Prosecution Agreements — a mechanism, drawn from the UK and the US, under which the prosecution of a commercial organisation may be deferred on agreed conditions — which, if enacted, would materially change how Section 17A cases against companies may be resolved.

This is a frequently asked question, and the answer is that it would depend on the facts and circumstances.

Section 289(1) of the Companies Act 2016 provides that a company shall not indemnify or effect insurance for the directors and officers in respect of their liability for any act or omission in his capacity as an officer and the costs incurred in defending or settling any claim or proceedings relating to any such liability.

However, Section 289(3) provides that a company may indemnify or effect insurance for the directors and officers for any costs incurred by him or the company in respect of any proceedings that relate to the liability for any act or omission in his capacity as a director or officer, provided that:

● the judgment is given in favour of the director or officer; or

● the director or officer is acquitted; or

● the director or officer is granted relief under the Companies Act 2016; or

● the proceedings are discontinued or not pursued.

Going by the provisions of the Companies Act 2016, it appears that coverage would likely be precluded in a situation where a company and/or its directors and officers have committed, or are deemed to have committed, an offence under Section 17A.

However, if the company and/or directors and officers are found by the court to have not committed an offence under Section 17A and acquitted of the charge(s), or the proceedings are discontinued or not pursued, it would appear that coverage may be afforded for the costs incurred by the company and/or its directors and officers pertaining to the proceedings brought under Section 17A, but that this would ultimately depend on the policy wording, and subject of course to any exclusion clauses, which may or may not be applicable, in the Directors and Officers (D&O) policy taken out.

For example, it is common to find a fraud exclusion in D&O policies, which excludes coverage for conduct, such as a “deliberately fraudulent act or omission, or any wilful violation or breach of any statute or regulation” (precluded conduct). It is usually the case that the fraud exclusion would only be applicable if there is a “final adjudication”, which establishes that the precluded conduct had actually taken place.

The next question that is commonly asked is whether the insurer would advance the costs incurred pending the disposal of the proceedings brought under Section 17A.

Again, subject to the policy wording and exclusion clauses in the D&O policy, our experience is that some insurers may advance the costs incurred prior to “final adjudication” of the matter, while others may wait until after that to decide whether or not to extend coverage altogether.

That a company is entitled to coverage under the D&O policy for the costs incurred would depend on whether there is Entity or “Side C” cover, as well as what the terms of coverage are, including the exclusion clauses therein.

In the circumstances, companies and directors and officers may wish to take the matter under immediate advisement, and conduct a review of their current indemnity arrangements, including seeking such appropriate advice on coverage issues, if necessary.

In the advent of Section 17A, companies may well have to take better precautions and adopt a proactive approach when it comes to addressing bribery and corruption issues, because a company would not be able to disavow liability unless it has taken “adequate procedures” in tandem with the principles set out in the Guidelines on Adequate Procedures and/or adopted such other policies and measures as may be necessary.

Consequentially, it would appear that directors and officers, quite apart from abiding by their fiduciary duties and responsibilities under Section 213 of the Companies Act 2016, would have to practise “due diligence” to prevent the occurrence of bribery and corruption, having regard to the “nature of his function in that capacity and to the circumstances”.

In the upshot, the key takeaways and points to consider are as follows:

● whether companies have put in place “adequate procedures” to prevent the occurrence of bribery and corruption, and what other steps and/or measures can be taken to improve their existing policies, mechanisms and/or procedures on anti-bribery and corruption;

● what are the “due diligence” practices adopted by directors and officers to prevent the occurrence of bribery and corruption, and what other steps and/or measures can be taken to improve such practices; and

● what are the current indemnity arrangements, if any, and whether there is a need to seek such appropriate advice on coverage issues.

Six years on, the provision has yet to yield a conviction. That is not a reason for comfort. It means only that the first company to test the defence will do so without the guidance of a single decided case, and no board should wish to be that company.

J J Chan is a barrister-at-law of the Honourable Society of Gray’s Inn, London, and an advocate and solicitor of the High Court of Malaya. He is the author of Directors & Officers Liability Insurance: Selected Articles, Cases and Materials (with Kevin LaCroix) — the first publication of its kind in Asia-Pacific, published pro bono, with a foreword by Tan Sri Datuk Zainun Ali, former judge of the Federal Court.

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