The Malaysian Companies Act
Enacted in 1965, the Act was revised in 1973 and incorporates the latest amendment in 2001. The Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia or SSM) is responsible for the administration and enforcement of this Act.
Companies (Amendment) Bill 2007
On 23 May 2007, the Companies (Amendment) Bill 2007, intended to enhance the countrys corporate-governance framework, was passed by parliament. It came into effect on August 15, 2007. Some of its key amendments include:
- Allowing companies to use more than one venue for their shareholder meetings, so as to enable all members a reasonable opportunity to participate. Companies may also utilise any technology to conduct their meetings.
- Requiring AGM notices to be sent out at least 21 days before meetings (the current rule is 14 days).
- Obliging an auditor of a public company to report to the Registrar of Companies any serious offence involving fraud or dishonesty that he/she believes has been committed by any officer or employee against the firm.
- Protecting any officer of a company who exposes breaches of the Companies Act from discrimination by their employer.
This is the only amendment to the Companies Act that has occurred since the the Companies Commission of Malaysia (CCM) established the Corporate Law Reform Committee to undertake a comprehensive review of the Companies Act 1965
and make it relevant in todays corporate environment.
Capital Market Services Act 2007
The Act, implemented in September 2007, is a consolidation of the securities, futures and fundraising laws into a single legislation for the capital market.
Securities Commission Act 1993
The Act, which came into effect in 1993, has undergone a number of amendments, the latest of which was in 2006.
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2. Accounting Standards
Financial Reporting Standards (FRS)
The new/revised Financial Reporting Standards (FRS), which are generally consistent with International Financial Reporting Standards (IFRSs), came into effect on January 1, 2006. However, on February 23, 2006, the Malaysian Accounting Standards Board announced that the new FRSs were optional for "private entities". In effect, there are two sets of accounting standards in Malaysia:
- FRSs, which must be used by companies that are required to prepare or lodge financial statements under any law administered by the Securities Commission or the Bank Negara Malaysia, and by subsidiaries, associates, or companies jointly controlled by them.
- Private Entity Reporting Standards (PERSs), which may be used by all other companies.
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3. Listing Rules
Listing Requirements for Main Board & Second Board
The listing requirements that apply to both the Main Board and the Second Board took effect on June 1, 2001, prior to which there were two distinct requirements for both Boards. Amendments have been ongoing, the latest ones having occurred on May, 2006.
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Corporate Governance Blueprint 2011
On July 8, the Securities Commission Malaysia published the "Corporate Governance Blueprint", its latest review of corporate governance practices and regulations in the Malaysian capital market. The Blueprint is the first "deliverable" of the Capital Market Masterplan 2, a decade-long strategy designed to double Malaysia's capital markets by 2020 to RM4.5 trillion (US$1.5 trillion), and is meant to be implemented over a five-year period.
The Blueprint is the product of "significant input drawn from domestic and international experts" and focuses on six core issues:
- Shareholder rights;
- Role of institutional investors;
- Boards role in governance;
- Improving disclosure and transparency;
- Role of gatekeepers and influencers; and
- Public and private enforcement.
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5. Official Codes and Guidelines
Malaysian Code on Corporate Governance 2012
On March 29, the Securities Commission published the MCCG 2012, the first deliverable of the five-year Corporate Governance Blueprint that it published on July 8, 2011. The Code was structured with these eight guiding principles:
- Establish clear roles and responsibilities of the board;
- Strengthen board composition;
- Reinforce board independence;
- Foster commitment to shareholder rights;
- Uphold integrity in financial reporting;
- Recognize and manage risks;
- Ensure timely and high quality disclosure; and
- Strengthen relationship between company and shareholders.
Malaysian Code on Corporate Governance (Revised 2007)
The Securities Commission together with other government agencies and the industry revised the Code to bring the country's corporate governance framework more in line with current globally accepted best practices. The Code came into effect on October 1, 2007.
The key amendments are aimed at strengthening the roles and responsibilities of the boards of directors and audit committees, and ensuring they discharge their duties effectively. The eligibility criteria for the appointment of directors, the composition of the board of directors and the role of the nominating committee are now clearly outlined.
Malaysian Code on Corporate Governance (March 2000)
In March 2000, the Finance Committee on Corporate Governance, a government-appointed group comprising public officials and private participants, released the final draft of The Malaysian Code on Corporate Governance. The code was developed by a working group of representatives from the private sector, the Securities Commission and the Kuala Lumpur Stock Exchange, among others.
Closely modelled on the 1998 UK Combined Code, as developed by the Hampel Committee, and influenced by rules in the US and Canada, the Malaysian Code goes further than many other national codes in Asia in promoting international standards of corporate governance.
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