and the audit committee. Whistle-bl

and the audit committee. Whistle-blowing provisions were also introduced in 2004. Since 2007, Malaysia requires auditors who resign or are removed from office to disclose to the regulators the reasons, except in cases where the auditor does not wish to seek re-appointment or is not re-elected at the annual general meeting (OECD, 2011).

The Malaysian Code on Corporate Governance released in March 2012 supersedes the revised Malaysian Code on Corporate Governance. The new Code, which follows international best practices, is a key deliverable of the Blueprint and is aimed at enhancing board effectiveness through strengthening board composition, reinforcing the independence of directors and fostering the commitment of directors. It also encourages companies to put in place corporate disclosure policies that embody principles of good disclosure. Companies are also encouraged to make public their commitment to respect shareholder rights (SCM, 2012).


In addition to the 2012 Code, a number of regulations that frame corporate governance in Malaysia, including the Companies Act (1965), the

Securities Commission Act (1993), and the Capital Markets and Services Act (CMSA, 2007). The texts, as well as their recent updates and applications, are presented in more detail below.


The Companies Act (1965)

Corporate law in Malaysia is primarily set out in the Companies Act (1965) which is based on the UK Companies Act (1948) and the Australian Uniform Companies Act (1961) and which incorporates the following provisions:

functions and powers of the board;

duty and liability of directors and officers;

meetings and members’ rights at meetings; and

regulation of related-party transactions. In 2007, the Act was amended so as to:

clarify directors’ duties;

strengthen as well as clarify regulation of related party transactions;

enable shareholders to take derivative action;

allow the use of technology to facilitate members meetings in more than one venue;

extend notice duration of AGMs. Now, a minimum of 21 days of prior notice must be given by a public company before it convenes its AGM;

enhance auditor’s duty by imposing a statutory obligation on auditors of public companies or companies controlled by a public company to report to the Registrar, should they become aware of a serious offence committed


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involving fraud or dishonesty against the company when carrying out their duties as auditor; and

● provide statutory protection to whistleblowers.

Securities Commission Act (SCA – 1993)

The Securities Commission Act 1993 was amended by the Securities Commission Amendment Act 2010 which established an Audit Oversight Board. The Commission, through the Board, provides independent oversight and regulation over external auditors of public interest entities to improve compliance with auditing standards. In this regard, the Board is responsible for registering individuals and firms who wish to audit the financial statements of such entities. The Board also takes enforcement action against registered auditors for non-compliance with auditing and ethical standards. The Board can impose sanctions of up to RM 500 000 and can suspend registrations. It began operations on 1 April 2010. On 28 February 2011, the Auditor Registration Application System was launched, allowing auditors to submit applications for registrations electronically. This aims to make registration more efficient while easing the creation of a database for the benefit of the Board and auditors.




The Capital Markets and Services Act (CMSA – 2007)

In 2007, the government streamlined the corporate governance framework by consolidating several laws, namely the Securities Industry Act,

Futures Industry Act and Part IV of the Securities Commission Act, into a single legislation: the Capital Markets and Services Act (CMSA). It also incorporates several new provisions that enhance corporate governance standards, such as by giving the Securities Commission the right to intervene where interest is prejudiced and by enhancing its ability to take civil action for market misconduct offences for both securities and futures contracts. Previously, the Securities Commission could only take civil action for offences relating to securities and not for futures contracts. The Commission can now also bar unfit persons from becoming a CEO or director of a public company.

Bursa Malaysia has also issued a new set of listing requirements for its Main Market and ACE Market (Bursa Malaysia’s secondary market, short for “Access, Certainty, Efficiency”). These new listing requirements came into effect on 3 August 2009. The Main Market replaces the first and second board of Bursa whilst the ACE market replaces the MESDAQ Market. The listing requirements oblige listed companies to disclose material information to the market in a timely manner and to comply with the requirements pertaining to related party transactions and to corporate governance. On the latter,