EDITORIAL
COMPANIES COMMISSION OF MALAYSIA
Greetings.
It gives me great pleasure to pen this editorial. This
is the first quarterly issue for the 2009 SSM’s
Bulletin. The articles in this bulletin are all
contributions from our own team of writers. I wish
to commend them for their contributions. I would
like to thank the management team for providing
support in making this issue a reality.
There are altogether 11 articles in this Bulletin
which focuses on key issues relating to SSM’s
regulatory oversight functions.
The front cover on the Bulletin depicts the
photograph of a high rise corporate building which
symbolizes high standards of corporate culture and
values. This is also SSM’s vision that employees will
inculcate these values and bring about
transformation in the work culture of the
organization. In steering SSM, I have always
emphasized on efforts in creating an efficient public
delivery system through the re-engineering of
SSM’s internal work processes.
The theme for this issue is “Dynamic Enforcement &
Integrity”. Management decided on this theme to
highlight the importance of effective enforcement
and good governance practices. Thus, the spotlight
2 Vol 1. 2009 | SSM Bulletin
Editor’s Notes
in this issue focuses on the new “balanced
enforcement philosophy” that embraces a holistic
notion of enforcement. We fervently believe that
education and creating public awareness should be
given equal emphasis as conventional enforcement
in enforcing compliance with the law.
We have also featured articles on issues relating to
corporate governance and auditors duties and
responsibilities which have of late raised significant
concern and interest amongst the corporate world
in the wake of scandals involving corporate giants
like “Satyam Computer Services”.
The editorial team has spent considerable time
putting together this Bulletin for your reading
pleasure. Please spend some time reading the
articles and we trust you will find them insightful.
Happy Reading!
Editor-in-Chief,
Datuk Abdul Karim Abdul Jalil
 SSM Bulletin
EDITOR-IN-CHIEF
Datuk Abdul Karim Abdul Jalil

EDITORIAL TEAM
Zahrah Abd Wahab Fenner DYNAMIC ENFORCEMENT AND INTEGRITY
Nor Azimah Abd Aziz
Thrichelvam Rasiah
Marina Nathan
Suzana Mohd Razali
Mohd Shahren Mohamad Yusri
Adura Mizan
Yani Shylvieana Mohd Sharif
CONTENTS
Fadilah Abdul Wahab Editorial
COMMITTEE 2 Editor’s Note
Mardiyana Ibrahim
Noorlida Hanim Ahmad Enforcement
Kamarul Bahrin Abdullah
4 Achieving New Heights in Corporate
Enforcement
COORDINATOR
Suzana Mohd Razali 16 Ensuring the Reliability of Financial
Mohd Shahren Mohamad Yusri Statements: “Quis custodiet ipso custodes?”
Zubaidah Yusoff (“Who watches the watchmen?”)

DISTRIBUTION 24 Effective Audit Department,

Hairul Adhar Ramli The Way Forward
Zairul Nizam Abdull Manaf
29 Interest Schemes in Malaysia
COOPERATIONS
33 Compulsory Winding Up and Striking Off the
States/ Branch SSM
Name of a Company

Contribution Of Articles 37 Reaching Out to Our Stakeholders through

Education
SSM welcomes original and previously
unpublished contributions which are of
interest to accountants, business leaders,
Corporate Governance
corporate and professional bodies.
Manuscript should be submitted in English,
45 CEO’s Interview with Asia Law - Getting to
Grips with Governance
range from 1,000 to 2,000 words and must
be submitted in softcopy.
48 Corporate Responsibility: The Next Evolution
in Doing Business
For enquires:
Tel: 03-40476111/6222
Fax: 03-40476375
Operations
Publishing Consultant 53 SSM e-Services and Business Registration
Mobile Counter
DeCalais Sdn Bhd
16th Floor, Menara Park CPCF Issues
Jalan Yap Kwan Seng
50450 Kuala Lumpur 58 Corporate Practice Consultative Forum (CPCF)
Tel: 03 2718 9688
Fax: 03 2718 9788 61 Regional Dialogue - Sabah & Sarawak
Email: deepa@decalais.com

Brief News
65 „ One Family One Business
„ Business Registration Mobile Counter
Suruhanjaya Syarikat Malaysia (BRMC) Achievements 2008-2009
Tingkat 2, 10-19, Putra Place „ Strategic Direction Plan (2009 - 2013)
100 Jalan Putra, 50622 Kuala Lumpur „ Smart Consumer Campaign
Tel: 03 4047 6000
Fax: 03 4047 6317 „ Nationwide Networking and Collaboration
Hotline: 03 4047 6111 / 6222
Email: enquiry@ssm.com.my
www.ssm.com.my

SSM Bulletin | Vol 1. 2009 3

 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

Achieving New Heights

in Corporate
Enforcement
As a regulatory body for corporate
Malaysia, the Companies Commission
of Malaysia (SSM) recognizes that there
is a crucial need to balance between
enhancing economic growth through
innovative business activities and the
need to enforce the provisions of
corporate law. Coming down too hard
on corporate offenders may discourage
public and investors’ participation and
expansion in the business industry
whilst lack of enforcement would
inevitably lead to a non-conducive
corporate environment. There is also a
need to embrace a more holistic
notion of enforcement where
adherence to the laws should ideally
be coupled with awareness, knowledge
and understanding of such laws.

(b) Balancing between initiating regulatory action,

SSM’s Enforcement Methodology: administrative action and criminal sanction.
The Balanced Enforcement SSM views that mere observance of the law without
Approach fully understanding its rationale and benefits will
not entail sustainable compliance rate. In this

S
ince January 2006, SSM’s enforcement
philosophy rests on the principle of ‘Balanced
Enforcement’. It entails the following notion:
(a) Balancing conventional enforcement approach
with that of creation of awareness; and
regard, SSM’s enforcement philosophy emphasizes
on the creation of awareness in addition to
conventional enforcement initiatives which focuses
on investigation, prosecution and the issuance of
compounds. SSM strives to create a culture of
compliance by creating understanding on the

4 Vol 1. 2009 | SSM Bulletin


“ …the Companies Commission of
Malaysia (SSM) recognizes that there
is a crucial need to balance between
enhancing economic growth through
innovative business activities and the
need to enforce the provisions of
”
corporate laws.
rationale and benefits of the various legal provisions
which the corporate community is required to
observe.
The second aspect of the ‘Balanced Enforcement’
concept entails balancing between regulatory
action, administrative action and criminal sanction.
SSM’s regulatory actions include the introduction of
new provisions in the CA 1965, amendments of
existing provisions and issuance of policies and
guidelines. Administrative actions involve the
issuance of notices to show cause, issuance of
letters of reprimand, offer of compound and
creating a database for the ‘blacklisting’ of repeat
offenders. The institution of criminal proceedings
against those who breach the provisions of the CA
1965 is carried out as a last resort where the
breaches involved are serious and involves public
interest considerations.
The underlying principle in the enforcement
strategy adopted by SSM takes heed of the theory
famously expounded by James Q. Wilson and
George L. Kelling in an article entitled Broken
Windows: The Police and Neighborhood Safety.
Simply put, this theory argues that people who see
signs of “disorder” - like broken windows, litter,
graffiti, and public intoxication- in their
neighborhoods are more likely to commit minor
crimes.
SSM is a firm advocate of this theory and its
enforcement strategy therefore places equal
emphasis on investigating both minor and major
corporate misdeeds. It is minor misdeeds that are
left unchecked that will lead to major corporate
failures. The cases investigated range from
bankrupt persons who act as directors of
companies, rendering of false and misleading
information to the Registrar of Companies, failure of
1. The Companies Commission of Malaysia’s (SSM) enforcement functions are derived from subsections 17(a), (c) & (d) of the Companies
Commission of Malaysia Act 2001 (CCM Act 2001).
ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
directors to exercise their fiduciary duties and
investment schemes (such as interest schemes)
which are not licensed or registered with the SSM.
The “balanced enforcement” strategy has yielded
encouraging results. The compliance rate has
improved tremendously from a low of 44% in 2003
to a record high of 91% in 2007. We anticipate
there will be similar compliance rate in 2009 as
well. The success story is primarily due to
numerous awareness programs conducted for
stakeholders with collaboration from SSM’s training
arm, COMTRAC and the outreach programmes by
the Public Affairs Section.
Correspondingly, efforts have been stepped up in
terms of investigations and prosecutions, as well.
There has also been a marked increase in the
number of investigations conducted, cases
prosecuted and investigations papers disposed off.
In terms of statistical data, there has been an
increase of 267% in the number of investigation
papers opened in 2008 as compared to the previous
period in 2003.
The introduction of the “balanced enforcement”
strategy has been successfully applied at all SSM’s
satellite offices located nationwide. SSM
enforcement officers are stationed at all SSM’s state
offices and branches where they carry out
surveillance, monitoring and investigation functions
in addition to numerous stakeholders programs that
emphasizes on public awareness on the importance
of complying with the relevant laws.
SSM’s enforcement functions 1 are carried out
through the Registrar of companies (Registrar) who
is also the Chief Executive Officer of SSM. Under the
CA 1965, the Registrar is vested with the following
enforcement powers:
(a) the power to call for information from any
corporation or person spelt out under
subsection 7(11) of CA 1965;
(b) the power to conduct inspection by having
access to any place, building or documents,
under section 7B;
(c) the power to conduct investigation upon
reasonable suspicion that an offence under CA
1965 has been committed, provided under
section 7C of CA 1965;
(d) the power to call for examination for the
purposes of an investigation, provided under
section 7D of CA 1965; and
SSM Bulletin | Vol 1. 2009 5
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

(e) the power to compound offences committed ‘Corporate governance is the process and
under the CA 1965, provided under section structure used to direct and manage the
371A of CA 1965. business and affairs of the company towards
enhancing business prosperity and corporate
In respect of prosecution powers, Section 36 of the
accountability with the ultimate objective of
Companies Commission Act 2001 provides that the
realizing long term shareholder value, whilst
power to institute prosecution resides exclusively
taking into account the interests of other
with the Public Prosecutor whose powers are
stakeholders’
exercisable through Deputy Public Prosecutors
seconded to the SSM. From the above definition, all legal provisions which
stipulate the management of the affairs of a
The Concept of Corporate company or a corporation constitute laws and
Governance Explained regulations pertaining to corporate governance.
There are altogether 249 types of offences spelt out
The term ‘corporate governance’ has been subject under the CA 1965 that relate to corporate
to numerous definitions. In Malaysian context, the governance. The cluster of offences and the
definition of corporate governance is provided by description of some of the key offences are
The High Level Finance Committee on Corporate described in Table 1:
Governance (HLFCCG) in February 1999:
Table 1

Duties, obligations, rights and liabilities of directors Basic corporate governance provisions

Section Provides for the prohibition for a bankrupt to act as company Section Provides for the requirement to issue share certificates.
107
125(1) director.
Section Provides for the requirement to keep copies of register of
Section Provides for the requirement for directors to disclose their
115(2) charges.
131 (or spouse/child’s) interest in contracts, property or office.
Section Provides for the requirement to notify change in registered
Section Provides for the requirement for companies to be managed or 120(1) address.
131B under the direction of the board of directors.
Section Provides for the requirement to print company name and
Section Provides for a director to exercise his powers for a proper 121(i)(b) number on official documents.
132(1) purpose, in good faith and in the best interest of the company.
Section Provides for the requirement to display the company’s name in
* For the purpose of section 132, directors also include the 121(3) the place of business.
CEO, COO, CFO and other persons primarily responsible for
Section Provides for the requirement to keep Register of Directors.
the company’s operations/financial management. 134
Section Provides for the prohibition against improper use of company’s
Section Provides for the requirement for companies to appoint a
132(2) property, position or corporate opportunity 139 company secretary.
Section Provides for a director to exercise reasonable care skill, the
Section Provides for the requirement for the office of the company
132(1A) application of business judgment rule and reliance on 139(1B) secretary not to be left vacant for more than 1 month.
-(1D) information by others.
Section Provides for the requirement for a company secretary to be
Section Provides for the responsibility of nominee directors. 139(3) appointed with the approval of directors.
132(1E )
Section Provides for register of directors, managers and secretaries to
Section Provides for the prohibition against the granting of loans by a 141 be kept at the registered office of the company.
133 company to directors.
Section Provides for the requirement to hold annual general meeting.
Section Provides for the requirement on part of directors to establish a 142(1)
167A system of internal control to safeguard the company’s
Section Provides for the requirement to keep minutes in the minutes
assets/properties. 156 book.
- applicable only to public companies and subsidiaries of a
Section Provides for the requirement for companies to keep a register
public company. 158(1)(a) and update the register of members.

Section Provides for the requirement for companies to lodge annual

Auditors 165(4) return.

Section Provides for the obligation to report any serious offences Section Provides for the requirement for companies to attach auditor’s
165A(1) statement.
174(8A) involving fraud discovered in the course of audit to SSM (i.e.
whistleblowing provisions for auditors). Section Provides for the requirement for entries to be made into the
167(1A) accounting record within 60 days of the completion of
transaction.
Sanctity of transactions
Section Provides for the requirement for directors to table audited
Section Provides for the prohibition for directors from voting in 169(1) accounts during AGM.

131A contracts/transactions where they have interest. Section Provides for the company’s account to be audited prior to their
169(4) tabling.
Section Provides for the requirement for the company’s approval for
132C the disposal of company’s undertaking/property.
Section Provides for the prohibition of substantial property transaction Rendering false statement to the Registrar
132E by a director/substantial shareholder with the company.
Section Provides that any person who makes false or misleading
364(2) statement in any return, report, balance sheet or any
document required under the CA 1965 constitute an offence.

6 Vol 1. 2009 | SSM Bulletin

 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

The concept of corporate governance is

Enhancing the capacity and capability of SSM’s
applicable to all companies regardless of
its nature of business, size of operations,
enforcement arms
the amount of capital or whether such The pre-restructuring organizational structure of
companies are listed or otherwise. enforcement is as follows:

Towards Strengthening MINISTER OF DOMESTIC TRADES

SSM’s Enforcement
& CONSUMER AFFAIRS

Functions Commission Members

Since its establishment in April 2002, Deputy CEO Chief Executive Officer Deputy CEO
SSM has continuously developed and (Operations) (CEO) (Operations)
enhanced its enforcement functions.
The organization has even formulated Registration ICT Compliance Legal
a strategic approach towards Department Department Department Department

enhancing its enforcement capability

and capacity through the Corporate Corporate Internal Audit
development of the First Strategic Resources
Department
Planning and
Development
Department

Direction Plan 2003 - 2008 (First Department

SDP). The initiatives carried out
under the First SDP and their status
are as follows:

No. Strategic Enforcement Initiatives Status

Upon the completion of the organizational
1. Increasing the capacity and capability of SSM’s Completed
restructuring, the enforcement’s organizational
enforcement arms. structure is depicted as follows:
2. Amending the provisions of the CA 1965 to Completed
strengthen the national corporate governance MINISTER OF DOMESTIC TRADES
framework. & CONSUMER AFFAIRS
* Additional enhancement initiatives are still ongoing

3. Increasing the awareness of the company secretaries Completed

in relation to their roles and responsibilities. Commission Members
* Continuous awareness initiatives are still ongoing)
Internal Audit
4. Improving SSM’s annual compliance rate. Achieved
* Initiatives to maintain a high compliance rate are still ongoing
COMTRAC (CEO)
5. Undertaking strategic enforcement collaborations with Ongoing
other regulatory and enforcement agencies.

6. Enhancing stakeholders knowledge through Ongoing

continuous education. Deputy CEO Deputy CEO Senior Director
(Operations) (Services) (Enforcement)
7. Improvement of SSM’s ICT framework Completed
(a) to enable database inspection and automatic Legal Services Investigation
issuance of compounds for non-compliance Division Division

(b) to enable tracking of compounds issued,

Compliance Complaints
collected by SSM
Division Section

Senior Director,
Enforcement Office
Further details of the components
within the various Divisions in the
Legal Services Investigation Compliance Complaints Enforcement Office are as depicted
Division Division Division Section on the left.
SSM has also invested substantially
Prosecution Special Surveillance in upgrading the skills of its
Section Projects Section
enforcement officers through the
Civil Litigation Finance & Corporate attendance of trainings with
Section Fraud Accounting
Monitoring COMTRAC on corporate fraud
Section
intelligence, forensic accounting
Legal Advisory Corporate
Section Governance
Corporate
and anti-money laundering in order
Intermediary
Section
to combat complex corporate
governance cases.

SSM Bulletin | Vol 1. 2009 7

 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
Amending the provisions of CA 1965 to
enhance corporate governance framework
The amendments of the CA 1965 in 2007 via
Companies (Amendment) Act 2007 [Act A1299]
saw the introduction of substantial provisions
pertaining to corporate governance which are
consistent with the recommendations of the High
Level Finance Committee on Corporate Governance
established in March 1998. Amongst the key new
provisions introduced are as follows:
z Expansion of directors’ duty to disclose interests;
z Prohibition upon interested directors from voting;
z Clarification of director’s functions & duties;
z Wider scope of duty of care, skill & diligence;
z Responsibilities of nominee directors;
z Clarification of director’s functions & duties;
z Prohibition against related party transactions except
where there is prior approval by disinterested
shareholders;
z A l l o w i n g c o m pa n i e s t o c o n d u c t s h a r e h o l d e r s
meetings electronically;
z Requiring establishment of a system of internal
control by public companies;
z Requiring auditors of public companies to report on
serious offence involving fraud and dishonesty and
affording protection to auditors on genuine reports
made in good faith;
z Requiring auditors to report to Registrar and Bursa
Malaysia (if listed company) the grounds of his
removal, resignation or declination of
reappointment;
z Introduction of the statutory derivative action;
z Introduction of application for injunctions; and
z Introduction of the “whistle blowing” provision to
a ff o r d p r o t e c t i o n f o r o ff i c e r s w h o r e p o r ts o n
contravention or serious offence involving fraud &
dishonesty.
Increasing the awareness of the company
secretaries in relation to their roles and
responsibilities
The provision of subsection 139(1) of CA 1965
requires all companies to appoint a company
secretary. They possess important responsibilities
ranging from lodging statutory documents with
SSM, keeping and updating of statutory books,
taking down minutes of meeting and even advising
8 Vol 1. 2009 | SSM Bulletin
the company on aspects of company law. There are
two types of company secretaries namely:
z company secretaries who are licensed by SSM;
and
z company secretaries who are members of
approved prescribed bodies such as the
Malaysian Institute of Chartered Secretaries
and Administrators (MAICSA), Malaysian
Institute of Accountants (MIA), the Malaysian
Institute of Certified Public Accountants
(MICPA), Malaysian Bar Council, Malaysian
Association of Company Secretaries (MACS),
Advocates Association of Sarawak and Sabah
Law Association.
The company secretaries serve as important
intermediaries between companies and corporate
regulators as well as between companies, the
shareholders and members of the public. In
realizing the strategic roles which can be played by
company secretaries, SSM has since 4 October
2005 set up a consultative forum known as the
Corporate Practice Consultative Forum (CPCF). As
at March 2009, a total of nine CPCF meetings were
held. The CPCF discussed on numerous issues and
problems brought up by the representatives from
the professional bodies and SSM in relation to
practices, policies and the law towards enhancing
the level of corporate governance in the country.
Apart from the CPCF, SSM also uses the platform of
Annual Dialogues held in the Peninsular Malaysia,
Sabah and Sarawak to engage with a higher
number of company secretaries to spread the
message urging for better corporate governance
practices by companies.
SSM through its training arm, the SSM Training
Academy (COMTRAC) has also designed a specific
training module called the Licensed Secretary
Training Programme (LSTP) to cater for the
knowledge needs of company secretaries
nationwide. The LSTP program has been well
received where it serves as a training module for
new company secretaries and as a ‘refresher’
course for seasoned practitioners.
Improving annual compliance rate
The annual compliance rate is based on the annual
submission of annual returns by companies and has
been accepted internationally as a means to gauge
the level of corporate compliance in jurisdictions
whose corporate legal framework requires the
lodgment of annual returns.
Since the introduction of the ‘Balanced
Enforcement’ approach by SSM in 2005, the

compliance rate has witnessed a dramatic increase
from a low of 44% in 2003 to a record high of 91%
in 2007. The 9th Malaysia Plan at paragraph 25.09
recognized SSM’s increased surveillance and
100% 91%
80% 71%
80%
64%
60%
44%
40%
20%
0%
2003 2004 2005 2006 2007
enforcement activities and commended on the
increase of compliance rate from 44% in 2003 to
64% in 2004.
Undertaking strategic enforcement
collaborations with other regulatory
agencies, enforcement agencies and
Ministries
Various strategic collaborations were entered into
by SSM with other corporate co-regulators and
enforcement agencies. They include:
(i) Tripartite meetings between SC, SSM and Royal
Malaysian Police (PDRM)
A tripartite agreement was formalised by way of
a Memorandum of Understanding (MOU)
between SSM, SC and PDRM on 14 March 2005
with the primary purpose of facilitating co-
operation in respect of surveillance,
investigative and enforcement functions of the
authorities relating to issues of corporate
governance involving public listed companies.
Pursuant to the tripartite meetings, a total of 65
cases were referred by SC to SSM in respect of
breaches under the CA 1965. As at 31
December 2008, a total of 54 cases were
disposed on the direction of the Deputy Public
Prosecutor. The remaining 11 cases are still
being investigated.
(ii) National Coordination Committee to Counter
Money Laundering (“NCC”)
SSM is an active member of the NCC. With
effect from August 2008, SSM was appointed by
NCC to head the Sub-Committee on Non-Profit
Organizations. Members of this sub-committee
comprise of BNM, Ministry of Domestic Trade
ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
“
SSM’s Balanced Enforcement
approach is not only implemented by
SSM’s headquarters in Kuala Lumpur
but also by the various SSM satellite
”
offices located nationwide.
and Consumer Affairs, Inland Revenue Board
and Registrar of Societies. SSM had cooperated
with BNM to produce the Standard Guidelines
on Anti-Money Laundering in respect of
Company Secretaries and trust companies,
which had been distributed to the respective
stakeholders.
(iii) Counter Terrorism Working Group - SSM is a
member of the Counter Terrorism Working
Group chaired by Wisma Putra. This Working
Group monitors the designated list of
individuals suspected of being involved with
terrorist organizations or assisting their cause.
Based on this designated list, SSM will bar
suspected individuals from being registered as
directors, shareholders and business
proprietors. SSM also uses the designated list
to commence action to wind-up any companies
which are being run by suspected individuals
related to terrorism.
(iv) Collaboration with the Ministry of Domestic
Trade and Consumer Affairs and the Royal
Malaysian Police - 95 cases on illegal direct
selling and 11 cases on infringement of
copyright.
(v) Collaboration with Jabatan Kemajuan Islam
Malaysia - 90 cases , collaboration with the
Ministry of International Trade and Industries
(MITI) - 16 cases, collaboration with Malaysian
Communication and Multimedia Commission -
64 cases, collaboration with the Ministry of
Health - four cases, collaboration with Vehicle
Licensing Board of Malaysia (LPKP) - 199
companies and 228 business cases.
The above statistics demonstrates the excellent
cooperation working relationship SSM enjoys with
its fellow regulators and government agencies
nationwide. This further substantiates that the
mutual cooperation model adopted so far in relation
to corporate governance is not only well accepted
but serves as an effective approach towards
resolving common issues.
SSM Bulletin | Vol 1. 2009 9
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

also entailed the upgrading of the head of the

Enhancing stakeholders knowledge
through continuous education and
awareness programmes
SSM’s enforcement initiatives also emphasize on
stakeholders education and awareness. The
establishment of SSM Training Academy
(COMTRAC) in April 2007 is a significant step
towards creating a new breed of corporate
community, one that is equipped with ample
knowledge on the obligations imposed by the
generic company law provision, which is the CA
1965. Since its establishment, COMTRAC has
carried out numerous stakeholders education
programmes throughout the country.
SSM has also embarked on a nationwide
stakeholders outreach programmes through the
following channels:
(i) Media engagements - SSM is working closely
with the media. Since 2006, there has been a
significant increase of articles and news written
on SSM’s various enforcement initiatives.
Clarifications and explanations were provided
through the media when significant
amendments were made to the CA 1965, there
were press releases in major newspapers and
media coverage on newly initiated criminal
prosecutions as well as on ongoing trials in
Court. SSM envisages that these measures will
educate and bring about greater public
awareness on the need to comply with the law
enforced by SSM.
(ii) Dialogue sessions, forums and expositions -
SSM organizes regular dialogue sessions and
forums with directors and corporate
section to that of a Senior Manager. The manpower
composition of the section has also been increased
from 3 to 5 officers who are supported by 1 clerical
staff. The Complaints Section receives complaints
from various channels, record and catalogue them
as well as review them to determine whether they
disclose any offences committed under laws
regulated by SSM.
The establishment of the SSM Complaints Section is
a strategic move towards enabling professional
management of complaints, tip-offs and referrals
received from the stakeholders and other regulatory
agencies.
Prior to the new set-up, there was absence of
complaints management in particular the disposal
and resolutions of complaints received. With a
dedicated section manned by officers who are well-
versed in the provisions of the CA 1965, it has
enabled effective filtration of complaints and
referrals prior to further enforcement action being
taken by SSM.
SSM has effectively publicized its Complaints
Section since its establishment. This has resulted
not only other corporate regulators, enforcement
agencies and Government agencies to lodge more
reports but has also resulted in more members of
the public to step forward and lodge their reports
and tip-offs on potential corporate breaches
committed.
Breakdown of Complaints Disposed
(a) Companies
Action Taken
Company

intermediaries. SSM disseminates action plans

2006 2007 2008 2009*
Refer to the Investigation Division 38 60 148 18

and recommendations for best practices to the Refer to the Compliance Division 189 234 172 33
Refer to the Legal Services Division 10 26 4 2
participants. In return, SSM obtains feedback - - 3 -
Refer to the Marketing & Business Development
from the directors and corporate Division

intermediaries, which help to identify its

Refer to the Registration Services Division - - 29 7
Beyond Jurisdiction - Referred to other agencies - 26 31 5

shortcomings. SSM’s aim is to work directly No further action (NFA) 39 44 131 22

with the people who use its services in order to Total 276 390 518 87
*as at 29 Feb 2009
ensure that SSM becomes the best in what it
does.
(b) Businesses
SSM’s Enforcement Milestones Business

And Activities
Action Taken
2006 2007 2008 2009*
Refer to the Investigation Division 1 4 37 10

Restructuring of SSM’s Complaints Refer to the Compliance Division 73 31 38 14

Refer to the Legal Services Division - 1 2 -

Management Refer to the Marketing & Business Development

Division
- - 2 -

SSM has since 2007 further enhanced its Refer to the Registration Services Division - - 3 2
Beyond Jurisdiction - Referred to other agencies - 54 18 4
Complaints Unit by upgrading it to the stature of a No further action (NFA) 78 13 54 5

section. The restructuring of the Complaints Section Total 152 103 154 35
*as at 29 Feb 2009

10 Vol 1. 2009 | SSM Bulletin

 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

Compliance Division Prior to 2007, the Compliance Division merely

carried out physical inspections on companies and
The specific functions of the 3 sections residing
businesses. The number of companies and
under the Compliance Division are as follows:
businesses subjected to such inspections were
Table 2 limited due to resources constraints. However, since
(i) Surveillance z Conduct inspection on companies
2007, SSM has in addition to physical inspections,
Section and businesses to ensure also carried out database inspections. Such
compliance with the provisions approach had tremendously increased the number
under the CA 1965, ROBA 1956 and
of companies and businesses inspected.
the Rules & Regulations therein.

z Offer compounds for non-

compliance offences. Year Number of Inspections
Number of
Compounds Issued
z Conducting preliminary inspection
2004 113,033 130,024
on complaints against companies
and businesses and forward to 2005 157,237 136,841
Investigation Division for further 2006 119,637 112,017
investigation on complex cases. 2007 641,469* 178,540

z Responsible to manage effective 2008 602,636* 187,365

compound monitoring and refer to * includes database and on-site inspections
Legal Service Division for
prosecution action.

(ii) Corporate z Ensure financial statements lodged The Corporate Intermediaries Section carries out
Accounts with SSM are in accordance with surveillance and enforcement actions against
Monitoring the provisions of Companies Act
company secretaries and company directors. The
Section and Approved Accounting
Standards. [Financial Reporting various initiatives carried out are as follows:
Standard (FRS) and Private Entity
Reporting Standard (PERS)].
NO INITIATIVES ACHIEVEMENTS
z Review and analyse the financial
1 Ensuring companies are 2006 : 538 cases
statements of public companies. not operating without a 2007 : 2,775 cases
company secretary for 2008 : 2,151 cases
z Conduct physical inspection on golf more than 30 days. 2009 : 293 cases
& recreational clubs time sharing,
trust companies and companies • 5,757 cases were compounded and
• a total of 17,271 directors were
limited by guarantee to ensure
issued warning letters
compliance.
2 Ensuring only licensed or 2006 : 21 cases
z Interview Panel for Auditors under approved individuals carry 2007 : 1 cases
the jurisdiction of MOF and a out the function as 2008 : 1 case
member of Audit Surveillance company secretary. 2009 : Nil
Committee.
• 19 cases were compounded
z Register new audit firms and • cases prosecuted and convicted
with fine.
conduct surveillance nationwide.
3 Ensuring company 2006 : 87 cases
z Conduct surveillance on approved
secretarial license are 2007 : 48 cases
company auditors to ensure renewed not later than 2008 : 92 cases
compliance. thirty days before the 2009 : 20 cases
expiry of the license.
• 247 cases were compounded
(iii) Corporate z Process new applications and
Intermediary renewal of secretarial licenses and
4 Ensuring the exercise of 2006 : 4 cases
Section conduct surveillance to ensure reasonable diligence in 2007 : 5 cases
compliance of the following: discharging duties as a 2008 : 20 cases
company secretary. 2009 : 7 cases
(a) to ensure fit and proper person
is appointed as an approved • 10 company secretaries were black
company secretary; listed
• 6 company secretaries’ license
(b) to ensure strict compliance of were revoked
• 20 warning letters were issued
the provision of C.A 1965; and

(c) to enhance professionalism 5 Ensuring individuals do 2006 : 443 cases

not practice as company 2007 : 99 cases
amongst company secretaries; secretaries after 2008 : 85 cases
disqualification /expiry of 2009 : 14 cases
z Maintain a database on company license
secretaries (Licensed company • 639 cases were compounded
secretaries and members of • 2 cases were prosecuted and
prescribed bodies). convicted with fine

SSM Bulletin | Vol 1. 2009 11

 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

NO INITIATIVES ACHIEVEMENTS No. SECTION DESCRIPTION

1
2. Section 366 The company
Ongoing has offered
investigation holiday package
on substantial trading
6 Enforcement action 2006 : 2,709 cases 132(1)
against company directors 2007 : 720 cases losses in Palm Oil trading by the company’s
who allow a person to 2008 : 64 cases traders.
continue to act as a 2009 : 48 cases
secretary even though he 3. Section 366 Ongoing investigation on an offence of offering
has been disqualified. • 3,329 cases were compounded non-existence holiday packages to the public.
• 212 directors were issued with
warning letters. 4. Section Ongoing investigation on accounting dispute
364(2) between the company and the auditor with
7 Detecting the rendition of 2006 : 13 cases
false or misleading 2007 : 7 cases regard to audit qualification of the company’s
information. 2008 : Nil reported income.
2009 : 1 case
5. Section 91 Ongoing investigation on 3 land banking
• 19 cases were compounded companies offering land investment schemes in
• 2 cases prosecuted and convicted
with fine. United Kingdom and Canada.

6. Section 366 A company was investigated for an offence for

8 Striking off defunct • 2006: 14,334 companies struck
companies. off fraudulently inducing people to deposit money.
• 2007: 30,650 companies struck The case is currently pending prosecution.
off
• 2008: 9,859 companies struck off 7. Section Failure of directors to exercise their fiduciary
132(1) and duties and fraudulently inducing people to
9 Surveillance on illegal A total of 50 companies nationwide 366(3)
interest schemes. deposit money. The case is currently pending
were subject to surveillance. 39 were
identified as unregistered interest prosecution.
schemes where the following 8. Section Failure of directors to exercise their fiduciary
enforcement actions were taken: 132(1) and duties and fraudulently inducing people to
(a) 11 cases were referred to other 366(3)
deposit money. The case is currently pending
agencies
prosecution.
(b) 22 cases were referred to Legal
Services Division for legal opinion
(c) 6 cases were recommended for
further investigation Raids Carried Out
Since its inception in 2006, the Investigation
Division had carried 48 raids at various locations
The Investigation Division nationwide. The raids carried out were pursuant to
investigations carried out and in some cases the
Since 2003, in tandem with the enhancement of
raids were conducted following tip-offs received
SSM’s investigation capacity and capabilities, there
from informers and members of the public or
has been marked increase in the numbers of
following the outcome of investigations.
investigation papers (IP) opened. For example, in
2003 there were only 73 IPs opened and 62 Since SSM’s publicized its enforcement efforts in the
disposed compared to 215 and 195 IPs opened and media, response from the public has been
152 and 253 being disposed in 2007 and 2008, encouraging and SSM had received information on
respectively. The disposal of IPs is done through the corporate misdeeds through complaints and even
initiation of prosecution, the issuance of compound whistleblowers. This is a recognition and confidence
notices or closure of such IPs where investigation by the public of SSM’s serious enforcement efforts
reveals no commission of offences. to combat corporate misdeeds.

Investigation on Public Interest Cases Warrants of Arrests

The Investigation Division had commenced In 2008, the Investigation Division executed a total
investigations on several public interest cases which of 13 warrants of arrest against individuals for
received wide attention from the public as the cases offences committed under the CA 1965. The
were highlighted in the local newspapers and mass warrants were successfully served and the persons
media. Details of the cases are described below: charged in Court for various offences under the CA
1965.
No. SECTION DESCRIPTION
1. Section 366 The company has offered holiday package From its experience SSM finds this mode of service
membership club to the public which is illegal. to be more effective and time and cost saving as
Warrant of arrest against the suspect has been compared to serving summons on the suspect. In
issued. Execution of the warrant is pending many cases the suspect avoids service and goes
service, since the suspect had already absconded into hiding. The warrant of arrest on the other hand
to China.
carries an element of surprise and upon the suspect

12 Vol 1. 2009 | SSM Bulletin


being arrested, he will be brought immediately to
Court for charges to be preferred against him.
Referrals from Other Agencies
Since its inception in April 2002, SSM had received
65 referral cases from the Securities Commission
through the Tripartite Working Committee and
subsequently the High Level Committee on
Corporate Governance for investigation of various
offences under the CA 1965.
As at 31 December 2008, a total of 54 cases had
been disposed on the directions of the Deputy
Public Prosecutor. The remaining 11 cases are still
being investigated.
One of the main difficulties in investigating such
cases is that the alleged offences concerned were
committed several years ago. Under the CA 1965,
Intelligence Sharing Intiatives with other Regulators
No. AGENCIES DESCRIPTION
1 BNM Investigation division together with
Financial Intelligence Unit (FIU) and
Special Investigation Unit (SIU) from
BNM have several meetings and
discussions on matter related to
investigation into Anti Money Laundering
offences for 3 investigation cases. In
addition Investigation Division has
participated in Certified Financial
Investigator (CFI) programme organized
by BNM.
2 Jabatan Insolvensi Joint enforcement efforts to ensure
Malaysia (JIM) corporate governance practice are being
observed and complied with for the
appointment of company directors. We
have received constant referral from JIM
on bankrupt persons appointed as
company directors. To date based on
referral from JIM we have investigated
140 cases of un-discharged bankrupts
acting as company directors for an
offence under Section 125 of Companies
Act 1965 where 127 cases have been
concluded and referred for prosecution
review. The Investigation Division has
also made a working visit to the JIM
headquarters in order to establish a
professional working relationship and
address issues related to the
appointment of undischarged bankrupts
as directors of companies.
3 Suruhanjaya Koperasi Investigation Division had also
Malaysia (SKM) participated in a knowledge sharing
session on investigation activities.
ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
the duty to retain statutory records is only for 7
years. The auditors and company officials of
companies being investigated will take the
opportunity to destroy incriminating documents as
there is no legal obligation for them to retain them
for more than 7 years.
Another difficulty faced is that in most of these
cases, the companies under investigation had
already been wound up or are in the process of
liquidation.
Working relationship and Intelligence
Sharing Initiatives
The Investigation Division enjoys a good working
relationship with fellow regulators and participated
in joint enforcement projects, such as the following
tabulated below:
No. AGENCIES DESCRIPTION
4 Malaysia Anti Joint investigation efforts in reviewing
Corruption Commission cases investigated for the purpose
(MACC) ascertaining the possibilities of breaches
under Companies Act 1965. In addition
regular participation by our Investigating
Officer in the training programmes
organized by MACC Training Academy.
5 Cybersecurity Active working relationship in assisting
our seizure exercise during our raids as
well as securing and analyzing digital
evidence gathered. To date we have
engaged technical expertise on digital
evidence from Cybersecurity for 5
investigation cases.
6 Commercial Crime Sharing of intelligence between CCID and
Investigation Division Investigation Division related to Internet
(PDRM) trading schemes offered to public.
7 Kementerian Joint investigation efforts with the
Perdagangan Dalam Enforcement Division of the Ministry in
Negeri dan Hal Ehwal relation to companies and businesses
Pengguna (KPDNHEP) involved in Direct-Selling, Quick Rich
Enforcement Division Schemes, Pyramid Schemes, Single-level
and Multi-level Marketing and “Scratch
and Win” contest for a numbers of
investigation cases.
8 Interpol Establish working relationship in order to
assist in locating and apprehending
absconded suspect for a case where it
was believed the suspect is currently
residing in China.
9 Malaysian Sharing of intelligence between MCMC
Communication and and Investigation Division related to
Multimedia Commission telecommunication and securing digital
(MCMC) evidence and vice versa.
SSM Bulletin | Vol 1. 2009 13
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

Table 3
CIVIL ENFORCEMENT CASES
Legal Services Division
No. Section Subject matter No. of
Delinquent Director’s Register System case
1 Section 11 Appeal to High Court on the decision or 5
Apart from criminal prosecution and administrative
action of the Registrar.
sanctions, SSM has taken a proactive enforcement 2 Section 22 and Similarities of names. 1
approach to ensure that only a fit and proper 23

person shall be appointed as a director of a 3 Section 54 & 63 Validation of share improperly issued. 4
company. SSM has developed a system known as 4 Section 65 Right of holders of classes of shares. 1
The Delinquent Director’s Register System or 5 Section 84(1) Interest scheme. 2
better known as the DDR system in the year 2006 6 Section 104 Transfer of share by personal 1
with a primary objective to record, store and representative.

maintain a comprehensive database on convicted 8 Section 125 (1) Application for leave from court for 1

directors in Malaysia. It is a ‘one-stop centre’ for bankrupt directors to continue holding

the database on convicted directors in Malaysia. office.

9 Section 141 Application for a declaration on 5
Initially at its inception stage in 2006, the management structure of a company.
database on convicted directors in Malaysia was 10 Section 144 Convening Extra Ordinary General 1
recorded manually in a log-book. SSM progressed Meeting.
by introducing a new DDR system in the year 11 Section 162 Application for court order to rectify the 8
2007 and further enhanced the system in year register of members.

2008. Today SSM is able to maintain 13 Section 243 Application for stay of winding up 2

comprehensive data which allows a greater order/proceeding.

standard of vetting when one applies to be a 15 Section 307(1) Application to declare company 1

company director. This wealth of information is not dissolution as void.

16 Section 308(5) Application to reinstate a company back 13
only utilized by SSM but also used by other of the CA into the register of companies after being
enforcement agencies such as the Securities struck-off.
Commission, Bursa, the Central Bank and PDRM.
17 Section 309 Application to appoint the Registrar to act 1
Civil Enforcement for dissolved companies.
18 Section 354(2) Application to relieve from liability. 1
Pursuant to section 37 of CCM Act 2001, SSM’s
19 Section 5 of Registration of business. 1
legal officers are authorized to appear in any civil ROBA
proceedings for and on behalf of SSM. SSM has 20 Section 6 of Effect of registration. 2
leveraged fully on its officers capacity in appearing ROBA
in the Court by also pursuing civil enforcement. 21 Section 7 of Rectification of Register of Businesses. 7
Between 2006 and February 2009, a total of 157 ROBA
civil litigation files were handled on matters 22 Recovery Action (a) Corporate Debt 3
related to the CA 1965 and the ROBA 1956 out of (b) Personal Debt 4

which 147 are pertain to civil enforcement. 23 Write of Action against infringement of SSM 1
Summons and rights.
A summary of SSM’s civil enforcement actions Injunction

taken is described in Table 3. 24 Judicial Review Application to Court to review the 2

Registrar’s decision.

The notable civil enforcement cases initiated and/or defended by SSM are as follows:

SSM v Open Borders Sdn Bhd and 2 others
[Kuala Lumpur High Court Civil Suit No. S4-21-269-
2008]
The Defendants have developed a website which is similar
to the Plaintiff’s website. Such website is misleading
matters and infringes the Plaintiff’s rights under the
copyright and passing-off. An ex-parte injunction was
granted by the Court in favour of SSM. Parties are now in
the midst of negotiation of settlement and towards
finalization of the terms of the consent judgment.
N.V Multicorporation and 17 others v. SSM
[Court of Appeal Civil Appeal No. W-01-41-2005]
NV Multicorporation Berhad and its subsidiaries are
developers and operators of memorial parks comprising
burial plot and columbaria structure in Malaysia. They
develop lands into burial grounds and sell individual plots
to the public. The general public enter into a license
agreement with the developer and pay the price of each
plot in one lump sum. The burial plot is not sub-divided
and proof of ownership for each plot is the license
agreement between the parties. The purchaser of the

14 Vol 1. 2009 | SSM Bulletin


burial plot is also required to pay a continuity fee to be
kept in a trust fund managed by the developer or its
appointed agent.
SSM views that the operations of NV Multicorporation and
its subsidiaries tantamount to selling interest to the public
or commonly known as interest schemes. These activities
are regulated under Part IV Division 5 of the Companies
Act 1965. SSM found that the companies did not have
approved deeds pursuant to section 91(1) of the
Companies Act for their business activities and took
enforcement action against them. The objective of the
prevailing law is to protect public interest by ensuring only
approved companies may offer interests other than shares
and debenture to the public. This would avoid potential
scams being offered resulting in massive loss of money by
the investing public.
The companies filed a civil action in Kuala Lumpur High
Court against SSM for a declaration that their business
activities do not fall under the category of ‘interest
schemes’ under section 84 of the Companies Act. The
Court of Appeal had decided in 13 June 2008 to allow our
appeal with costs against the High Court decision. The
Court of Appeal held that the business operations of NV
Multicorporation and its subsidiaries were interest scheme
under the purview of Division 5 Part IV of the Companies
Act. Therefore, the companies must comply with the
provisions stipulated under the said provision. In
furtherance to the Court of Appeal’s decision which was in
favour of SSM, NV Multicorporation Bhd has filed an
appeal to the Federal Court. The appeal is fixed for hearing
on 13 April 2009
Amalgamated Batteries Sdn Bhd v. SSM
[Kuching High Court Originating Summons No. 24-14-
2008-II]
In March 2007, SSM received a complaint that the
managing director and company secretary of
Bahterangkut Sdn Bhd relating to false information given
by an individual on the resignation of the company
secretary and changes to the board of directors.
Pursuant to the complaint, SSM’s investigation officers
(IO) had applied a search warrant to conduct a search of
the premises of Amalgamated Batteries Manufacturing
(Sarawak) Sdn Bhd (Plaintiff’s in this case) on the ground
that the accounting records of Bahterangkut Sdn Bhd
were kept at the Plaintiff’s premises. The Magistrate’s
Court in Kuching granted the warrant to search, however
on the day of the search, the Plaintiff’s officers and staff
refused to allow SSM’s IO to enter the premises.
Thereafter, the Plaintiff filed a civil action to set aside the
search warrant and applied a stay of execution of the said
search warrant. SSM however filed a Summon in Chamber
to set aside the Plaintiff’s application on the following
grounds:
(i) Plaintiff has no reasonable cause of action;
ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
(ii) Plaintiff application is scandalous, frivolous and
vexatious;
(iii) The conduct of the Plaintiff and it’s officer amounts to
an abuse of the process of Court;
(iv) The search warrant was validly issued; and
(v) The filing of Plaintiff application (Originating
Summons) by the Plaintiff did not provide an
automatic stay against the execution of the search
warrant.
The Kuching High Court Judge granted an order pursuing
to SSM Summons in Chamber and dismissed the Plaintiff’s
application with costs.
In furtherance to the Kuching High Court’s decision, the
Plaintiff has filed an appeal to the Court of Appeal. The
date of hearing for the appeal will be fixed by the Court of
Appeal.
Halagel (M) Sdn Bhd v. SSM
[Alor Setar High Court Originating Summons No. MT2-24-
1618-2006 and another]
In October, the Alor Setar High Court dismissed an action
by a company against SSM and another company. The
action was filed for a declaration that SSM made an error
in approving the name of another company using the
word ‘Halagel’ which was claimed to be similar to the
Plaintiff hence causing confusion to the public. The Court
ruled that the Plaintiff did not provide any evidence to
proof any confusion was caused by usage of the name
‘Halagel’ and that using the discretion conferred by section
22 of CA, the Registrar had acted properly. The Plaintiff
has filed a Notice of Appeal against this decision at the
Court of Appeal.
Toyochem (M) Berhad v SSM and another
[Kuala Lumpur High Court Civil Suit No. D3-24-329-2003]
A decision by Kuala Lumpur High Court on the issue of
company’s name (section 22 & 23 of Companies Act
1965). The 1st plaintiff is a company incorporated in
Japan. Together with its local subsidiary, they applied for a
declaration that SSM’s decision in allowing the registration
of 2nd defendant’s name was contrary to section 22(1) of
the Companies Act 1965 due to similarity with the 1st
plaintiff’s name. In his judgment, the learned judge held
that the Registrar of Companies has a discretion in
considering and allowing a company’s name, subject to
the provisions of section 22 of Companies Act and the
Minister’s Directive on prohibited names. Since the 1st
plaintiff is a company incorporated under a foreign
jurisdiction, SSM has no authority over it nor must take
cognizance of its name when approving names for
companies to be incorporated in Malaysia. The application
was therefore dismissed with cost. The plaintiffs initially
filed a notice of appeal against the whole decision to the
Court of Appeal, but subsequently withdrawn it in
December. ~
SSM Bulletin | Vol 1. 2009 15
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

Ensuring the Reliability

of Financial Statements:
“Quis custodiet
ipso custodes? ”

(“Who watches the watchmen?”)

Auditors have been regarded as the major line of defense in ensuring the reliability
of financial statements prepared by officers of companies. If auditors are dishonest,
negligent or incompetent and signed off false accounts, then the fraud may not
surface until it is too late. Financial statements can be easily distorted under the
disguise of certain accounting treatments or hidden under certain accounting
practices which currently allow an array of choice of method in determining the
system of measurement, criteria for recognition, and even the approach in defining
an accounting entity.

T
he attempt of improving financial performance
of companies which is also referred to as
creative accounting usually involve non-
disclosure or concealment of certain crucial
information. The failure in corporate financial
reporting system will be apparent in the event
auditors do not play their role when unscrupulous
fraudulent accounts left unchecked1.
Corporate collapses due to
misleading financial reporting
Misleading financial reporting could lead to collapse
of large corporations where in most cases huge
losses were concealed. For example, recently in
India The Satyam Computer Services scandal was
publicly announced on 7 January 2009, when the
Chairman resigned after notifying its board
members and Securities Exchange Board of India
(SEBI) that he had falsified Satyam’s accounts.
It was reported that the Chairman confessed to
Satyam’s balance sheet that carried inflated figures
for cash and bank balances. It carried an accrued
interest which was non-existent with an
understated liability on account of funds that was
arranged by the Chairman himself. He claimed that
neither he nor the managing director had benefited
financially from the inflated revenues. He also

1. In Malaysia, Section 174 (2)(a(ii) of the Companies Act 1965 (CA1965)[Act 125] - requires an auditor to report to the members of the
company on the accounts required to be laid before the company at the general meeting and to state in his report his opinion whether the
accounts are properly drawn up and are in accordance with the provisions of the Act so as to give a true and fair view of the financial
position of the company.

16 Vol 1. 2009 | SSM Bulletin


claimed that none of the board members had any
knowledge of the situation in which the company
was placed. He stated:
“What started as a marginal gap between
actual operating profit and the one
reflected in the books of accounts
continued to grow over the years. It has
attained unmanageable proportions as the
size of company operations grew
significantly. As the promoters held a
small percentage of equity, the concern
was that poor performance would result in
a takeover, thereby exposing the gap. It
was like riding a tiger, not knowing how
to get off without being eaten.”
The irony is that, Satyam was the 2008 winner of
the India’s acclaimed Golden Peacock Award for
Corporate Governance under Risk Management and
Compliance Issues, which was stripped-off from
them subsequent to the scandal.
Corporate collapses give rise to the questioning of
the credibility of the auditing profession by the
public especially by investors who assumed that
audited financial statements are reliable. There is
now demand for a higher degree of good
governance practice to safeguard public interest.
One of the most evident global trends which is
currently making headways into various
jurisdictions is in relation to the setting up of an
oversight body to monitor the affairs of auditors.
Who Watches the Watchmen?
“Quis custodiet ipso custodes? 2”
In cases where accounting scandals were being
unraveled, all fingers will be pointing to auditors
questioning why unscrupulous fraudulent accounts
have been issued with ‘unqualified’ or ‘clean’ reports
by auditors as they are supposed to provide
independent assurance that such accounts
represent the true state of the financial health of
the company. There are many possible answers to
this question which range from lack of audit
independence, conflict of interest, influence by
other parties, rendering of non-audit engagement
to audit clients to technical competencies issues.
In ensuring auditors’ independence, countries in
many jurisdictions have moved towards the setting
up of an oversight body to serve as “watchmen”
2. is a Latin phrase from the Roman poet Juvenal, which literally translates to “Who will guard the guards themselves,” and is variously
translated in colloquial English as “Who watches the watchmen?”, “Who watches the watchers?”, “Who will guard the guards?”, “Who shall
watch the watchers?”, “Who polices the police?” or other similar translations - Wikipedia.
3. 2008 Budget Speech by the Honourable Prime Minister delivered on 7 September 2007
ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
to monitor the “watchers” or auditors and such
body or institution will be charged with overseeing,
regulating, inspecting, and disciplining functions on
auditors of public companies to avoid situations
where their independence would be threatened. The
oversight functions of the public audit profession
has witnessed a paradigm shift where the oversight
functions performed traditionally by the professional
accounting and auditing bodies is transferred to
another institution which is affiliated closely, directly
or indirectly to the Government.
In United States (US), the concern on the accuracy
of financial reporting and the professionalism of the
public accounting industry gave birth to the
formation of the Public Company Accounting
Oversight Board (PCAOB) pursuant to the provisions
of the Sarbanes-Oxley Act 2002 (SOX). The PCAOB
is. The SOX also covers issues such as auditor
independence, corporate governance, internal
control assessment, and enhanced financial
disclosure.
In Singapore, the Public Accountants Oversight
Committee (PAOC) established in 2004 is a creature
established under the Accountants Act which is
regulated by the Accounting and Corporate
Regulatory Authority (ACRA). The PAOC, which
comprises members from the accountancy
profession, legal profession and the academia deals
not only with all operational matters pertaining to
the registration of public accountants, but also
oversees the monitoring of audit quality and the
disciplinary process governing public accountants.
In the European Union (EU), pursuant to Article 29
of the EU’s 8th Directive, the EU has also prescribed
the requirement for all their members to ensure
that all statutory auditors and audit firms are
subject to a system of quality assurance which
meets certain minimum criteria. The EU has set a
timeframe from 2006 until 2010 for full compliance
by the Member Countries in relation to the setting
up of such oversight board.
In Malaysia, the government3 is on the verge of
establishing a Public Accounting Oversight Board to
monitor auditors of public listed companies as well
as to instill public confidence on the quality and
reliability of audited financial statements of public
listed companies and public interest entities.
SSM Bulletin | Vol 1. 2009 17
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

(c) a partner or employee of an

The Malaysian Legal Framework
on Approved Company Auditors
In Malaysia the principal statute that governs
company auditors 4 is the Companies Act 1965
(CA1965). Section 8 stipulates the approval
authority for company auditors resides with the
Minister of Finance. Other salient features of
section 8 are as follows:
z the approval of an individual to be an auditor is
upon the Minister of Finance’s satisfaction that
the person is of good character and competent
to perform the duties of an auditor, upon
payment of a prescribed fee.
z The Minister may duly approve an auditor to be
a company liquidator.
z The approval of an auditor (and liquidator) is
renewable every two years.
z The Minister may delegate his functions and
powers to a person (or body of persons);
z An appeal pursuant to the Minister’s decision
may be made to the Yang di-Pertuan Agong.
Section 9 provides that only an approved company
auditor may be appointed and act as an auditor of a
company. A person, although an approved company
auditor, shall not knowingly consent to be appointed
and act as auditor of any company nor shall he
prepare for and on behalf of a company any report
required by the CA 1965:5
(1) if he is indebted to the company, its holding
company or subsidiaries in an amount
exceeding RM2,500;6
(2) if he is:7
(a) an officer of the company;
(b) a partner, employer or employee of
an officer of the company;
employee of an officer of the
company; or
(d) a shareholder or his spouse is a
shareholder of a corporation whose
employee is an officer of the
company; or
(3) if he is responsible for or is the partner,
employer or employee of a person responsible
for the keeping of the register of members or
the register of holders of debentures of the
company.
An audit firm shall not knowingly consent to be
appointed and act as auditor of any company nor
shall he prepare for and on behalf of a company any
report required by the CA 1965 unless:
(1) all the partners of the firm resident in Malaysia
are approved company auditors, and that none
of the partner is disqualified under (1), (2) and
(3) above;8 and
(2) where the audit firm is not registered as a firm
under any law for the time being in force, a
return showing the full names and addresses of
all partners of the firm (i.e. in Form 59) has
been lodged with the Registrar of Companies.10
Contravention of the above restrictions will render
each partner of the firm or the person guilty of an
offence against the CA 1965, the penalty for which
is a fine not exceeding RM30,000.11
Apart from sections 8 and 9, other provisions
pertaining to auditors are:
(i) Section 165: the lodgement of annual return
and audited account. Essentially, the audit of
accounts of all companies is an obligatory
requirement posed by the law. This function
can only be dispensed with by the auditor.

4. Referred to as an “approved company auditor” - section 4 CA19653.

5. CA 1965 s 9(1).
Note:
(a) For the purpose of s 9(1), an officer of a company:
(i) includes an officer of any company of the group; or
(ii) means any person who has been an officer or promoter at any time within the preceding period of 12 months of the company
or its related companies.
(b) A person will not be deemed to be an officer by reason of being appointed as auditor of the corporation
6. CA 1965 s 9(1)(b).
7. CA 1965 s 9(1)(c).
8. CA 1965 s 9(4)(a) and (b).
9. of Companies Regulations (CR) 1966, Return of partners of firm of auditors.
10. CA 1965 s 9(4)(a) and (b)
11. CA 1965 s 9(1) and (5).

18 Vol 1. 2009 | SSM Bulletin


(ii) Section 167(1): the mandatory requirement
to keep accounting and financial records and
for such documents to be audited.
(iii) Section 169(4): the mandatory requirement
for the accounts of a company to be audited.
(iv) Section 172A: duty to inform the relevant
regulators (i.e. SSM and Bursa Malaysia)
upon the cessation of the period of
engagement of auditors.
(v) Section 174(2): the requirement for auditors
to state whether the accounts have been duly
prepared in accordance with the provisions of
the CA 1965 and whether they are in
accordance with the approved accounting
standards.
(vi) Section 174(3): the requirement for auditors
to form an opinion whether all information has
been duly obtained, proper accounting and
records kept, returns received are adequate
and procedure in relation to the consolidation
of accounts were appropriate.
(vii) Section 174(8): An auditor of all companies
(private and public) is imposed with the duty
to report to the Registrar if in the course of
audit, he is satisfied that there has been a
breach of any of the provision of the CA 1965
and the circumstances are as such that in his
opinion the matter has not been or will not be
adequately dealt with by comment in his
report or by bringing the matter to the notice
of the directors of the company.
(viii) Section 174(8A): mandatory ‘whistleblowing’
provision applicable to auditors of public
companies/companies controlled by public
companies where fraud/dishonesty is being
committed.
Role of SSM as Corporate
Monitoring Agency
The Companies Commission of Malaysia (SSM) is a
statutory body which regulates companies12 and
businesses under Companies Act 1965 and the
Registration of Businesses Act 1956 and it is the
responsibility of SSM to ensure that auditors comply
with the provision under CA 1965. The preparation
of a company’s Financial Statement is based on the
guidelines as stated in the CA 1965 as well as the
accounting standards as issued by the Malaysian
Accounting Standards Board (MASB). In this matter,
12. Refer to Section 17(a) of the Companies Commission of
Malaysia Act 2001 [Act 614]
ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
it is the duty of SSM to ensure that financial
statements audited by the auditor were pursuant
with the CA 1965 and the MASB standards.
SSM’s Monitoring and
Surveillance Activities
An enforcement activity by SSM pertaining to
corporate monitoring is conducted by the Corporate
Account Monitoring Section (CAMS). This section
performs its corporate enforcement activities by
checking the Financial Statements of companies to
ensure that companies comply with the provisions
of the Companies Act 1965 and it is also responsible
for monitoring the company’s auditors and
liquidators.
(a) Monitoring of Auditors and Liquidators -
Issuance of Licenses for auditors and
liquidators
In terms of issuance of licenses of auditors and
liquidators, SSM is a member of the interview panel
for approving licenses to company auditors and
liquidators established pursuant to Section 8, CA
1965. SSM is also responsible for the evaluation of
the candidates’ competencies on understanding the
CA 1965. Besides that, SSM also provides
recommendations for the renewal of the auditor’s
license.
(b) Registration of Audit Firm
An approved company auditor who has been issued
with the licence, has to be in full time practice. They
have a choice to either incorporate new audit firm
or to be a partner in other audit firms which have
been registered with SSM. Based on SSM’s record,
until December 2008 there have been 1,763 audit
firms which have registered with SSM. CAMS is
constantly monitoring and updating the changes of
information regarding the audit firms and partners
of the audit firms. Out of the total audit firms
registered, 1,471 audit firms are active, 214 audit
firms have ceased practice and 78 audit firms had
been dissolved or removed by SSM. Out of 1471
active firms, 1,069 audit firms identified as sole
proprietorships and another 402 firms were
partnerships.
“
If auditors are dishonest, negligent
or incompetent and signed off false
accounts, then the fraud may not
”
surface until it is too late.
SSM Bulletin | Vol 1. 2009 19
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
“ Corporate collapses give rise to
the questioning of the credibility of the
auditing profession by the public
especially by investors who assumed
that audited financial statements are
”
reliable.
All audit firms in Malaysia are responsible to inform
SSM with regard to any changes which have
occurred in a firm within one month from the date
of such changes as stated in a Regulation 8A (4) of
Companies Rules & Regulation 1966 in order to
ensure that the information contained with SSM is
updated and accurate.
(c) Removal of auditors
CAMS also ensures that all removal of auditors will
be recorded in the SSM database for further action.
Such information is recorded with SSM via the Form
11 and Special Notice which is submitted by the
company. As at 31 December 2008, 1,426 auditors
were removed by companies as compared to 2007
where 799 auditors were removed.
(d) Resignation of Auditor
Besides registering and monitoring the removal of
auditors, SSM also registers the resignation of
auditors. Under section 172A, CA 1965, the auditors
are required to notify SSM on the resignation. If
required, SSM will conduct inspections with regard
to this matter.
Since the effective date of compliance of the section
172A from 15 August 2007 until December 2008,
CAMS had processed 6,998 notices of resignation of
auditors due to various reasons. The reasons of the
resignation of company’s auditors can be classified
as follows:
No Reasons of Resignation %
1 Voluntary resignation 32%
2 Requested by company / shareholders / client / 27%
BOD
3 Ceased / audit firm restructuring 22%
4 No reason stated 17%
5 Others 2%
20 Vol 1. 2009 | SSM Bulletin
(e) Surveillance on Provision under Section
174(8A) Companies Act 1965
Section 174(8A) introduced the requirements for a
company’s auditor is to inform in writing, the
Registrar if the auditor in the opinion that there is a
serious offence involving fraud or dishonesty which
is being or has been committed against the
company when the auditor carried out its duties.
(f) M o n i t o r i n g o f C o m p a n i e s F i n a n c i a l
Statement - in Compliance with CA 1965
and Approved of Accounting Standards
As the financial statements lodged by the company
is public information it is important to ensure that
all information, lodged with SSM is accurate. For
that, CAMS carried out inspections on the
companies Financial Statements which were lodged
to ensure all the provisions under CA 1965 and
requirements of Account Standard with regards to
the Statement preparation were complied with.
In the year 2008, CAMS inspected 1,036 balance
sheets where a total of the debit balances did not
agree with the credit balances. For the year 2007, a
total of 1,633 inspections were carried out for the
same offences.
(g) I n s p e c t i o n o n C o m p a n i e s A c c o u n t i n g
Records
CAMS also carried out physical inspections on
companies’ accounting records to ensure that the
records were kept accordingly to the duration of
time as stated under Section 167 of the CA 1965.
CAMS also carried out investigations for offences
involving accounting issues on a case to case basis.
Enforcement Actions By SSM
Based on the enforcement activities that were
carried out for the year 2008, CAMS identified
various offences which have occurred with regard to
the auditors and accounting issues. The identified
offences were as follows:
Offences
Notices
Section Involvement
Section 9(1)(a) 33 auditors 34
Section 9(4)(a) 58 auditors 62 audit 61
firms
Section 9(1)(a) & 9(4)(a) 7 auditors 10
Section 9(6) 10 companies 10
Regulation 8A(4) 28 audit firms 28
(investigation
Section 364 1 individual
action)

From the above offences, section 9(1)(a) and
9(4)(a) CA 1965 constituted the highest
number of offences which involved auditors. In
the year 2008, 98 cases were identified to have
been committed and this will affect the
credibility of the profession. In view of the
profession that is under the purview of the
Malaysian Institute of Accountant (MIA)13, SSM
also informs MIA on the non-compliance or
offences that were committed by the auditors.
Furthermore, SSM also notifies MIA about query
letters sent by the auditors regarding the debit
balances in the Financial Statement which have
been checked by CAMS.
For cases of serious offences committed by
auditors, SSM will recommend to the
Surveillance Audit Committee, which was
established by the Finance Ministry of which
SSM is a member to review the case and to
penalize them accordingly. Until now, six
auditors’ license were terminated or dissolved
and one of it was on the recommendation of
SSM.
Apart from statutory monitoring, SSM is also
executing a degree of professional oversight
functions under its Corporate Accounts
Monitoring Section (CAMS) through the
following activities:
(i) CAMS audits the audited accounts to see
whether the auditors who signed them are
indeed registered auditors.
(ii) CAMS inspects the documentations which
an auditor has purportedly gone through
and cross-checked them with the standard
prescribed by the Malaysian Approved
Standard of Auditing (specifically A1 230
standard for documentations). In the event
of any findings of non-compliance to the
respective standard, SSM will inform MIA
for their further action.
(iii) In the event of irregularities detected in the
accounts lodged, CAMS will scrutinize such
accounts and issues a query letter to the
auditor. A copy of the letter is also sent to
MIA for their further action.
(iv) CAMS assesses the independence of
auditors as against the companies which
they audit.
13. Which is a Self-regulatory body for the profession of
accountants, auditors and liquidators (MIA is a membership
based establishment under the Accountants Act 1967).
ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
Vital Statistics and a Brief
Account on Activities by CAMS
z As at 23 October 2008:
(a)there were 1,524 active auditors throughout
the country
(b)there were 760 non-active auditors
(c) there were 1,473 active audit firms (of which
1,074 are sole proprietorship while 399 are
partnerships)
z Between January to October 2008, a total of 24 new
auditors were approved.
z In Q1 of 2008, SSM inspected 153 auditors involving 275
audit firms. Such inspection was able to detect various
non-compliance of section 9 of CA 1965. The names of
the individuals involved were sent to the MIA for their
further action.
z CAMS has also carried out a special project to inspect the
audit quality of exempt private companies (EPC -
companies which are exempted from lodging their audited
accounts. However, the accounts of such companies are
still subject to mandatory audit. SSM has carried out such
enforcement initiative to ensure the standard of audit for
all types of companies are maintained. The findings
revealed that a number of auditors have failed to adhere
to the International Standard of Auditing (Documentation
AI 230). The list of such auditors was submitted to the
MIA for their further action.
z Since the introduction of the new section 172A of CA 1965
on 15 August 2007, SSM has received 5,633 notifications
involving termination and resignation of auditors. These
are effectively ‘red flags’ which prompted SSM to
investigate further the circumstances of the premature
departure of the auditors.
z CAMS is a section residing under the Compliance
Division. Its structure is as follows:
Corporate Account Monitoring
Section
Corporate Report Interest Scheme & Auditors Monitoring
Monitoring Unit Trust Companies Unit
Monitoring Unit
z Generally, CAM functions are as set out below:
(i) monitoring interest schemes and companies
limited by guarantees.
(ii) inspection of companies financial reports
(iii) manage registration and removal of auditors
(iv) collaborate with other agencies in supervising
auditors
(v) issuance of compounds for non compliance
(vi) referring cases to the Investigation Division for
further investigation
SSM Bulletin | Vol 1. 2009 21
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

● S:9(6): 4 companies
compounded RM2,000
● S:143(1):4 companies

Special projects and operations

compounded RM4,650
z ● S:165(5): 6 companies
compounded RM3,800
carried out in 2008: ● S:167(1): 1 company
compounded RM2,000
● S:169(1): 7 companies
compounded RM194,400

STRATEGIC THRUST #6: ‘Facilitating compliance of regulatory 3. Development To create an 1,473 active audit firms
requirements through balanced enforcement towards ensuring good on Audit improved information have been updated
corporate.’ Firms’ database for through this system.
Database audit firms’
Projects/ Objective(s) Status surveillance as
activities a new product
under SSM’s
1. Monitoring of To halt  Auditors inspected : 153 information
Auditors misconduct or database
2008 other acts of  Audit firm inspected : 275
auditors which Outcome : 4. Inspection As an initial 339 companies’ financial
are inconsistent on non- stage of statements have been inspected.
from the • 39 auditors – s9(1)(a) CA’65 balance compliance
CA1965, • 79 auditors –s9(4)(a) CA’65 Balance inspection on
specifically • 1 case – s364 CA’65 (has been Sheet companies
forwarded to Investigation Status:
under s9(1) financial
Division)
and s9(4) • 144 notices compound have statement 921 errors on financial statements
CA’65. been issued with the amount of have been queried for correction.
RM2,149,500.00.
5. Registering To update ● FORM 5 [ Return of Partners of
and database on Firm of Auditors]
2. Surveillance To halt the  “Interest Scheme” Processing auditors and
for cases misconduct of Audit Firms audit firms Status: 394 forms have been
under Directors in 9 companies undergo processed.
and Auditors
section 132 Public comprehensive inspection
Information ● FORM A [ Application to be
(as to the Companies and Outcome :
Involvement Company Auditors under
duty and its subsidiaries
as Panel S:8(1)]
liability of • 2 companies complied
director) GLC • 7 companies suspected on non- Status: 27 forms have been
and public compliance of various sections:
processed.
 S:90(1): 1company
companies
 S:94(1)(b):7 companies ● FORM C [ Application
with RM5
million paid onRenewal of Approval of a
up capital  CLBG with the word Berhad” Company Auditor or Liquidator
under S:8(5)]
● 295 companies inspected in
the initial stage Status: 628 forms have
been processed.
● 9 companies undergo
comprehensive inspection ● FORM 3 [Approval of

Outcome : Auditor/Liquidator under S:8(1)

and S:8(3)]
• 5 companies complied
• 4 companies compounded under Status: 34 forms have been
processed.
Action taken (Compound
Issued): ● FORM 4 [ Form of Renewal of
Approval of Auditor/ Liquidator
● S:115(2): 1 company under S:8(5)]

compounded RM500 Status: 776 forms have been

processed.
● S:121(1)(b): 1 company
compounded RM500 ● FORM 11 [ Special Notice
under S:153(1), S:172(4) &
● S:156(1)(a): 1 company
S:174(8) - on Removal of
compounded RM200 Auditor]

● S:158(1): 1 company Status:1139 forms have been

processed
compounded RM200
● Requirement under S:172A
CA 1965
 CLBG without the word Berhad” 5,930 letters have been
(S:24 CA’65): 54 companies processed
inspected
Outcome:
Outcome :
• 28 compound notices issued
• 43 companies complied under Companies Regulations
• 11 companies compounded 1966 para 8A(4) worth RM
under various sections. 6,800 528 copies of FORM 5
have been issued to the public
Action taken (Compound) worth RM 2,304

22 Vol 1. 2009 | SSM Bulletin


6. Interviewer To facilitate 19 interview sessions were
for Auditors Ministry of attended by CAMS officers.
and Finance (MOF)
Liquidators in ensuring
License auditors/
Application liquidators are
29 out of 75 candidates had
succeeded in their application.
well versed on
CA 1965
The current approach in
Monitoring Mechanisms on
Auditors
As can be seen from the above, the oversight and
monitoring mechanisms on auditors in Malaysia are
already in existence through the efforts
implemented by SSM. The current framework has
served its purpose and is consistent with those
implemented in developed jurisdictions where, SSM
being a statutory body under an Act of Parliament
has undertaken the oversight functions in
monitoring the profession of public accounting or
auditing which is at the same time being self-
regulated by the Malaysian Institute of Accountants.
The law as it stands today requires accounts to be
audited mandatorily for all companies regardless
whether it is a private company, public company,
listed or non-listed and irrespective of the areas of
business which the company is involved. Under the
existing framework, the audit requirement for
companies’ accounts is a basic corporate
governance requirement representing a trade-off in
exchange of the privilege of limited liability
accorded under the CA1965. As such, the same
standard of accountability and professionalism is
expected from all auditors of all types of companies.
The current approach caters to all, specifically
where the interest of foreign investors is not only
confined to the companies categorized as ‘public
interest entities’. Joint ventures and equity
participation by them also extends to non public
listed companies and beyond the banking, insurance
and capital market industry as well as public or
private companies involved in strategic areas such
as biotechnology, retail, shipping and others.
The Corporate Law Reform
Committee’s (CLRC)
Recommendation for an
Establishment of an Auditor
Oversight Framework
The concern relating to audit oversight functions is
not a new subject. This issue had been deliberated
ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
as early as December 2005 by the Corporate Law
Reform Committee (CLRC), an independent
committee established by SSM to spearhead the
reform of the CA 1965. In its discussion, the CLRC
had recommended for the strengthening of relevant
provisions under the CA 1965 to further enhance
the oversight function.
The CLRC has officially released its Final Report on
20 October 2008 and one of its recommendations is
the establishment of an independent oversight
board for auditors. Since the proposal for the
establishment of the body was part of the CLRC
recommendations, the manifestation of the legal
framework catering to the establishment and
operation of the proposed independent board
naturally resides within the framework of CA 1965.
Conclusion
It is submitted that the governance structure of the
independent board would be premised on the
following:
(a) Transparency of the appointment mechanism
such as the qualification criteria, tenure of
service, revocation of appointment, disclosure
requirements and others. All these could be
captured in the new provisions to be introduced
under the CA 1965;
(b) Appointment of qualified, experienced and
knowledgeable individuals to be appointed as
member of the independent body;
(c) Clear stipulations in the form of statute in
relation to the functions and powers of the
independent body;
(d) Clear stipulation on appeal process in relation to
decisions arrived by the independent body;
(e) Clear stipulation of disciplinary proceedings
processes; and
(f) Clear stipulation on the requirement for
periodical disclosure and reports to be
published for the public’s consumption.
SSM further submits that the proposed model for
Malaysia may leverage on the existing legal
framework, to further strengthen the statutory
functions already performed by SSM under the CA
1965. Such move would also minimize the
establishment and operations costs required from
the Government. In addition, it will also avoid
unnecessary complexity to be imposed to the
current corporate legal framework. ~
SSM Bulletin | Vol 1. 2009 23
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

Effective Audit Department,

The Way Forward
Audit, Internal Control and
Compliance are important
components to the topic of
corporate governance. Matters
in relation to audit, internal
control and compliance are
specifically subjects of their
own with distinctive history,
parameters, dynamics and
methodologies involving mostly
different individuals. However,
most interestingly, these
subject matters possess
common objective, that is to
ensure the well running and
administration of a company,
compliance of legal framework
as well as safeguarding the
interests of the shareholders of
the company. These objectives
are also shared in the pursuit
of corporate governance by the
business community, other
stakeholders and corporate

“
regulators alike. …internal auditors must reach out to the
management and other components within the
company to clarify their roles and how their
presence and functions can contribute towards the

24 Vol 1. 2009 | SSM Bulletin

well being of the company.
”

M
ajor corporate failures
such as the collapse of
the BCCI Bank, the
collapse of the Barrings empire,
the Maxwell affair and nearer to
home Transmile, NasionCom and
the Perwaja episodes, all pointed
to the lack of a proper corporate
governance system. Closer
scrutiny of the events that led to
the scandals point to a common
cause - ineffective internal audit,
lack or absence of internal control
and utter disregard to the
requirements of the laws. These
are issues related to the functions
of a company’s internal audit.
The Institute of Internal
“
Auditors defines internal
auditing as:
“...an independent
objective assurance and
consulting activity
designed to add value
and improve an
organization’s
operations. It helps an
organization
accomplish its
objectives by bringing a
systematic, disciplined
approach to evaluate
and improve the
effectiveness of risk
management, control
and governance
processes”
Based on the definition above,
an internal audit department
has to be fully equipped in order
to fulfil the objectives of:
z reassuring the management
of a company that their
arrangement for intensive
controls are adequate and
satisfactory.
z identifying and drawing the
attention of the management
to weaknesses in internal
control and whether the audit
objectives have been
achieved.
z lending credibility that is, to
detect errors, frauds and
disclose information.
z ensuring accountability that
is, to evaluate the
performance of the
management of the company.
z reporting on conflicting issues
to top management of the
company and provide
guidance to the management
in making decisions for future
plans.
In carrying out their respective
functions towards meeting their
duties and responsibilities,
The advantage of internal
auditors while carrying out
this function is their ability to
remain independent. This
unique feature carries
significant value to the
company and if leveraged
properly, can be used to
propel the company to a
”
new height.
internal auditors, the
management, the shareholders
and members of the public
generally must embrace a new
thought paradigm. Predominantly
perceived as individuals who
carry out process checking,
random sampling, tracking of
companies’ assets and detecting
management weaknesses, the
functions of the internal auditors
are actually designed to add
value to the organization. The
challenge towards changing the
perception first lies in the internal
ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
auditors themselves. Firstly,
they should not subscribe to the
stereotype thinking and
perception of those outside the
profession. In running companies
in the 21st century, internal audit
should be acknowledged as an
important component of the
companies’ management. In
carrying out their functions,
internal auditors serve as a
company’s internal educational
and consulting arm. The
advantage of internal auditors
while carrying out this function is
their ability to remain
independent. This unique feature
carries significant value to the
company and if leveraged
properly, can be used to
propel the company to a
new height.
Secondly, internal auditors
should also ensure that
their stakeholders
understand their roles.
More often than not,
internal auditors are
loathed as they are
perceived as ‘the enemy
within’, always around to
find faults and highlight
mistakes. As such, internal
auditors must reach out to
the management and other
components within the
company to clarify their
roles and how their
presence and functions can
contribute towards the well
being of the company. Once the
understanding and misconception
has been corrected, the
management and employees
alike will better appreciate the
presence and functions of
auditors. This will later translate
to better cooperation, less
hostility and commitment to
improve pursuant to the
comments and suggestions
highlighted by the internal
auditors. T h i r d l y , internal
auditors should also be proactive
in volunteering advice and
SSM Bulletin | Vol 1. 2009 25
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
thoughts on the internal process
of a company. This would require
the internal auditors to step out
from the traditional function as
the policing tool acting on behalf
of the board of directors and act
as consultants by giving advice to
close the present gaps. In
carrying out their duties, internal
auditors are privy to a wealth of
information and data more often
than not cutting across the
various functions or departments.
They are also able to view certain
issues from a different
perspective compared to those
who are responsible in carrying
out the functions of a certain
department. Owing to their ‘bird’s
eye view’ of the operations of a
company, internal auditors are
able to see the levels of
integration, areas of strength and
weaknesses, processes and
output simultaneously. Not many
companies are aware of this
advantage possessed by
internal auditors. Even lesser
are those who are able to
leverage on such unique
capability of internal auditors
and channel them to further
make the company prosper. As
such, internal audit is an
integral part of the business of
a company where the sharing
of honest data can add value
to the company. In doing so,
internal auditors are not simply
determining mere compliance
to policies and procedures.
The three main issues
described above are challenges
posed to internal auditors in
carrying out their functions in
the 21st century. It is a form of
evolution to the auditing
profession, just like other forms
of evolution experienced by
professionals such as lawyers,
accountants, architects and
engineers. Gone are the days
where lawyers are perceived as
mere legal experts, accountants
as being able to decipher and
make accounts or architects as
26 Vol 1. 2009 | SSM Bulletin
designers. In the modern world,
there is a need for integration
and leveraging of knowledge and
experience towards making a
professional distinctive and better
than the others within the same
genus of profession. Likewise,
internal auditors must also equip
themselves with not only the
knowledge of auditing but also
the knowledge of the law,
business and processes in order
for them to be of value to the
company.
The 21st century discussion on
auditing and internal control is
incomplete without also taking
into consideration the subject of
risk management. As a matter
of fact, most internal auditors
have rapidly shifted to risk-based
auditing in identifying auditable
areas. Risk management is the
science of identifying,
categorizing, assessing and
“
…there is a need for
integration and leveraging of
knowledge and experience
towards making a
professional distinctive and
better than the others within
the same genus of
”
profession.
managing potential risks. The
subject has gained prominence
with various systems,
methodologies and tools
developed as well as individual
involvement by specializing into
the subject matter. It is difficult
to separate auditing and risk
management as both are
interlinked with one another. As
such, the enhancement of
enterprise risk management plan
for an internal audit department
is strongly recommended. Studies
conducted found that the
assessment of risk has fallen by
the wayside for some companies.
According to a report published
by PricewaterhouseCoopers, 18
percent of companies do not
conduct an annual risk
assessment. The inclusion of a
risk management plan is to
ensure that internal auditors
maintain the objectivity and
independence required when
providing assurance and
consulting services. This is
achieved by ensuring that the key
business risks are managed
appropriately and that the system
of internal control is operating
effectively. The main issues to be
taken into account in determining
the internal auditing role is to
question whether the activity
raises any threats to the internal
auditor’s independence and
objectivity, and whether such
activity will enhance the
organisation’s risk
management, control and
governance processes.
In managing the risks, there
are key stages that should
be included and they are
such as the identification of
the risks, rolling out of a
control risk management
assessment, integrating the
work of internal audit and
risk management, creating
risk KPIs to support the risk
reporting process, early
warning systems. However, it
is important to caution that
although internal auditors and
risk managers share some
knowledge, skills and value, risk
managers are reporting to the
management of the company
where else the internal auditors
have to maintain their
independence and objectivity.
Internal auditors should also not
extend their roles on risk
management to cover specialised

areas as this would fall under the purview of the
risk managers (unless of course the internal auditor
can demonstrate that he has the appropriate skills
and knowledge).
Internal auditors need to be alert of inadequacies in
record keeping, errors and unusual transactions or
results which could be indicative of fraud, improper
or unlawful expenditure, unauthorised operations,
waste, inefficiency or lack of priority. As such
forensic auditing is another tool that can be used to
carry out general review of activities to highlight
risks arising either out of fraud or from any other
source with the purposes of initiating focused
reviews of particular areas, targeting specific
threats to the organisation.
The growing dependence of companies and
organisations to computerised systems has given
auditors another challenge. Gone are the days
when papers are the auditors’ best friends. Now,
they have to quickly embrace the information and
communication technology advancements. Auditors
are now required to understand the detailed
functions and applications of computerised system,
its control and the continuous development of ICT.
More auditors resort to using computer assisted
audit tools and techniques (CAATTS) to increase the
efficiency and effectiveness of the audit function.
The role of internal auditors must evolve towards
one of being a strategic partner to the
organisation’s Board and management. Internal
auditors must be responsible for many, broad and
varied tasks, ranging from assessing the quality,
economy and efficiency of business activities and
controls, to advising on harnessing opportunities
arising from emerging technologies and improved
business practices. In this regard, it is imperative
for the Audit Committee to review the internal audit
programme and result of the internal audit process,
and for the Management to ensure that appropriate
actions are taken on the recommendations made by
the internal auditors. Additionally, it is
ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
recommended that an Audit Committee comprising
non-executive Directors should be established by
the Board as an over-sight committee to ensure
that the internal auditors could effectively discharge
their functions. The internal auditors should report
directly to the Audit Committee and not the
Management to maintain the independence and
neutrality.
The independence of internal auditors in carrying
out their functions is another important area. Just
as lawyers need law books, doctors require their
medical tools or architect their measuring
instruments, the important ‘tool’ for auditor is
independence. As such, companies should utilise
better practice principles when establishing the role
and managing the use of their internal audit
functions. Internal auditors on the other hand must
be vigilant about any form or attempt to undermine
them. Internal auditors can only discharge their
roles effectively if the Board and management
recognise not only the value and strategic
significance of the role of internal auditors, but also
grant them with a degree of independence for them
to carry out their functions. Often, complaints are
received that internal auditors are not allowed to
probe certain issues or address certain matters.
Sometimes, veiled threats are communicated. Other
times, the warnings posed are more direct. There
are times when some auditors are faced with a
dilemma. They are caught in between the
requirement of highlighting an issue or giving an
opinion and risking their job which may in the end
cause difficulties to the members of their families. It
is a dilemma with no easy solution but for those
who possess conscious and a high level of integrity,
such decision is not difficult to make. SSM
recognizes this predicament facing internal auditors
and as such has introduced an amendment in the
form of section 368B of the Companies Act 1965.
Section 368B is essentially a provision which
protects an officer of a company in the event he
makes a disclosure pertaining to any breach of the
SSM Bulletin | Vol 1. 2009 27
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
Companies Act 1965 to the Registrar. Upon making
such disclosure in good faith and with reasonable
belief, the law provides that the company shall not
remove, demote, discriminate or interfere with his
employment or livelihood. In addition, the officer
of the company concerned shall be granted
immunity from civil litigations or disciplinary
actions. The introduction of this provision is a
significant achievement for SSM towards
protecting the interests of brave and honest souls
who dare step forward with incriminating evidence
of company law breaches against the company or
the management or the fellow officers.
The amendments of the Companies Act 1965 in
2007 has also taken cognisance of the functions and
roles of internal auditors. The new section 167A
prescribes that directors of public companies and its
subsidiaries are required to establish a system of
internal control to safeguard the assets of such
companies from unauthorized use or disposition. It
is also prescribed under the section that
transactions of the companies’ properties must be
properly authorized and recorded. The responsibility
to establish the system of internal control lies with
the directors of the public company and its
subsidiaries. This provision can be seen as providing
assistance to internal auditors in carrying out their
duties and responsibilities in that the law has made
it mandatory for such system of internal control to
be established. Some internal auditors may have
raised the issue on the need of the company to
establish a system of internal control but such call
was not heeded of by the directors or management
of the company. By making such requirement
mandatory, SSM has facilitated the functions of the
internal auditors. Their task is now to examine
whether such system of internal control established
fulfils the requirement of section 167A.
Apart from internal auditors, external auditors also
play an important role in ensuring that the company
is in a healthy state. Among the landmark
amendments include the introduction of the
mandatory obligation upon external auditors of a
public company to report any fraud and dishonesty
committed by any officer of the company under
section 174 (8A) of the Companies Act 1965. Such
obligation is further complemented with the
protection accorded for auditors when reporting
such incidences. Unlike their counterparts who are
employed by a public company, the requirement to
inform the regulators on any findings of fraud or
dishonesty to the Registrar is mandatory. Such
obligation imposed warrants the comprehensive
protection offered under section 174A (2A) which
protects the external auditor from civil or criminal
28 Vol 1. 2009 | SSM Bulletin
“
…internal auditors must also equip
themselves with not only the
knowledge of auditing but also the
knowledge of the law, business and
processes in order for them to be of
”
value to the company.
proceedings in court as well as any disciplinary
proceedings.
The various samplings of the new provisions
introduced in the recent amendments to the
Companies Act 1965 signifies that SSM takes
seriously the issue of auditing of companies by both
the internal auditors as well as external auditors.
Both parties play an important role towards
ensuring the sustainable existence of the company
as well as its operations. While internal auditors can
be said to be the first line of defence, the external
auditors on the other hand can be described as the
last line of defence towards protecting the interest
of the shareholders and ultimately ensuring the
healthy environment of corporate Malaysia.
The work of external and internal auditors has
always been given due recognition and importance.
Today, with the dramatic changes around
governance in both the private and public sectors,
the work by auditors has a much higher profile. It
has moved out of the back room to the centre
stage. With this higher profile comes greater
accountability and higher expectations. In the
private and public sectors alike, the stakeholders
count on professionalism and integrity to protect
their interests. Though the roles of internal auditors
and external auditors are different, the same
interests are targeted i.e. achieving and maintaining
good governance within a company. Without strong
internal and external audit processes, accountability
and transparency would be greatly compromised. It
is hoped that auditors, both internal and external
will be able to work together towards achieving a
common goal, which is to elevate standard of
national corporate governance. In doing so, the
regulator and the regulatee must always work
together hand in hand towards creating a conducive
and sustainable corporate environment. ~
*This article is based on the speech by the CEO of
SSM, presented at the MICG Conference, 16 July 2008

Interest Schemes in Malaysia
“What is an interest scheme?” That is the typical reaction that one would get when
mentioning the above phrase. Interest schemes have been in existence in Malaysia
for more than 20 years. However, it has never been given the proper recognition it
deserves by the public at large.
I
n Malaysia, offerings of
such interests are subject
to the provisions of Division
5 Part IV of the Companies Act
1965 (“Companies Act”) and
accordingly may only be carried
out by a Malaysian public
company or foreign public
company registered in
Malaysia.
Interests that attract the
prospectus registration
requirements under section
84(1) of the Companies Act are
defined broadly to mean any
right or interest in:
(a) any profit, assets or
realization of any financial
or business undertaking;
ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
(b) a common enterprise
whereby the interest holder
“
is promised profits, rents
or interests from efforts of The rationale for … a
the promoter or third
party; wide definition [of interest]
(c) time-sharing; and is necessary to provide
(d) investment contracts.
protection to investors
It is important to note that the
scope of what is meant by who may have been
interest is broad and that it is
necessary given that the duped or coaxed into
categories have evolved out of
a need to regulate instruments investing in unregulated
”
that were neither shares nor
debentures within the scheme
interest schemes.
of regulation of companies.
SSM Bulletin | Vol 1. 2009 29
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

operators of fitness clubs will be

Interest Scheme
regarded as “interest” within the
80 definition of Section 84 of the
70 2005
60 Companies Act.
50 2006
40 2007 The latest challenge faced by
30
2008(f ) SSM in regulating interest
20
10 schemes involves land banking
0
R) ... k g g schemes. The business model of
) )) a r
(G (G (R (S in Pa rin in
a typical land banking scheme
lu
b
lu
b u b ( R ar ria
l
sh
a
ar
m
lC lC Cl ub M o e -F
na na n al l Cl em Tim ar
e involves the identification and
ti o tio tio n a M Sh
ea ea ea tio acquisition of strategically locally
ecr e cr cr rea
R R R e
Re
c land banks and those overseas.
nd nd
fl a fl a The land banking company then
Go Go
sells undivided shares in the land
to its investors. The value of the
The rationale for providing such a Companies Act has been in land should appreciate over time
wide definition is necessary to existence since the enactment of allowing the investors to sell their
provide protection to investors the Act, the turning point for the share in the land for a profit to
who may have been duped or development of the interest either the land banking company
coaxed into investing in scheme industry was when major or to a third party developer
unregulated interest schemes. amendments to the Act were depending on the particular
made in 1992 to include time- model adopted.
In the recent decision by the
sharing schemes and the rights to
Malaysian Court of Appeal in the The current legal thinking in
use facilities in a property as
case of Suruhanjaya Syarikat Malaysia is that such schemes
interests within the definition of
Malaysia V NV Multi Corp Bhd & fulfil the requirements of an
Section 84 of the Companies Act.
Ors (2008), the Court held that interest scheme and must
Following these amendments,
the sale of burial plots and urn therefore be registered with SSM.
there are currently six types of
compartments in memorial parks
registered interest schemes in
to purchasers amounted to
Malaysia, which are: Surveillance on
offering or issuing interests to the
public within the meaning of (a) Sale of memberships by golf
Unregistered Interest
Section 84 of the Companies Act. clubs; Schemes
This decision is to be lauded
(b) Sale of memberships by The SSM is currently carrying out
because it indicates that the
recreational clubs; investigations into such
courts are prepared to extend the
scheme of regulation under (c) Sale of licence for the use of unregistered schemes, indicating
Division 5 Part IV of the urns and burial plots by its seriousness in addressing
Companies Act even to memorial parks; investor and consumer protection
transactions that are not in the issues. Such schemes have also
(d) Sale of memberships by been frowned upon by other
nature of investments. marinas; regulatory agencies such as the
In a nutshell, before any offering (e) Sale of memberships in time- UK Financial Services Authority
of an interest to potential sharing schemes; and, which took regulatory action to
investors is made, there must be wind up UK Land International for
strict compliance with the (f) Sale of growers’ plots in
operating an illegal collective
requirements in Division 5 Part IV share-farming schemes.
investment scheme.
of the Companies Act. Any breach To date, the Registrar of
of the requirements is a criminal Besides the above interest
Companies has approved 160
offence which is punishable with a schemes there are also other
interest schemes in Malaysia:
five year imprisonment term or a unregistered interest schemes
Recently, SSM had added another operating illegally in Malaysia.
fine of RM100,000.00 or to both.
category of interest scheme to its Such schemes are cloaked
Current Trend stable when it issued a press
statement announcing that
creatively as different types of
business models.
It would be proper to state that membership subscriptions of
In December 2008, the SSM set
although Division 5 Part IV of the more than 12-months sold by
up a special task force to monitor

30 Vol 1. 2009 | SSM Bulletin

 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

the activities of unregistered or

illegal interest schemes. By the
end of February 2009, the task
force had conducted surveillance
on 50 schemes that were
suspected of carrying on possible
activities of unregistered
schemes.
The special task force’s
preliminary investigations
uncovered many ingenious
schemes. The special task force
had classified the schemes into
categories shown in the table
above.
Out of the 50 schemes, SSM
identified 26 schemes that are
offering unregistered interest
schemes and are therefore
required to be registered with
SSM. SSM had also identified 3
schemes that are suspected of
committing serious offences
under the Companies Act namely,
including offering the public to
deposit money with the company
and to subscribe to the
companies’ shares. These
offences carry penalties of 10
years imprisonment or
RM250,000.00 fine or both.
In addition to the internal
surveillance activities, SSM
actively participates in meetings
with other regulators including
KPDNHEP and the Ministry of
Agriculture in its efforts to
monitor schemes which may fall
within the scope of section 84(1)
of the Companies Act that are
offered illegally in Malaysia. This
year alone, with the assistance of
KPDNHEP and the Ministry of
Agriculture, SSM had identified
18 companies that may be
operating illegal schemes
Scheme Structure of Scheme Products
Management of Public is required to provide funds for the company Frisian cows
livestock to carry out the activities of breeding, tending and Boer goats
selling of animals. Profits from the activities are Swiftlets
shared between the management company and the Leeches
members of the public-investors. Earthworms.
Management of Public is offered to invest in businesses whereby the Vending-
businesses investor would be entitled to the profits from the Machines
business run by the promoters of the schemes. Ice Cream
Machines
Share farming Public is required to provide funds for the company Vanilla
to carry-out plantation and harvesting activities. Palm oil Lemon
Profit from the selling of the harvest is shared grass seaweed
between the investors and the company.
Land Banking Public is required to purchase a plot of a piece of Land in US
greenbelt land. Purchaser of the plot of land does Land in Canada
not have the absolute rights to enjoy the plot of land Land in United
due to the company’s right to buy back the land. Kingdom
The company promises the purchaser to take
necessary actions to convert the status of the land
into development land and subsequently sell the
land to a 3rd party at a profit. The profit would be
shared between the company and the purchasers of
the plots of land.
Rent-back Public is offered to invest their respective Resort units
schemes residential/ commercial units into a pool of
residential/commercial lots that will be managed by
the company. Profit from the rental/lease of the
units would be shared between the company and the
unit owners.
Memberships Public is offered to purchase membership cards Restaurants’
issued by the company. The membership entitles the membership
member to benefits and rights including rights to Hotels’
use facilities on properties and monthly fix income. membership
Fitness Clubs’
membership
Multi-level Public is offered to purchase virtual products. e-points
Marketing Returns are from the commission receives upon e-books
investment introducing the products to another purchaser.
in Malaysia is due to public nonetheless, in line with its
apathy and ignorance of the law “balance enforcement ”
which requires for such schemes philosophy, SSM will provide a
to be registered with SSM. ‘grace period’ or window
Although prima facie such for operators of genuine but
unregistered schemes may be unregistered interest schemes to
committing a breach of the law, register their schemes with SSM.
10
9

Implementation of
8
7
6

the Balance
5
4
3

Enforcement
2
1
0

Approach s g k t e s No of Files
ck es in
g
in ac ip lu
b
en m er
sto nk sh he h
ve usin a rm a nt-b b er ssC stm c Ot
f B S
t: L
i
t: B ar
e
nd Re em ne ve t
en en Sh La M Fit In en
SSM takes cognizance that the em e m
M
LM
tir
em
ag ag Re
mushrooming of the large an M
an
M
number of unregistered schemes

SSM Bulletin | Vol 1. 2009 31

 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
“ …the Companies Commission had added another category of interest scheme
to its stable when it issued a press statement announcing that membership
subscriptions of more than 12-months sold by operators of fitness clubs will be
regarded as “interest” within the definition of Section 84 of the Companies Act.
But where the schemes offered to
members of the public is laced
with deceit and are purely scams,
SSM will aggressively pursue
enforcement action against the
scheme-operators.
Other than its enforcement role,
the SSM is also intensely involved
in promoting the ‘interest
scheme’ industry to the public at
large. This is because it sees
great potential for growth of this
industry given the large number
of schemes promoted by
entrepreneurs to the public and
the participation by investors.
SSM believes that this industry
can play a major role in
contributing to the growth of the
Malaysian economy while
providing an alternative way of
doing business and raising funds
for SMEs’.
Campaigns Efforts
Organized by
SSM/Industry
Participants
The SSM supports fully
programmes and campaigns
efforts organized by industry
participants to aggressively
promote the robust development
of the industry while preserving
public’s interest.
In August 2008, the SSM
organised a ‘meet the regulator
session’ with industry
participants. Some 68
participants from the Malaysian
Holiday Time Sharing
Development Federation
(MHTDF), Malaysian Association
32 Vol 1. 2009 | SSM Bulletin
of Golf and Recreational Club
Operators (MAGRO) and the
Association of Trust Companies
(ATCM) attended this session.
Various issues faced by the
industry were raised and
discussed during the one-day
event including the SSM’s
concerns on the mushrooming of
illegal and unregistered interest
schemes in the country The SSM
is confident that such sessions
would become an annual event
for the industry.
Way Forward
SSM is committed to
implementing awareness
campaign programmes. It is
targeting to secure 1,000 new
interest scheme registrations
within the next 3 to 4 years which
will help contribute towards the
nation’s economic growth. The
interest scheme business model
will enable a wide range of public
participations. Investors will be
interested in investing in
particular interest schemes
businesses that provide attractive
returns.
Despite the economy downturn,
SSM expects there will be
increased registration of new
interest schemes in 2009. New
types of interest schemes is also
expected to emerge especially
schemes which involve fund
raising activities especially where
the banking and financial sectors
are now strict in granting credit
facilities to individuals and SMEs’.
In view of the immense potential
interest schemes offer as an
”
alternative mode of financing,
SSM will endeveour to promote
the growth of the industry
aggressively in 2009 and
thereafter. Given the economic
slowdown and the lack of
business opportunities and lack of
funding sources available to
potential entrepreneurs and
SMEs’ whom wish to participate in
business, the interest scheme
industry will be an ideal avenue
to raise funds.
Some of the promotional
activities that SSM will carry out
include the promotion of interest
schemes business modules
through the distribution of
brochures, road shows and
seminars, media engagement as
well as through the introduction
of new policy guidelines for new
type schemes.
One such programme that would
be hosted by the SSM in April
2009 is a seminar that will be
conducted by internal expertise.
The seminar will provide
guidance, clarification and
explanation on the detailed
processes and the regulation
requirements involved in
registering and operating an
interest scheme in Malaysia.
Hopefully, through greater
awareness, the two-pronged
objectives of public interest
protection and ensuring the
growth of the industry can be
achieved. Through these efforts,
SSM is optimistic that the interest
scheme industry will grow rapidly
and gets the proper recognition
that it deserves. ~
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

Compulsory
Winding-Up
& Striking
Off the
Name of A
Company
As the Regulator of Companies in
Malaysia, SSM is empowered under
section 218(1)(m) & (n) of the
Companies Act 1965 (CA 1965) to
wind-up companies and to strike off
the name of a company under
section 308 whenever the elements
contained in the provisions can be
satisfied / proven.

T “
he power and action taken under these sections do not
just stop there. Other issues also have to be taken into SSM has a significant
consideration such as:
z handling matters relating to the winding-up of companies;
role to play in
z striking of defunct companies from the register; safeguarding the interests
managing assets of defunct companies;
z
of the stakeholders and
z keeping records of companies under the process of winding-
up (voluntary and compulsory); and shareholders. … SSM will
z regulating compliance to CA 1965 in relation to the winding-
up of companies and the dissolution of companies. be constantly supervising
Basis for winding-up the activities of companies
Section 211 of CA 1965 lays down two regimes for the winding- to ensure that good
up of companies - compulsory and voluntary. A compulsory
winding-up stems from a winding-up order granted by the court corporate governance

”
on the request (petition) of an interested petitioner. A voluntary
winding-up, on the other hand, is initiated by the company practices are adhered to.
itself, by the passing of an appropriate resolution. The term
winding-up and liquidation have the same meaning. winding-up

SSM Bulletin | Vol 1. 2009 33

 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

“
of a company is the process by which its assets are
collected, its debts paid and the surplus, if any, The role played by SSM in
distributed among its members. Until this process is
completed, the company remains in existence as a discharging its function will be
legal entity.
done in a rational and objective
Compulsory winding-up is initiated by application to
the court by any of the persons listed under section manner with due regard to the
217(1) and must establish one of the grounds
contained in section 218(1). Section 217(1) lists interests, right and obligations of

”
down eight categories of persons who may initiate a
winding-up application. The persons are the all stakeholders.
company, creditors, contributories, liquidators, the
Minister pursuant to section 205 or on the ground
specified in section 218(1) (d), licensed institutions,
Tutormaster Pty Ltd1. In this case, the Defendant
licensed insurance companies, and the Registrar of
was incorporated solely to provide tutorial services
Companies under section 218(1)(m) and (n). The
to students. The Defendant then advertised its
Registrar of Companies on the ground specified in
services to the public at large, resulting in payment
section 218(1)(m) or (n) however, is the most
being made in full for the services offered. The
uncommon person to apply for a winding-up
Defendant however failed to fulfill its responsibility
petition. The compulsory winding-up of a company
and was therefore found by the court to have acted
under section 218 (1)(m) or (n) is rarely pursued
prejudicially towards the interest of the public and
by the Registar.
was ordered to be wound up.

Winding-up by Registrar of
Companies
Under section 218(1) (m) and (n), there are two
grounds which specifically empowers the Registrar
of Companies to petition for winding-up. The two
grounds are:
z where the Registrar becomes aware that a
company is being used for unlawful purposes or
any other purpose prejudicial to or incompatible
with the peace, welfare, security, public order,
good order or morality in Malaysia;
z where the Registrar is aware that a company is
being used for any purpose prejudicial to
national security or public interest.
The elements of public interest and /or protecting
the public was applied in the case of Australian
Securities and Investments Commission (ASIC) v

“
Strike Off the Name of A
A compulsory winding up stems Company under section 308 of
from a winding up order granted by the the Companies Act, 1965
The Registrar of Companies is empowered to strike
court on the request (petition) of an

”
defunct companies off the register under section

interested petitioner. 308. Under this section, the Registrar may exercise
his discretionary power to strike the name of a
defunct company off the register if the Registar has
reasonable cause to believe that a company is not
1. 6252/06, 2006 NSWSC 1430 (unreported) carrying on business, or that a company is not in
operation.

34 Vol 1. 2009 | SSM Bulletin


“
…the Registrar may exercise his
discretionary power to strike the name
of a defunct company off the register if
the Registrar has reasonable cause to
believe that a company is not carrying
on business, or that a company is not
”
in operation.
In determining whether a company is not carrying
on business or is not in operation, the Registrar
may form his opinion based on information
contained in the records of the company under the
Registrar’s custody, and through the application
made by the company (by its director or
shareholder).
Under section 308, once the Registrar has
reasonable cause to believe that a company is not
carrying on business, or that a company is not in
operation, the Registrar may send a letter to the
dormant company. This letter must state that an
action under section 308 will be taken against the
company, unless and until a reply to the contrary is
received within one month from the date the
company received the letter. However, if the
Registrar does not receive any reply, then a notice
will be published in the Gazette with the view to
strike the name of that company off the Register.
ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
Consistent with the Registrar’s power under section
308, SSM has issued a guideline on 12 January
2007 to this effect namely, “Guideline on
Application to Strike Off the Name of a Company”.
This guideline provides the companies with
procedures and requirements to give effect to
section 308 if they are not carrying on business or
have ceased operations.
Requirements that must be
Satisfied by Companies for
Striking Off Applications
The requirements in the guidelines are as follows:
z The directors must obtain the resolution of the
shareholders for the initiation of the application
to strike off the name of the company from the
register on the basis that the company is not
carrying on business or the company is not in
operation;
z The company has no assets and liabilities at the
time when the application is made;
z The company has no outstanding charges in the
Register of Charges;
z The company has no outstanding penalties or
offer of compounds under the Companies Act
1965;
z The company has no outstanding tax or other
liabilities with any government department or
agency;
z The information of the company with the
Registrar is up to date;
z The company is not involved in any legal
proceeding within or outside Malaysia;
z The company has not made any return of capital
to the shareholders;
SSM Bulletin | Vol 1. 2009 35
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

z The company is not a holding
company or a subsidiary of
another corporate body; and
z The company is not a
“Guarantor Corporation” (A
“Guarantor Corporation”
means a corporation that has
guaranteed or has agreed to
guarantee the repayment of
any money received or to be
received by any third party).
Moratorium Period
In October 2006, SSM had
granted a ‘window period’ for
eliminate inherent liabilities
associated and arising therefrom.
By prescribing the moratorium
period for the purpose of striking
off, SSM will reduce or waive all
outstanding compounds so that
the directors of the companies
will not be burdened with the
unpaid compound and to enable
them to concentrate fully on their
businesses. The move will provide
an opportunity to the directors
and shareholders involved to
start on a clean slate by
to invoke section 308 to ‘strike
off’ such companies from SSM’s
database.
As a result, notices under section
308(1) were sent to 130,932
companies notifying them of the
Registrar’s intention to strike off
such companies. Further to this
action, 125,230 notices under
section 308(2) were sent to
inform the companies concerned
that the Registrar will proceed to
strike off such companies unless
the contrary is proven. The

No. Description Total Notices

1 Number of notices under Section 308(1) sent out to 130,932

the companies registered address

2. Number of companies which raised objections on 5,702

their name being struck off

3. Number of companies which have agreed to their 2,969

names being struck off
4. Number of notices returned (undelivered) 14,560
5. Number of notices with no response 107,701

dormant companies to apply to incorporating new companies details of response received

the Registrar to strike off the
company from the register. A
moratorium period of three
months was given to dormant
companies to apply for striking
off at a fee of RM 120 per
application.
As a result, a total of 23,327
companies were struck off during
the three-months moratorium
period and another 4,853
applications received after the
expiry of the moratorium period.
SSM proposes to reintroduce such
initiative during this period of
economic slowdown. As there are
compliance costs associated with
maintaining a dormant company,
the opportunity to strike a
company off the register will
towards exploring new and
potential business activities.
Pursuant to the above, SSM is
proposing to grant a moratorium
period of 6 months beginning 1
April 2009 to encourage the
application for striking off of
dormant companies.
SSM Special Project
In March 2008, SSM embarked on
an initiative to ‘strike off ’
companies in SSM’s database
which were found to be dormant
for more than 5 years. Through
this initiative SSM found that
there is a total of 251,331
companies which are dormant
and that there is a need for SSM
pursuant to the notices sent are
as follows:
Conclusion
SSM has a significant role to play
in safeguarding the interests of
the stakeholders and
shareholders. The role played by
SSM in discharging its function
will be done in a rational and
objective manner with due regard
to the interests, right and
obligations of all stakeholders.
SSM takes this role very
seriously. SSM will be constantly
supervising the activities of
companies to ensure that good
corporate governance practices
are adhered to. ~

36 Vol 1. 2009 | SSM Bulletin

 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

Reaching Out to Our

Stakeholders through Education
The Companies Commission of Malaysia is a strong proponent to the
“enforcement by education” philosophy. With ‘Balanced Enforcement’ approach,
the Companies Commission of Malaysia or Suruhanjaya Syarikat Malaysia (SSM)
believes that education complements the effectiveness of our enforcement
initiatives in ensuring voluntary compliance. Our efforts in educating stakeholders
to enhance public awareness on the need, importance and benefits of complying
with the corporate legal provisions are spearheaded by the Companies
Commission of Malaysia Training Academy or “COMTRAC”.

SSM Bulletin | Vol 1. 2009 37

 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

C
OMTRAC commenced
operation in April 2007 to
function as the training arm
of SSM. It serves to elevate and
promote ethical business and
good governance values to the
business and corporate
community as well as enhancing
the skills and competencies of its
employees. It is a Division within
SSM comprising of four sections
which are supported by four
schools. Each school will plan,
develop and conduct training
programmes in the related area
of specialization.
Continuous
Compliance Through
Education
COMTRAC envisage that when
stakeholders are educated on the
need to abide by the laws and are
conscious of the SSM’s serious
commitments in enforcing the
laws it governs, compliance will
become voluntary. The results
can be seen as more companies
are complying with the
Companies Act 1965. The
balanced enforcement approach
combines the conventional
enforcement actions such as
prosecution and related actions
with the inculcation of awareness
through continuous education
programmes that can be achieved
through media and publication
promotional efforts, engaging
stakeholders in dialogue sessions
and forums as well as organizing
formal training programmes
secretaries, auditors, lawyers,
liquidators, receivers and
managers, academician, public
officers, co-regulators, business
entrepreneurs as well as SSM’s
employees.
Corporate
Development Section
The Corporate Development
Section is tasked to offer training
programmes to the public. In
year 2008, a total of 109 training
programmes were organized for
external stakeholders and
attended by 4,049 participants.
Apart from this, COMTRAC had
participated actively in providing
free training to educate and
create awareness amongst the
newly graduated students and
unemployed graduates of higher
COMTRAC’s Total Number of Programmes and Participants for 2008
Training categories
Corporate Training Programmes For External
Stakeholders
Participated as speakers in various
entrepreneurship programmes and in house
programmes conducted by relevant
institutions
Internal Training Development For SSM’s
Employees
Total
learning institutions and would be
entrepreneurs to encourage them
to venture into business.
The seminars on the topic of
‘Start Your Own Business:
Registration of Business and
Incorporation of Companies’
seminar was incorporated into the
entrepreneurship programmes
that were conducted by the
relevant institutions. In total,
COMTRAC had sent its
representatives to speak on this
subject at 26 events and
attended by 1,624 participants.
These events were organized by
the Malaysian Entrepreneurship
Development Centre (MEDEC),
SME Bank, Department of
Agriculture Malaysia, Institut
Keusahawanan Negara (INSKEN),
Putrajaya Malay Chamber of
Commerce Malaysia, Dewan
Number of Number of
Programmes Participants
109 4,049
30 1,739
55 1,631
194 7,419

“
through COMTRAC.
The Companies Commission of Malaysia is a
Milestones of
COMTRAC For 2008 strong proponent to the “enforcement by education”
Since its inception until December philosophy. With ‘Balanced Enforcement’ approach,
2008, COMTRAC had conducted a
total of 271 training programmes
[we] believe that education complements the
for 13,926 participants effectiveness of our enforcement initiatives in ensuring

”
comprising local and foreign
company directors as well as voluntary compliance.
senior management personnel
from various industries, company

38 Vol 1. 2009 | SSM Bulletin

 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

Y. Bhg. Datuk Abdul Karim Abdul Jalil seated on stage with Y. Bhg. Datuk Seri Ustaz Haji Azizan bin Abdul Razak, Chief Minister of Kedah at the
launching event of the “Corporate Directors’ Seminar” organised for Kedah State Corporations held on 30 November 2008.

Perniagaan Melayu Malaysia, Universiti Teknologi

Mara (UiTM), Universiti KL - British Malaysia Licensed Secretaries Training
Institute, Universiti Kebangsaan Malaysia (UKM), Programme (LSTP)
Universiti Putra Malaysia (UPM) and Dewan
Bandaraya Kuala Lumpur. In 2008, a total of 51 LSTP (Level 1 to 3) were
conducted, 36 programmes at Kuala Lumpur, three
COMTRAC was also invited to speak at four other at Kota Kinabalu, three at Kuching, three at Johor
events organized by Maktab Polis DiRaja Malaysia, Bahru, three at Penang and three at Kuala
Suruhanjaya Koperasi Malaysia,Latihan Kehakiman Terengganu. A total of 1,612 participants had
Dan Perundangan (ILKAP) and Malaysian Institute benefited from these programmes. Feedback from
of Corporate Governance (MICG). These past participants revealed that these programmes
programmes were attended by 115 participants. were practical and knowledge gained can be
implemented in their daily job. The course also
Corporate Directors’ Training gave in-depth insight into the role and
Programme (CDTP) responsibilities of a company secretary and many
participants found this to be a good refresher
A total of 23 One-Day Corporate Directors Training course on the Companies Act 1965.
Programmes were held in year 2008, of which 14
programmes were held in Kuala Lumpur and nine
were held at Kedah, Penang, Johor, Terengganu,
Sarawak, WP Labuan and Sabah respectively. These
programmes were attended by a total of 962
participants.
Year 2008 saw the introduction of ‘Two-Day
Corporate Directors Training Programme’ in Kuala
Lumpur. A total of two programmes were held for
33 participants.
COMTRAC had also customized seven sessions of
CDTP and these were conducted as in-house
training programmes for commercial organizations
and governmental agencies.

SSM Bulletin | Vol 1. 2009 39

 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
Customized In-House Training
Programmes
‘The Companies (Amendment) Act 2007’ seminar
continued to receive requests for various
organization to be conducted as in-house
programme for organizations in 2008. A total of 13
programmes were customized based on this module
and also from the Company Secretarial modules. In
total 694 participants had attended these training
sessions.
Public Programmes
Two new series i.e. the Directors Series and
Company Secretarial Series were initiated in the
second half of 2008.
(i) Directors Series
This series offered topics on ‘Analyzing and
Interpreting Financial Statements’, ‘Corporate
Taxation’ and ‘Labour Legislations’. These
programmes aims to equip directors with the
necessary skills to navigate through financial
reports confidently and successfully, understand
basic tax principles and procedures following
the introduction of Self Assessment and the
understanding of directors’ obligations in
relation to relevant labour laws in Malaysia. The
overall goal of these programmes was to build
competencies deemed necessary to be an
effective director.
(ii) C o m p a n y S e c r e t a r i a l S e r i e s T r a i n i n g
Programmes
COMTRAC introduced secretarial practice
courses which aimed to further enhance
knowledge, skills and competencies of company
secretaries. The topics introduced were ‘The
Law and Practical Guide on Transactions by
Directors’, “Year End Regulatory and
Compliance Matters- AGM, Audited Accounts &
Annual Returns”, “What Directors and Company
Secretaries Need to Understand About Shares &
Related Issues” and “Insights on Voluntary
Winding-Up, Striking-Off Application and Its
Procedures”.
These seminars highlighted the provisions of the
Companies Act 1965 relating to transactions by
directors (s.131 to s.135), review all statutory
returns lodged with the Registrar of Companies
(ROC) during the year-end of a company, statutory
requirements on share capital and the power of
directors in relation to shares transactions and
enhanced the understanding on the process and
40 Vol 1. 2009 | SSM Bulletin
procedures in voluntary winding-up and striking-off
of dormant company.
Collaboration Programmes With
Professional Bodies
It is embedded in SSM’s strategy that it shall
continue to strengthen regulatory compliance and
uphold good corporate governance through effective
focused enforcement and continuous education. It is
in this spirit of co-operation that COMTRAC had
successfully organized seminars with Institute of
Internal Auditors Malaysia (IIAM) and the
Malaysian Institute of Chartered Secretaries
and Administrators (MAICSA) to benefit and
serve the interests of company secretaries, auditors
and the accounting profession. 18 briefing sessions
on ‘S S M e - L o d g e m e n t ’ were conducted in
collaboration with professional bodies from the
month of February to October 2008. The objectives
of the briefing sessions were to provide a better
understanding on the features, process and how to
use the SSM e-Lodgement services.
Staff Development Section
The Staff Development Section had been assigned
with the tasks to conduct regular technical and
tactical or soft skills training programmes to
enhance the competencies of SSM employees and
to enable them to carry out their duties
competently and to better serve the public and
business community at large.
Throughout 2008, Staff Development Section has
conducted a total of 55 internal training
programmes which were attended by 1,631
employees of SSM. The programmes that were
conducted comprised of the newly introduced
“Knowledge Enhancement For Employee
P r o g r a m m e s ” ( K E E P ) and other technical
competency training programmes. These
programmes covered area pertaining to
enforcement, investigation, legislative drafting, ICT,
specific areas of company law, english and business
writing skills, on-the-job training (SOPs and work
manual familiarization for various Divisions), train
the trainers (TOT), call centre awareness
programmes, annual budgeting and planning,
financial accounting and contract management.
Knowledge Enhancement For
Employees Programme (KEEP)
Since July 2008 the Staff Development Section
(SDS) has introduced a training programme for
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA

internal staff (executives and non-executives) z Basic Financial Accounting;

known as KEEP. The primary objective of KEEP is to z Intermediate Financial Accounting; and
instill pertinent knowledge to participants on
z Advance Financial Accounting.
company law, all aspects of Companies Act 1965,
ROBA 1956 other related legislations, The basic, intermediate and advance modules were
understanding of Malaysian Legal System, developed and successfully implemented on
Constitutional Law, the ROC and ROB operations October 2008 and will run for a duration of eight
processes, basic, Intermediate and advanced weeks.
financial accounting as well on matters pertaining
to all administrative and financial circulars that Attendance Of KEEP
were issued by SSM.
KEEP has received encouraging response from
The KEEP also serves as one of the criteria for SSM SSM’s employees and this can be gleaned from the
promotional exercise for employees to be equipped attendance, whereby as at December 2008, a total
and prepared with knowledge required for of 1,011 employees have attended various modules
promotional evaluation, assessment or of the KEEP compared to 625 employees as
examination. A total of 22 modules were developed targeted by SDS.
by SSM internal experts consisting of executives
from various divisions. The target group of Other Technical Competencies
participants for the 22 modules comprised of the
non executives who will attend 11 modules of Level
Training Programme
1 programmes and the executives and senior Besides the KEEP, SDS also developed and
executives who will attend 11 modules of Level two conducted other programmes covering all aspects
programmes. of SSM functions and services within the
The lists of the modules developed for KEEP were: organization and to work closely with Corporate
Resources Division to identify the relevant training
needs for the internal staff. In response to the
KEEP Level requirement of higher level of competencies and
SSM Act 2001 & Malaysian Legal System & 1&2 skills to meet the needs of the organizations and
Constitutional Law stakeholders i.e. the public and business
Registration of Businesses Act 1956 1&2 community, COMTRAC has developed and
implement various training programmes in line with
Company Law and the Companies Act 1&2
the Technical Competency policy implemented by
1965
Corporate Resource Division (CRD).
ROC Process & Procedures 1&2
In 2008, 30 technical competencies programmes
ROB Process & Procedures 1&2
were conducted and a total of 620 SSM employees
Interest Scheme Process & Procedures 1&2
from HQ and State Offices attended these
Insolvency Process & Procedures 1&2 programmes. Some of the programmes were
Corporate Admin Process & Procedures 1&2 ‘Effective Business Writing Skill for Manager’, ‘Train
SSM Policies on HR 1&2 of Trainers’, ‘ICT Awareness Programme (Help Desk
Service)’, ‘Legislative Drafting Training Programme’,
SSM Policies on Admin 1&2
‘Corporate Annual Budget Planning & Preparation’
SSM Policies on Finance 1&2
and ‘Legal & Enforcement Module on SSM Act
2001, ROBA 1956 and CA 1965’.

KEEP Financial Accounting Training Effectiveness And

Modules
Due to overwhelming feedback from the employees
that there is a need for COMTRAC to develop a
structured training programme for Financial
Accounting, three new modules under KEEP
programme were introduced. The new modules are
as follows:
Training Gaps Analysis
To monitor the training effectiveness, COMTRAC
has adopted the K i r k p a t r i c k ’ s T r a i n i n g
Evaluation Model. Based on this model COMTRAC
has formulated and implemented the Training Gap
Analysis Forms to assist identifying internal staff’s
technical competency gaps and training needs
requirements.

SSM Bulletin | Vol 1. 2009 41

 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
COMTRAC has also developed new competency
requirement to assess English Communication and
Writing Skill Competencies to ascertain the
effectiveness of the English training programmes
conducted by COMTRAC as well as to ensure
gradual improvements and increase English
Communication proficiency amongst SSM
employees. The English Communication
Competency Directory which has been developed
contains two major parts i.e. English Writing and
Speaking Skill.
SSM’s Resource Centre
In the year 2008, SSM’s Resource Centre (RC)
focused on the development of collections to
further increase the number of books and materials
available at the RC and expanding the RC services
to enhance the user awareness of reading habit.
In 2008 the number of new materials that had
been acquired was 1,489. Currently, the numbers
of collection available at the RC stood at 3,354
comprising of various subjects such as company
and corporation law, commercial and business
related law, Malaysian Legal System,
Administrative and Constitutional law, training
materials, Human resource, accounting and
finance, IT, motivation, executive skills, politics,
annual reports etc. They are categorized into three
types of materials which are Reference, General
and Special Collections.
RC Open Day
The SSM’s RC organized a Library “Open Day” on
22 August 2008 with the objective to increase the
awareness of reading habit and to inculcate
learning culture amongst SSM staff as well as to
inform them on all the services and materials that
are available at SSM RC. The “Open Day” featured
relevant activities such as book exhibition, V-Lib
and online system demo, LexisNexis legal research
briefing session and games such as scrabble
competition, crossword puzzle, memory
competition, and knowledge treasure hunt. There
were also booths from the Wilayah Persekutuan
Zakat as well as an Optometrist counter (for free
eye check). The opening ceremony was launched
by SSM’s CEO, Datuk Abdul Karim Abd Jalil.
2009 Annual Strategies for
COMTRAC
In 2009, COMTRAC will continue to offer a range of
training programmes on corporate law and related
topics to meet the training needs of our
42 Vol 1. 2009 | SSM Bulletin
stakeholders as well as providing high quality
training programmes to enhance staff
competencies. Our key projects and initiatives for
2009 are:
Corporate Development Section
For Corporate Development Section (CDS), the
projects and initiatives to be carried out in 2009
fall under SSM’s strategies numbers 6 and 8 as
follows:
2009 Annual Strategy No #: 6 & 8
9 “Strengthening Regulatory Compliance And
Upholding Good Corporate Governance Through
Effective Focused Enforcement And Continuous
Education;” and
9 “Promoting And Developing COMTRAC As A
Reputable Learning Center For Corporate And
Business Law”.
CDS’s projects and initiatives for 2009 are:
z Organize 1-Day and 2-Day C O R P O R A T E
DIRECTORS TRAINING PROGRAMME
(CDTP)
z Organize LICENSED SECRETARIES
TRAINING PROGRAMME (LSTP)
z Organize SSM DIRECTORS’ SERIES:
9 Understanding Corporate Taxation
9 Implementing The Single-Tier Tax System
9 Understanding Boardroom Finance
9 Analyzing and Interpreting Financial
Statements
z Organize SSM COMPANY SECRETARIAL
SERIES:
9 Company Secretarial Practice for Beginners
9 Examining Critical Company Secretarial
Issues @ Boardroom
9 Law and Practical Guide on Transactions by
Directors
9 All About Shares and Related Issue
9 Practical and Regulatory Issues an
Solutions to Year-End Compliance Matters
- AGM, Audited Accounts and Annual
Returns
9 Managing Meetings and Effective Minutes
Writing

9 Managing Register Books and Guides to
Comply with Statutory Forms
Requirements
z Organize COMPANY LAW Seminars:
9 Implications of Companies Amendment
Act 2007 on Companies and Directors
9 Insights on Voluntary Winding-Up,
Striking-Off Applications and Its
Procedures
9 Receivership & Winding-Up
9 Interest Schemes for Industry
Practitioners
9 Law on Registration of Charges and
Debentures & Implications in the Event of
Default
9 Company Limited by Guarantee: Law &
Compliance
9 Understanding Partnership Law
z Organize FINANCE Seminar:
9 Introduction to Company & Business
Accounting for Non-Accounting Personnel
9 Fundamental Finance for Non-Finance
Executives
9 Finance Essentials for Non-Finance
Managers
9 Cash Management & Credit Control
Strategies
z Organize SMEs & BUSINESS ENTERPRISE
Series:
9 Pemahaman Mengenai Pendaftaran
Perniagaan & Penubuhan Syarikat
9 Start Your Own Business (SYOB):
Understanding Registration of Business &
Incorporation of Companies
9 Corporate Governance and CSR for SME
z Organize CORPORATE GOVERNANCE &
ENFORCEMENT Seminar:
9 Corporate Governance Cases & Corporate
Fraud Detection and Prevention
9 Framework for Whistleblower Protection
and Creation of Anti-Fraud Culture within
a Corporation
9 Corporate Governance and Fraud
Detection Conference for delegates from
the Commonwealth nations (This is a
collaboration effort between COMTRAC
and Malaysian Institute of Integrity)
ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
z Organize COLLABORATION PROGRAMMES
between SSM and professional bodies:
9 SSM & Institute of Internal Auditors
Malaysia (IIAM) - Implementing an
Effective System of Internal Control
9 SSM & CPA Australia - Part 1: SYOB -
Understanding Registration of Business &
Incorporation of Companies - Part 2 -
Transactions by Directors
9 SSM & Malaysian Institute of Certified
Public Accountants - Risk Management
Workshop
9 SSM & Institute of Approved Company
Secretaries - SSM’s Practice Notes and
SSM E-lodgement Awareness Sessions
Staff Development Section
For Staff Development Section (SDS), the projects
and initiatives to be carried out in 2009 fall under:
2009 ANNUAL STRATEGY NO #1 and 7:
9 “Driving towards high performance culture
through competitive human resource policies
emphasizing on competency centric approach”
9 “Enhancing domestic and global presence
through strategic branding initiatives
SDS’s projects and initiatives for 2009 are:
9 Develop and Implement Training Gaps
Analysis (TGA) for Executive and Non-
Executives based on Technical
Competencies developed by CRD;
9 Develop English Communication
Competency Directory for Training Gap
Analysis;
9 Implementation and coordination of
Training Calendar 2009;
9 Update, enhance & implement KEEP
Program;
9 Develop and Implement KEEP Level 3 -
Advance Company Law Modules;
9 Develop and Implement new KEEP
modules for Enforcement Officers,
comprising of Law of Evidence, Criminal
Procedure Code and Interpretation of
Statutes;
9 Develop and Implement of Microsoft
Office 07 Training Module (Words, Power
Point & Excel 07);
9 Develop and Implement of Lotus Notes
Domino Training Program for End User;
SSM Bulletin | Vol 1. 2009 43
 ENFORCEMENT
COMPANIES COMMISSION OF MALAYSIA
9 Develop and Implement of Call Centre
Development Training Program;
9 Develop and Implement training session on
the Practice Notes (issued by CDPD) and
the CBS ROC Reporting System Briefing
Session via Video Streaming & Tele
Conferencing;
9 Develop and Implement Business
Registration System (BRS) Awareness
Training Program & Train The Trainers
Training Program for BRS;
9 Develop Structured Training for officers of
Enforcement Officer;
9 Develop Work Manual for Enforcement
Officers;
9 Organise Short term attachment stints with
other regulatory agencies such as AG
Chambers (POs’), SC/BNM/JIM/IRD/PRDRM
(IOs); and
9 Enhance COMTRAC’s Training Management
System (CTMS).
COMTRAC Resource Centre
For COMTRAC Resource Centre (CRC), the projects
and initiatives to be carried out in 2009 fall under
strategy number 8:
2009 ANNUAL STRATEGY NO: 8
9 “Promoting And Developing COMTRAC As A
Reputable Learning Center For Corporate And
Business Law”.
CRC’s projects and initiatives for 2009 are:
9 Procument of books and information
materials for Resource Centre (RC)
9 RC Current Awareness Services
9 Selective Dissemination of Information -
SDI
9 Reading Campaign
9 SSM electronic Library System
Conclusion
Inculcation of awareness through continuous
education programmes have indeed yielded positive
results. As can be seen from our data, our officers
who have undergone extensive training have
44 Vol 1. 2009 | SSM Bulletin
moved towards providing efficient services and
capable in developing innovative products to the
public. With enhanced competencies, SSM’s
enforcement officers have shown aptitude in
delivering extensive enforcement initiatives as
reflected in the high number of complaints
resolved, extensive investigation conducted and
increase in the number of prosecution actions
instituted in the court of law.
As for our stakeholders, with education and
awareness on their duties and responsibilities, SSM
has recorded increase in compliance where more
companies are complying with the Companies Act
1965. In December 2007, the compliance rate for
local companies was 91 per cent, against below 50
per cent five years ago. Awareness that has been
created amongst corporate players pursuant to
education and understanding of their duties and
responsibilities under the existing legal framework
would ensure continuous development of ethical
corporate players as well as fundamentally strong
businesses. Through education, we build trust and
confidence within the stakeholders. A conducive,
transparent and well regulated business
environment is vital for our nation’s economic
growth. On the local front, businesses can prosper
and the consumers can reap the benefits. On the
international front, it would make Malaysia as the
preferred and competitive business destination in
South East Asia.
In conclusion, COMTRAC believes that through
education, it will harness its internal competencies
which will in turn as well as instill good corporate
governance practices amongst the corporate and
business alike and in the long run ensure voluntary
compliance. Though the country is experiencing the
impact of economic meltdown, COMTRAC urges its
stakeholders to take advantage and forge ahead
during this challenging time with training to
enhance their organization’s efficiency. COMTRAC
will play its role to encourage its stakeholders to
invest in training to amplify and build capacity
during this difficult time to improve staff knowledge
and skills so as to be well ahead when the economy
eventually improves. ~

Reprinted with permission from Asia Law, February 2009
Getting to Grips
with Governance
What are the key
challenges the
commission is facing?
Our key challenge is to make sure
that good corporate governance
is an active part of Malaysian
corporate culture. Our corporate
culture is well-established and we
want to attract foreign investors
to come to Malaysia. We want to
sell our expertise to foreign
investors as well.
The greatest challenge all of right
now for us is how the SSM will be
able to assist the government in
managing the impact of the
global economic slowdown. We
will come out with some type of
stimulus package. We may also
consider liberalizing some things,
like the cost of starting business
in Malaysia.
We ended our first five-year plan
last year, from 2002 to 2008 and
are in the process of formulating
our second strategic direction
plan. We will come out with the
total plan at the end of this
Datuk Abdul Karim Abdul Jalil, Chief Executive
Officer of the Companies Commission of Malaysia
speaks to Candice Mak about the successes and
challenges of the country’s corporate regulator
month. We have come out with
eight strategies in ways we can
make ourselves relevant
nowadays. We want to become a
world class registrar of
companies.
What are the highlights of
these strategies?
We want to drive towards a high
performance culture. One of the
most important things is
employer competency skills,
including managerial skills. We
aim to improve this. Crucially, we
aim to initiate a legal framework
toward fostering a business
development environment, as
well as develop an effective legal
framework to protect
shareholders and investors. We
must also uphold regulatory
compliance and good corporate
governance. One of our key
functions is to enforce the law
and the reason why we coined
the term “balanced enforcement.”
If we are too strict, we may kill
the goose that lays the golden
egg.
CORPORATE GOVERNANCE
COMPANIES COMMISSION OF MALAYSIA
Instead, we are to encourage
them to lay many eggs, but we
also have to have them lay these
within certain parameters. We
must also enhance Malaysia’s
domestic and global presence
through strategic branding
initiatives. We are still continuing
to reposition ourselves to keep on
creating and re-branding
ourselves and putting ourselves
in the category of a world class
registrar. We also want to
strengthen our information
technology. We are working
toward delivering a reliable
offering to stakeholders.
How do you execute
these strategies?
We have come out with an action
plan for each strategy. We have a
monitoring system to advise us
on these action plans and we
have key performance indications
and effective result indications to
follow. We check on these daily,
weekly, and monthly.
We are very serious about this
because 2009 will not be an easy
SSM Bulletin | Vol 1. 2009 45
 CORPORATE GOVERNANCE
COMPANIES COMMISSION OF MALAYSIA
year. We have to make sure we take on all
problems, convert them to opportunities and use
them to enhance our function.
Are these initiatives exclusively
Malaysian?
So far I haven’t come across these initiatives in
other countries and we are a member of the
corporate registrar forum. We recently made a
presentation to other member countries and they
were very appreciative to hear about these
initiatives. For some of them it was their first time
hearing and learning about these.
Can you expand on the concept of
balanced enforcement?
The term was coined by us in 2006. One of the
primary functions of the SSM is to enforce the law
and the balanced enforcement philosophy says that
everything we do ought to be well-balanced
between regulatory and administrative action, and
criminal sanction action. Apart from creating an
environment conducive to business, we also
promote good corporate governance and good
behaviour.
46 Vol 1. 2009 | SSM Bulletin
“Our key challenge is to make
sure that good corporate
governance is an active part of
Malaysian corporate culture.”
This involves the power to impose penalties and
give warnings. We decide whether or not a public or
private warning is warranted with respect to any of
the breaches committed which are not strong
enough for us to justify taking them to court. So we
can impose penalties or requirements for them to
attend certain courses in our training academy to
make them fully aware of their function and their
responsibilities and obligations to comply with the
law.
This is part and parcel with education and we have
to tell them again our underlying philosophy. If they
are doing business using the Companies vehicle,
there is a philosophy behind this. We give them a
limited liability, but in turn there are obligations
from them to give us full disclosure about their
whole company and to run the company with full

“We are ... continuing to reposition ourselves to keep on creating and
re-branding ourselves and putting ourselves in the category of a
world class registrar.”
corporate governance principles
in mind. We have to make them
aware. It doesn’t mean you can
set up a company and do
anything you like. We want
disclosure from you, we want
these for people to know and see
that the company is being
managed in accordance with good
practices, good corporate
governance and in accordance
with the law. Monetary penalties
are there in order to prod you to
understand your obligations.
Sometimes, obligations without a
little pain may not be felt.
Then there is criminal sanction. If
you commit a serious offence
under the act fraud, for example,
or you give the authorities
misleading or false statements.
These offences would seriously
impair the reputation of the
company and the country. These
are the sort of cases we will bring
to court as an example to punish
them. It will also inform people
who are considering doing the
same that we are very serious
about it.
How successful have
compliance rates been?
In 2003, the compliance rate was
44%. I started enforcing the
balanced enforcement approach
in early 2006, and the compliance
rate shot up to 80%. In 2007, we
went up to 91%, and last year it
was 94% compliance. We have
been so encouraged by this
success and are aiming to get as
near to 100% as we can.
I don’t think we can get there
though because there are so
many family companies in
Malaysia. These are private small
companies and they are not
required to submit their financial
statements to the SSM. It’s from
their annual returns that we know
who they are, what they are
doing and where they are.
How effective have the
recent amendments to the
Companies Act been?
The law just came into effect
August 2007 and it ’s a very
comprehensive amendment. We
started working on this in 2003
after the Asian financial crisis. We
set up a special task force to
come up with new strategies to
enhance corporate governance
and then came out with the green
book on corporate governance.
We took the lead and made all
these best practices into law.
Areas where we are achieving
success include the protection of
whistleblowers and also if
companies want to change the
auditor or if the auditor resigns
they must inform us.
We are receiving hundred of
these notifications, which is a lot
of information. We’re assuring
them of all the protections under
the law. In some of the cases we
have initiated investigations. If
you came to us four years ago
you wouldn’t hear about cases
like breach of fiduciary duties, the
fraud committed by directors, or
fraud committed by employers
against shareholders and
employees. We are taking a lot of
cases to court. The whistleblower
provision is well-received because
we have now codified the
protection. We are receiving so
CORPORATE GOVERNANCE
COMPANIES COMMISSION OF MALAYSIA
much information and feedback
that we had to create a
complaints department to
specifically handle these cases,
which are mounting every day.
What is the best advice
you have for corporate
counsel?
It’s very important for people to
really get the correct information
from the right people and from
the right authority. We have seen
organisations seeking certain
information and they go to
persons who are nonplayers and
actually unaware of the role of
the SSM. Then they end up
providing the wrong information.
We also want corporate counsel
to advise the clients to comply
with the requirements of the law.
For example, provisions on
whistle blowing and derivative
actions.
Corporate counsel need to make
sure annual written compliance
statutory reports are in place too.
On our part we will keep on
listening to stakeholders and
counsel. One of our initiatives is
to keep on producing practice
notes, which are interpretations
of certain provisions of the Act.
We will give these practice notes
to all the lawyers and players.
We ask that people uphold
corporate governance. Don’t just
listen to people and assume that
in Malaysia the company law is
very bad, and that we don’t have
effective rule. These are
misconceptions and such notions
are something of the past. ~
SSM Bulletin | Vol 1. 2009 47
 CORPORATE GOVERNANCE
COMPANIES COMMISSION OF MALAYSIA

Corporate Responsibility:
The Next Evolution in
Doing Business
Viewpoints by Azryain Borhan

Director, Corporate Development & Policy Division

The business environment can be said to be constantly evolving. Initially, the

idea behind the setting up of companies was pure and simple, that is for the
purpose of conducting business to attain profitability. The idea behind the
conferment of the status of separate legal entity coupled with the privilege of
limited liability was to enable complex and risky business transactions to be
executed. It then evolved with the element of corporate governance being
injected as a consideration in the administration and management of
companies.

48 Vol 1. 2009 | SSM Bulletin


I
t is unclear as to when the
notion of corporate
governance first originated
but the first true multinational
company, the Dutch East India
Company way back in 1622 was
scrutinized by its shareholders
due to allegations of
management enrichment and
secret profit. The Wall Street
crash in 1929, the Asian Financial
crisis in the late 1990s and
prominent cases like Enron,
Worldcom and the most recent
being Satyam have contributed in
making the subject of corporate
governance prominent.
The next form of business
evolution is when companies no
longer confine their
considerations to issues such as
profitability, due administration
and management but takes on a
whole range of subjects which
may or may not be directly
related to their business such as
social well-being and the
environment. This concept is
known as Corporate
Responsibility or more popularly
known by the abbreviation ‘CR’.
The term CR has been widely
used at the advent of the 21st
century, replacing the initial term
‘Corporate Social Responsibility’,
(often referred to as ‘CSR’) which
was used to describe the
concept. Such ‘downsizing’ of
term is indeed significant as the
term CR is more all-
encompassing and is not only
confined to social considerations
per se.
The idea of CR is consistent with
the notion that corporations are
part of the community. When
companies, corporate leaders,
the management and the
employees of a company start to
deliberate on matters such as
social well-being and the
environment, such concern raised
has re-positioned companies in
the society, making them closer
by each day. CR as such can be
said to be an element which
integrates (or re-integrates)
corporations into the society.
“
Firstly, companies possessing good CR policies,
practices and reputation are more likely to attract
better and talented employees.
Over the past decade, there have
been extensive discussions on CR
by the business community,
corporate regulators and
members of the public. The
phrase which gained prominence
during the 1970s (at that time
known as CSR) was given
numerous definitions. Since then,
new theories on CR have been
deliberated, new dimensions of
the subject matter have been
explored and hundreds of
definitions of CR have been
assigned. There were both
proponents and critics of the
subject matter. The subject of CR
is not only discussed by the
business community but also by
Governments and members of
the public. The subject is so
extensive that many universities
worldwide have included such
topic in their economics, business
and legal studies curriculum.
Rules and regulations are being
developed by numerous countries
in furtherance of CR. CR has
become such an important topic
that the World Bank has taken up
further discussions and study on
the subject matter. In Malaysia,
CR is explicitly mentioned in the
2007 and 2008 budgets. The
notions of CR are also clearly
reflected in the Ninth Malaysia
Plan and Vision 2020.
With CR, the 21st century
business environment has
become more complex. Apart
from the objective of attaining
profitability, companies are also
facing other forms of challenges
such as competition,
globalization, management,
business strategies, products and
services and the need for good
corporate governance practice.
Nowadays, corporate citizens
everywhere are required to add
CR into their business dimension.
CORPORATE GOVERNANCE
COMPANIES COMMISSION OF MALAYSIA
”
CR is both an easy and
complicated subject. While the
underlying principle can be
summed up by simply stating the
‘good deeds done by companies’,
it is in actual fact much more
complicated. Its in-depth
discussions and implementation
involves a multitude of subject
including sociology, history,
management, philosophy,
economy, financial, regulations
and policies and even applied
science. The current discussions
involving CR involves topics such
as the triple bottom line and
sustainability. The former
connotes the pursuit towards
achieving equilibrium in the
economy, social-well being and
the environment while the latter
focuses on how a well balanced
business pursuits can ensure long
term benefits to the economy,
society and the environment. The
inclusion of CR into the business
dimension to a large extent
indicates the maturity of human
civilization. From an almost single
minded pursuit of profitability to
the call for corporate governance,
CR has added additional extrinsic
considerations to outgoing
businesses, elements which are
not directly concerned with the
dynamics of business itself or at
times none at all. Profitability
relates to business. Likewise,
corporate governance where it
pertains to matters such as
duties and responsibilities of
directors, shareholders interests
and due disclosure. CR on the
other hand embraces a wider
perspective and is aligned closely
with social and environmental
well being in addition to the
pursuit of profitability.
Whilst CR clearly benefits
members of the society and the
environment, industry
SSM Bulletin | Vol 1. 2009 49
 CORPORATE GOVERNANCE
COMPANIES COMMISSION OF MALAYSIA
participants are still looking for its
positive linkage with the element
of profitability. Some proponents
have argued that CR indeed does
give positive effect on companies’
profitability while others have
maintained that there is no
positive correlation between the
two subjects. It is interesting to
note that such paradox also exist
in the deliberation of whether
good corporate governance
practice can possess positive
implications to business
profitability. Be that as it may,
being an optimistic, I am more
inclined with the line of thought
that CR, like corporate
governance can cast positive
implications to businesses, both
directly and indirectly.
Firstly, companies possessing
good CR policies, practices and
reputation are more likely to
attract better and talented
employees. Graduates nowadays
possess heightened degree of
awareness on many issues
concerning the society, from labor
policies to youth problems, from
problems created by pollution to
conservation and from equitable
distribution of wealth to economic
sustainability. The better ones
embody these concerns as part of
their individual parameter in
integrating themselves with the
society. They would want to be
associated with companies whose
50 Vol 1. 2009 | SSM Bulletin
business practices are consistent through employee satisfaction
with the social and environment and loyalty.
well-being. By choosing
Secondly, companies practicing
companies possessing good CR
CR initiatives may be in the
framework and initiatives, they
position to attract clients. In fact,
feel that to a certain extent, they
in a survey conducted by Cone
are contributing also to nation-
Inc. in 2004, 80% of consumers
building. These breed of highly
preferred businesses that support
conscious individuals are often an
a good cause. In today’s business
enthusiastic lot. Combine such
world, competition is extremely
characteristic with the likelihood
stiff. Clients and consumers alike
that these individuals have done
are well positioned to choose one
reasonably well in their studies
company over the other in
back at the university, chances
relation to numerous products
are, companies possessing such
and services. Clients and
talent pool will possess a special
consumers no longer consider
breed of employees. This can
features, expiry date, durability,
translate into numerous human
ingredients and quality of
capital and work process
products as part of their only
considerations such as
considerations. Of late, they have
competency and efficiency, all of
also asked questions whether
which benefits the operation of a
child labors are used to
company positively. Companies’
manufacture the product,
CR initiatives however need not
whether the product is
be confined only to extrinsic
biodegradable, whether animal
activities, considerations or
testing is conducted, whether the
pursuits. Internal CR initiatives
company practices good
practiced by companies
corporate governance practices,
particularly the pursuit of a
what are the natural resources
conducive work environment has
which form the ingredients of the
the potential of retaining talents
products and numerous other
“
CR … embraces a wider perspective and is aligned
closely with social and environmental well being in
”
addition to the pursuit of profitability.

“ Companies which possess
credible CR framework will
be able to enhance their
profile through the focusing
on their good deeds in
addition to the products or
”
services offered.
questions, all of which are linked
to social, economic and
environmental sustainability. One
of the ways as to how one
company distinguishes itself from
the rest perhaps lies in its CR
practices. In this regard, CR can
be said to be an element which
provides a company with a
competitive edge. In short, a
niche market can be created by
companies who are able to
integrate CR successfully in their
business.
Finally, it has been often
mentioned that good CR practice
will add premium to the company.
There are perhaps many ways as
to how such premium can be
created. Companies which
possess credible CR framework
will be able to enhance their
profile through the focusing on
their good deeds in addition to
the products or services offered.
Positive reputation created will in
turn generate interest amongst
clients and consumers which will
further entice them to procure
products and services from such
companies. In addition, ‘good
vibes’ pursuant to good CR
practices can also have the
potential to attract investors to
invest their monies into the
company. Apart from the ‘feel
good’ factor, such form of
investment is perceived to be
able to contribute towards
sustainability and longevity of the
conduct of business.
In the context of the current
state of economy, the need for CR
now is more apparent than ever.
We tend to generally think that
CR is only applicable during times
when the economy is
experiencing growth where
companies which post significant
profit are well positioned to
donate their excesses for social or
environmental causes. This
notion however is wrong. CR will
always be relevant irrespective of
the state of economy. In fact, it
can be argued that the need for
CR becomes more apparent
during hard times. In this regard,
CR has substantially evolved from
the simple notion of philanthropy
and financial contribution. Forms
of contributions to the social,
environmental and economic
well-being can come in any forms
and is only restricted by
imagination. Apart from monetary
form, companies can also
contribute in terms of time,
effort, business asset, knowledge
and expertise. These are the
forms of investments towards
making the world a better place
to live. A management
consultancy company for example
may advice on the efficient
running of an orphanage, a
shipping company may share the
experience of seafaring with
CORPORATE GOVERNANCE
COMPANIES COMMISSION OF MALAYSIA
aspiring young sailors, a company
selling scuba diving gear may
sponsor annual clean-ups against
crown of thorns at prominent
coral diving sites while a medical
practice may conduct annual
medical checks on children in
remote areas. These represent
only some of the numerous
instances where CR can actually
be practiced by companies. In
short, there is always something
good that can be done by
everyone in the business
community by simply leveraging
on existing resources. While
some form of CR initiatives may
require monetary contributions, a
substantial number do not. It
goes to the ability and willingness
of such companies to contribute
towards the social well-being.
This concept entails that all
companies, regardless of their
nature of business, big or small,
private or public, listed or
otherwise can always carry out
CR initiatives.
Still in the context of the current
adverse state of the global
economy, CR activities can
actually contribute towards
generating economic activities
through donations, sponsorships,
consumptions and procurements.
These translate into attaining
more domestic liquidity which is
vital towards sustaining the
national economy. In addition, CR
SSM Bulletin | Vol 1. 2009 51
 CORPORATE GOVERNANCE
COMPANIES COMMISSION OF MALAYSIA
activities can also alleviate the
various forms of difficulties and
deficiencies faced by members of
the public as well as the
environment in general. Some
form of assistance provided by
the private sector will go a long
way towards ensuring
sustainability in the country. CR
activities undertaken by the
private sector in this context will
also assist the Government in
meeting the numerous needs of
the society.
Malaysia must identify the various
forms of challenges in relation to
the subject of CR. In my view,
the fundamental challenge lies in
creating awareness amongst the
business community and the
public in general in relation to the
subject. Many are of the view
that CR is only applicable to
certain segment of the business
industry and are confined to
public-listed companies and
multinationals. The notion of
‘exclusivity’ of CR here is quite
apparent. This is especially news
on CR initiatives which most of
the time spotlights on the
initiatives carried out by such
companies. In actual fact, CR is
applicable to all types of
companies just as the principle of
good corporate governance is
applicable to all types of
companies. Despite the disclosure
requirement on CR posed by
Bursa Malaysia onto public listed
companies in 2006, Bursa
Malaysia’s CR 2007 status report
revealed that Malaysian PLCs
generally lag behind in terms of
knowledge and awareness. There
was no finding however on
private companies and non-PLCs
but it can generally be concluded
that in all likelihood, the level of
“
Positive reputation created will in turn generate
interest amongst clients and consumers which will
further entice them to procure products and
services from such companies.
52 Vol 1. 2009 | SSM Bulletin
awareness and knowledge is even
lower.
The second challenge lies in the
issue of integration between CR
and the business activities. Most
companies see CR as a secondary
pursuit to that of profitability.
This is especially where they
perceive the element of costs is
always inherent in any CR
pursuits. The key approach is not
by ranking one on top of the
other but rather a question on
how the pursuit of profitability
and CR can be done concurrently.
This relate substantially to the
issue of integration. We have
heard that some companies are
able to successfully integrate
profit-making with CR and still
able to retain a competitive edge
in business. In fact, there are
cases where businesses thrive
upon embracing CR as part of the
business agenda.
Taking into consideration the
diversity and complexity of the
subject matter, the third
challenge lies in structuring the
subject of CR. There are literally
hundreds of definitions of CR.
New concepts pertaining to CR
are being developed almost
everyday. The latest that have
managed to gain acceptability are
the concept of triple bottom line
and sustainability. Whilst such
developments can be said to be
positive and reflect the growing
awareness and discussion on the
subject matter, a form of
structure on CR must be
established. In this regard, the
institutionalization of CR is
necessary. This will enable the
private and public sector to give
focus on the subject matter as
well as to enable some form of
”
uniformity to be achieved apart
from facilitating understanding.
In addressing the three
challenges highlighted above, the
Companies Commission of
Malaysia (SSM) is currently in the
midst of finalizing its very own CR
Agenda. The SSM CR Agenda
which will be rolled in Quarter 2
2009, will serve as a general
roadmap for SSM to drive the CR
culture amongst the business
community in Malaysia. The
document will feature:
z SSM definition and
organizational statements on
CR;
z SSM’s classification of CR;
z SSM’s role as a component of
the public sector in driving the
CR culture amongst the
business community; and
z SSM’s approaches, initiatives
and projects towards
enhancing the national CR
framework
The concept of CR is here to stay.
Whether we like it or not, future
business discussions will have to
take CR as part of their business
considerations. The concept will
be continued to be nurtured both
by proponents and critics and
new dimensions will be added
into it. Currently, various CR
indexes are being developed to
measure CR practices by
companies as well as their
impact. Companies internationally
are being ranked and assess for
their CR policies, initiatives and
practices. It will just be a matter
of time when CR may also be
used to gauge a country’s
competitive index in addition to
the costs of doing business, the
time taken to set up a business,
the processes of setting up a
business, labor policies and
corporate governance. Strong
foundation on the subject of CR
must be built through strategic
collaborations between the public
and private sectors. Early
preparatory steps taken now will
ensure Malaysia will not lose its
competitive edge in the future
trends of doing business. ~
 OPERATIONS
COMPANIES COMMISSION OF MALAYSIA

SSM e-Services and

Business Registration
Mobile Counter

“
Fast, Easy, Reliable, Anytime And
Anywhere SSM’s e-Services … is a modern

F
ast, easy, reliable, anytime, anywhere is what way of doing business as currently
SSM’s e-Services is all about. It commenced
in July 2006 upon the introduction of the e- more organizations are converting
Info service followed by the e-Lodgement service
in November 2007. e-Info and e-Lodgement were their services from conventional to
developed pursuant to the request of the
stakeholders. Many countries such as the UK, e-Environment which is in line
Canada and Singapore have discovered the
advantage of e-Services. It is a modern way of with the global business

”
doing business as currently more organizations are
converting their services from conventional to e- environment and needs.
Environment which is in line with the global
business environment and needs. This is also one
of the ways to attract foreign investors to invest in
Malaysia as the online services provide a
borderless mode of doing business in Malaysia.

SSM Bulletin | Vol 1. 2009 53

 OPERATIONS
COMPANIES COMMISSION OF MALAYSIA

Table 2.0 Total transaction and revenue collected via e-Info

service for 2006 - 2008
In the circumstances, businessmen need to change
Year Transactions Revenue
the approaches of doing business and must adopt a
more efficient and cost effective ways of carrying 2006 16,819 224,610

their business activities. SSM has developed its e- 2007 85,847 1,217,220

Services to enable more efficient transactions to be 2008 241,583 3,105,353

carried out.

SSM e-Info Service had increased significantly to 241,583 transactions

in 2008 compared to 85,847 in 2007 and and
The e-Info service is one of the internet based
16,819 in 2006. Total transaction recorded for
services provided by SSM. It was introduced in July
2008 shows a 181% growth as compared to 85,
2006 as an alternative channel for obtaining
847 transactions in the preceding year. This reflects
company/business information. Over the years,
that customer are well aware and receptive to the
SSM e-Info service has improved its stability and is
concept of purchasing information via online.
able to serve the customers at anytime, anywhere
and at their own convenience. With its enhanced
Chart 1.0 : Transactions and revenue of e-Info for 2006-2008
stability and expanded product range, e-Info is now
the main avenue to obtain corporate information.
3,105,353
SSM e-Lodgement Service
3,500,000
3,000,000

e-Lodgement is a service that enables the 2,500,000

lodgement or filing of statutory documents online. 2,000,000
1,217,220
SSM e-Lodgement is divided into two categories; 1,500,000
e-Lodgement (Company) and e-Lodgement 1,000,000
(Business). Advantages of using this service are 500,000
16,819 224,610 85,847 241,583

as follows:
0
1 2 3

9 speedy registration Transaction

Revenue
9 no queuing hassle
9 comprehensive tracking functions to monitor

“
status applications
9 image through e-Info will be available on the …businessmen everywhere need to
next day
9 alternative mode of payment available
change the approaches of doing
9 24/7 business and must adopt a more
efficient and cost effective ways of

”
Closure of Supply of Information carrying their business activities...
Counters
The objective of closing SSM supply of information
counters is to encourage people to obtain their
desired company/business information via the
internet. There are three stages in implementing
the closure of information counters which is also Customers Acceptance Towards
known as transitional period. During this period,
SSM will provide e-kiosk as well as customer guides
The Service
that are responsible to assist and guide users on SSM e-Info initiative to encourage online
how to operate the new online system. transactions has proven to be successful . This is
Table 2.0 shows that subsequent to the closure of reflected by the increase in volume of online
counters in October 2008, the e-Info transactions transactions even though there were initially some

54 Vol 1. 2009 | SSM Bulletin

 OPERATIONS
COMPANIES COMMISSION OF MALAYSIA

“ SSM’s e-Services … also one of the customers feedbacks on the e-Info service for the
month of October - December 2008.
ways to attract foreign investors to invest The survey showed that 80% of the customers fully
accepted the e-Info initiatives and have positively
in Malaysia as the online services changed their perceptions towards the online
provide a borderless way of doing services. The customer now realized that by using

business in Malaysia.
outcry regarding the price increase, that the
system was not being user friendly and complaints
that the data produced is not reliable.
Action Taken
SSM has taken appropriate action to ensure the
services provided is convenient to the users by
solving all issues and complaints raised in the
various channels such as newspapers, PEMUDAH
and National Consumers Complaint Centre (NCCC).
ISSUE RAISED
”
the online service, they will secure the information
at ‘no extra charges’ and at the same time they will
be dealing directly with SSM.
In the long run, the cost of doing business is much
cheaper and the service is fast and convenient.
15% of the users were satisfied with the service
and the remaining 5% were unsatisfied with the
price, DIY concept and they were also not computer
illiterate.
Positive Impact
Since the e-Info service was made mandatory in
October 2008, the take up rate of the service had
increased from 20% to 62%. In order to ensure
high customer satisfaction, SSM closely monitors
the performance of the e-Info System from time to
ACTION TAKEN time.

SSM e-Lodgement Mandatory

i) Network congestion SSM has stored 12 servers to avoid
ii) Real time data network congestion, bulk
iii) Loading process applications and real time data.
Services
iv) Rejection from other government SSM issued official letter to all
agencies, banks. government agencies, banks on the SSM has identified six (6) services to be
validity of the information obtained mandatorily lodged via SSM e-Lodgement service
from e-Info service. starting from June 2009. The reason for introducing
the mandatory services is to encourage more
people to use the online service instead of
From the survey and research conducted via transacting over-the-counter. Most of the selected
distribution of questionnaires, SSM hotlines, services are auto-approved and these are among
information counters and e-mails, SSM found that the simplest transactions that do not involve
the complaints came from the so called ‘agents’, thorough verification compared to F24, Annual
‘middle person’ and ‘touts’ Return and Charges.
whose core business is
performing information
searches on behalf of
individuals and
corporations. The main
reason why they made such
claims is to discourage
other people to use SSM e-
Info service and encourage
the public to use their
services in order to obtain
company/business profiles.
The chart on the right
shows the record of

SSM Bulletin | Vol 1. 2009 55

 OPERATIONS
COMPANIES COMMISSION OF MALAYSIA

Below are the six mandatory services:

Statistics
FORM DESCRIPTION

F48B Application for Company Secretary’s License In view of the drastic increase in the number of
BRMC locations SSM will continue its efforts in 2009
F48C Application for Renewal of Company Secretary’s
with aggressive promotion and awareness
License (Auto approved)
programs to ensure that the BRMC sustains its
F13A Request for Availability of Name effectiveness. Statistics of the BRMC progress from
the year 2005 until 2008 are as follows:
F11, F52 Application for Change of Company Name
(F11- Auto approved) Table 1.0: Statistics of BRMC (HQ) for 2005 - 2008
F53 Notice of Place where Register of Members & YEAR
Index is Kept, or Change in that Address (Auto approved) HQ
2005 2006 2007 2008
F44 Notice of Situation of Registered Office & Office
No. of location 10 10 29 84
Hours & Particular of Changes. (Auto approved)
New registration 1,963 1,060 2,031 2,316

Table 1.0 above shows the progress of the BRMC

Business Registration Mobile
Counter
The Business Registration Mobile Counter (BRMC)
was introduced in September 2005 with the
objective to facilitate the business community,
mainly the petty traders, to register their business.
At the initial stage of its implementation, the BRMC
was only available at SSM’s Headquarters (HQ) in
Kuala Lumpur. However, several state offices began
implementing this service in 2006 and by 2007, all
state offices (where the Registration of Businesses
Act 1956 is enforceable) have conducted the BRMC
campaigns.
from 2005 until 2008. Overall, the total revenue,
new registration and the number of locations of
BRMC carried out by the HQ team had increased
over the years. The total number of new
registration from BRMC campaign increased by 18%
from 1,963 in year 2005 to 2,316 in year 2008.
This shows that the public is aware about the
BRMC campaign and SSM’s objective to facilitate
and provide service to the business community is
achieved.
Table 2.0: Statistic of BRMC (State offices) for 2005 - 2008
YEAR
OTHER STATES

BRMC is an extension of the outreach program

2005 2006 2007 2008

which provides the public with SSM’s business No. of location 108 235 1,193

registration facilities at specific locations with the New registration 1,212 2,845 17,443

intention to educate business owners on the

benefits of registering their businesses.
BRMC and ICT
In ensuring that the convenience of the public is
enhanced by the services provided, SSM introduced
the application of ICT in conducting the mobile
registration counters. This has widened the
availability of the services provided to cover all
business registration services.
Besides direct connectivity with the internal system
being the CBS-ROB, the BRMC is also equipped with
other facilities such as 3G applications, laptops and
printers which allow certificates and receipts to be
issued on site. The monitoring of the system is
conducted by the ICT Division through the “remote
desktop connection”. This will allow the ICT Division
to troubleshoot the users’ computers whenever the
system fails to function or if problems occurred
during the BRMC activities.
According to the statistics recorded in Table 2.0,
the number of new registrations by State Offices
have also increased to 17,443 in 2008, as compared
to 2,845 and 1,212 in 2006 and 2007, respectively.
This corresponds to the fact that all state offices are
now providing the BRMC services and as at
December 2008 1,536 mobile counters were
conducted nationwide.
From the statistics, we know that the campaign is
widely accepted by the public. Improvements made
to the BRMC system such as the enhancement of
the usage of the Wi-Fi, 3G and wired connectivity
will be constantly undertaken.
BRMC in 2009
Previously, the BRMC campaign focussed only on
petty traders and business owners who have
already been licensed by the Local Authorities but

56 Vol 1. 2009 | SSM Bulletin

 OPERATIONS
COMPANIES COMMISSION OF MALAYSIA

Benefits BRMC are Circuit Counter

conducted
near to The circuit counter which was introduced in
business area May 2008 acts as a counter service centre
that allows the public to register their
business at four local authority offices
i.e. the Dewan Bandaraya Kuala
Lumpur (DBKL), Majlis Perbandaran
Convenience; BMRC is a one
SSM officer stop centre for Sepang (MPSepang), Majlis
assisting in business Perbandaran Ampang Jaya (MPAJ)
reg. process registration
and Majlis Perbandaran Kajang
(MPKj). The objectives of
BRMC introducing the circuit counter are:
(i) to enforce compliance with
section 5(1) of the Registration of
Businesses Act 1956 that requires
all businesses to be registered;
BRMC is (ii) to encourage petty traders and
usually Facilitating the
conducted public in business owners to register their
during both business businesses by undertaking a proactive
weekdays and registration initiative to facilitate the registration
weekends
process; and
(iii) to educate petty traders and business
owners regarding the Registration of Businesses

“
The e-Info service
is one of the internet based services
provided by SSM. It was introduced in
July 2006 as an alternative channel for
obtaining company/business
Act 1956 and the Registration of Businesses
Rules 1957.
Circuit counters enhance the collaboration efforts
between SSM and other local authorities in
facilitating the public and reducing the cost of doing
business in Malaysia. Below are the statistics of
circuit counters for the years 2007 and 2008:-
T a b l e 3 . 0 shows the total of new business
registered during circuit counter had increased by

”
information.
have not registered their business with
SSM. However, since 2008 SSM has
broadened its focus area to supermarkets
and hypermarkets.
Looking at the opportunities in 2009, SSM
has in the pipeline new ways to collaborate
55.33% from year 2007. At the same time, the
total transactions for renewal of business
registration had increased from 4,151 transactions
in 2007 to 5,954 transactions in 2008 which is a
growth of 43.4%. ~
Table 3.0: Statistic of BRMC (HQ) for 2005 - 2008
YEAR
HQ
2007 2008

and co-operate with other business New Registration 779 1,210

associations, government agencies and
Renewal 4,151 5,954
societies in conducting the BRMC
campaign.

SSM Bulletin | Vol 1. 2009 57

 CPCF ISSUES
COMPANIES COMMISSION OF MALAYSIA

Corporate Practice
Consultative Forum
(CPCF)
NO. 2/2008 - 19 November 2008

Getting Online and Closure of Counters for Supply

Background of Information’ and ‘Interest Scheme’ were

C
The Corporate Practice Consultative Forum presented by the Head of ICT Section, Director of
(CPCF) which was held at the SSM Marketing & Business Development Division and
Headquarters in Kuala Lumpur, afforded a Director of Registration Services Division
platform for the professional bodies to express their respectively.
views on matters affecting them in relation to their The issues raised by SSM were as follows:
dealings with SSM.
(a) Limited Liability Partnership
The Forum consisted of two sessions. The first
The members of the forum were informed that
session covered the presentations by the
pursuant to the feedbacks received from the
representatives from SSM as well as deliberations
Consultative Document on LLP, there were a few
on issues raised by SSM. The three presentations
issues that needed to be resolved as contained in
titled ‘Introduction to Company Secretary
the presentation by SSM titled ‘Proposal for an
Integration System (CSI)’, ‘Beyond Counters:

58 Vol 1. 2009 | SSM Bulletin


Alternative Business Vehicle: Limited Liability
Partnership: Issues to be resolved’. Members of the
Forum were requested to give their feedback on the
said issues in order to allow SSM to proceed with
the drafting of the policy statement.
The issues were on:
z Bonds/Insurance requirements
z Compliance Officer not being one of the
partners of LLP
z Claw-back period
z Formulation of the insolvency test
It was further decided that the issues are to be
dealt with by a working committee.
(b) Issuance of Practice Notes
SSM notified members of the Forum on the
proposed issuance of the following Practice Notes:
z Practice Note 2/2008 on ‘Change of Financial
Year’ in December 2008;
z Practice Note 3/2008 on ‘When a Liquidator is
deemed to cease to act in voluntary winding up’
in December 2008; and
z Practice Note 1/2009 on ‘Lodgement of Annual
Return where an Annual General Meeting
cannot be convened’ by first quarter of 2009.
(c) Updates on e-services / e-lodgement
SSM notified the members of the Forum on the
updates of the following e-services :
z Closure of Counters for Supply of Information
Members of the Forum were informed that the
business and corporate information can only be
purchased online through the e-Info service
except for bulk purchases.
The closure of counters for supply of
information will be carried out in three phases.
The first stage will only involve SSM’s
Headquarters, and the state offices of Selangor
and Negeri Sembilan. The second stage will
involve all other SSM offices in Peninsular
Malaysia. The third stage will be implemented
at the SSM Labuan, Sabah, Sarawak state
offices and branch offices at Tawau and Miri.
A “transitional period” between one to three
months will be implemented to facilitate the
change in services, and concurrently, e-Info
Kiosks will be set up before total closure of the
CPCF ISSUES
COMPANIES COMMISSION OF MALAYSIA
counters for supply of information at a
particular state/branch offices.
z Mandatory online services
Members were also informed that effective
March 2009, the following services will only
available through the e-Lodgement service:
(a) Application for Company Secretary’s
License;
(b) Application for Renewal of Company
Secretary’s License;
(c) Request for Availability of Name;
(d) Application for Change of Company Name;
(e) Notice of Place where Register of Members
& Index is Kept, or Change in that Address;
(f) Notice of Situation of Registered Office &
Office Hours & Particular of Changes;
z Company Secretary Integration System (CSI)
The Forum was informed on the development of
the CSI System as an alternative to the filing of
Annual Returns through the traditional
methods. As part of the development of the CSI
System, company secretaries will be engaged
to gauge their views and feedback to ensure
that the users’ requirements are taken into
consideration.
(d) Interest Scheme
SSM notified the Forum members on Division 5,
Part IV of the Companies Act 1965 which regulates
the Interest Schemes. The Forum members were
also informed of the various type of interest
schemes offered.
The second session of the Forum was dedicated to
the professional bodies. A presentation was tabled
for notification by a representative from MAICSA
entitled ‘Technical Committee under Corporate
Practice Consultative Forum’. The Forum members
agreed to form a Technical Committee under the
CPCF to resolve technical and operational issues.
This Technical Committee will consist of
representatives from the professional bodies and
relevant SSM officers. MAICSA will be the
Secretariat of the Technical Committee.
Issues Raised By Professional
Bodies
The session also deliberated the issues raised by
members of the professional bodies. The issues
raised by members of the professional bodies and
SSM Bulletin | Vol 1. 2009 59
 CPCF ISSUES
COMPANIES COMMISSION OF MALAYSIA
the respective responses provided by SSM are
reflected below.
Final Report from Corporate Law Reform
Committee (CLRC)
Members of the CPCF were happy to note that the
CLRC has completed its review on the Companies
Act 1965 and has handed over the Final Report to
the Minister of Domestic Trade & Consumer Affairs
on the 20 October 2008. The members further
enquired on the status of the Report and whether it
will be released to them for comments.
SSM highlighted that the Final Report has been
uploaded in SSM’s website. SSM would not be
inviting comments as ample opportunity has been
provided to all stakeholders to comment on the
recommendations during the consultative process.
Annual Return /Financial Statement
Members sought clarification in relation to the
circumstances in which annual returns could be
submitted without the submission of a financial
statement.
SSM clarified that under the SSM Practice Note
1/2008, annual returns must be submitted together
with the financial statement and not otherwise.
However, in certain specific circumstances where an
AGM cannot be convened due to the lack of a
quorum, SSM will accept the lodgement of annual
return without a financial statement provided they
meet the requirements found under the Companies
Act 1965. Companies faced with this predicament
are expected to rectify the matter before the next
AGM. Repeat lodgements of annual return where
the AGM cannot be convened on the same reason
will be rejected.
Closure of Supply of Information
Counter at SSM And E-Info
Services
Members were also notified that pursuant to the
latest directive issued by SSM on the closure of
supply of information counter at SSM and e-Info
“
SSM felt that looking at the
potential adverse scenario, this
represented a golden opportunity for
”
companies to restructure.
60 Vol 1. 2009 | SSM Bulletin
Services, SSM’s supply of information counter will
only open one counter for purposes of bulk
purchases i.e. more than 20 applications on the
search reports. For less than 20 applications,
customers will be required to use the SSM e-Info
service kiosk. In view of acquiring the said search
report online where it is expected that it will be
relatively slow and time consuming coupled with
lack of online assistance for SSM e-Info service
kiosk at various state level, the forum members
proposed to continue allowing SSM state offices to
accept acquisition of search reports for applications
totaling 10 and above through the counter.
The intention of the gradual closure of the supply of
information counter is to increase the take up rate
of the e-Info services. SSM is currently addressing
the slow response time. However, the procedure for
an online application is quite simple to follow. e-Info
service kiosk has also been set up for online
application on a Do-It-Yourself (DIY) basis.
Companies (Amendment) Act
2007 Under Section 134 (12)(C)
Pertaining To “Register Of
Directors’ Shareholdings, Etc”
Members sought clarification on section 134 (12)
(c) of the Companies Act 1965 in relation to
“Register of Directors’ Shareholdings, etc”.
In a situation where a child or adopted child who is
a director of the company and the parent is merely
a shareholder of the company, is the parent(s)
shareholding considered as the child’s or adopted
child’s interest in shares of the company (deem
interest of the director)?
Section 134 (12)(c) provides that:
“a reference to an interest of the spouse of a
director of company (not being herself or
himself a director of the company) and an
interest of a child, including adopted child or
stepchild, of a director of the company (not
being himself a director of the company) in the
shares or debentures of the company, shall be
treated as the interest of the director in the
shares or debentures of the company” …
In essence, the law only requires disclosure in
respect of the interests of a director’s spouse or
child, and only if the spouse or child themselves are
not directors of the company.
The law is silent in respect of the disclosure of
interest as illustrated by the illustration given. ~

Regional Dialogue -
Sabah & Sarawak
24 & 25 November 2008
Background
T
he Companies Commission of Malaysia (SSM)
Regional Dialogue was held on 24 and 25
November 2008 in Kota Kinabalu, Sabah and
Kuching, Sarawak respectively. The Regional
Dialogue witnessed participation of 278 delegates
comprising of 150 in Sabah and 128 in Sarawak
from various professional bodies, Chambers of
Commerce, Industrial Associations and other
Government Agencies. The theme for this year’s
Regional Dialogue was ‘Beyond Counters: Getting
Online’.
Objectives of Regional Dialogue
The main objectives of the Regional Dialogue are:
(a) To promote understanding and closer cohesive
relationship between the SSM, the industry and
professional bodies;
CPCF ISSUES
COMPANIES COMMISSION OF MALAYSIA
(b) To exchange ideas and clarify matters
pertaining to operational issues which in turn
would enhance overall efficiency of SSM’s
service delivery system to the public; and
(c) To disseminate information towards ensuring
that the functions of SSM as the enforcing body
of all the related legislations are fully
understood by the public.
CEO’s Keynote Address
The Regional Dialogue was officiated by the Chief
Executive Officer (CEO) of SSM, Yang Berbahagia
Datuk Abdul Karim Abdul Jalil. Through his keynote
addresses, the CEO conveyed the following
pertinent matters to the participants:
(a) Economic Adversities
The international community is facing potential
economic turmoil. SSM felt that looking at the
SSM Bulletin | Vol 1. 2009 61
 CPCF ISSUES
COMPANIES COMMISSION OF MALAYSIA
potential adverse scenario, this represented a
golden opportunity for companies to
restructure. The term ‘restructuring’ connotes
something more than the usual term ascribed
to it, that is ‘corporate restructuring’ - the
reshuffling of company structure, renegotiation
of corporate commitments, redistribution of
manpower and re-alignment of business
strategies. For SSM, in the challenging years to
come, sees an opportunity for various forms of
restructuring to come into place, be it in the
form of restructuring of the national corporate
governance agenda, restructuring of
transactions carried out with SSM and most
(d) Extension of CPCF to Sabah and Sarawak
importantly, the restructuring of the mindset
towards embracing the future ways of doing
business.
(b) Changes in facing the economic adversities
In riding the potentially adverse economic
scenario in 2009, businessmen everywhere
need to change their approaches and must
adopt a more efficient and cost effective way of
doing business. The development of SSM’s e-
Lodgement and e-Info services are indeed
timely as these represents the next generation
of the ways to conduct business in Malaysia.
Many countries such as the UK, Canada and
Singapore have discovered the advantage in e-
Services. As such, leveraging and harnessing
the powers of the ICT will catapult the
Malaysian way of doing business to be at par
with the practices in other developed countries.
The e-Lodgement and e-Info services will
enable more efficient transactions to be carried
out with SSM. Costs wise, the development of
e-Lodgement and e-Info will eliminate the need
to be physically present at SSM’s branches
nationwide to lodge documents or search for
information. As such, enhancing business
efficiency through the application of SSM’s e-
Services represents another viable approach in
a moderately robust economic scenario.
possibility of extending the application
(c) Extension of ROBA to Sabah and Sarawak
The registration of businesses via the
of ROBA to Sabah and Sarawak. This
Registration of Businesses Act 1956 (ROBA) has
enabled partnerships and sole proprietorships
to increase the level of awareness of their
business portfolios beyond the traditional
boundaries. In realizing the vast opportunities
represented if the business information is made
available worldwide, SSM is looking into the
possibility of extending the application of ROBA
62 Vol 1. 2009 | SSM Bulletin
to Sabah and Sarawak. To weather through
difficult times, one needs to most of the time
adopt unconventional approaches. During
challenging times where businesses need to
expand their clients’ base, the application of
ROBA may provide the answer to enhance sales
and promote business. SSM hope to achieve
this in the near future and is optimistic that the
business community in Sabah and Sarawak will
support such a project. This form of
restructuring involves the reinvention of the
existing regulatory regime for the registration
of businesses in Sabah and Sarawak.
SSM is of the view that closer rapport with the
professional bodies in Sabah and Sarawak is
necessary. This can also be said to be a form of
restructuring involving the re-assessment of the
regulator-regulatee relationship. Apart from the
Regional Dialogues, SSM plans to enhance its
stakeholder relationship through the
participation of the Sabah’s and Sarawak’s
prescribed bodies in its Corporate Practice
Consultative Forum (CPCF) beginning next year.
The formation of the CPCF has enabled various
outstanding practice issues to be resolved
through discussions and issuance of Practice
Notes. Corporate regulators and regulatees can
no longer exist in isolation. As such, there must
be more frequent meetings and discussions
towards understanding the issues faced by each
other. Each must play their roles to enable the
other to prosper and function more effectively.
Such form of relationship restructuring will
enable corporate Malaysia to face the
adversities more confidently.
“
…SSM is looking into the
form of restructuring involves the
reinvention of the existing regulatory
regime for the registration of
”
businesses...

“ …SSM plans to enhance its stakeholder relationship through the participation
of the Sabah’s and Sarawak’s prescribed bodies in its Corporate Practice
Consultative Forum (CPCF) beginning next year.
A Walk-Through by Sabah
Development Corridor (SDC) and
Sarawak Corridor of Renewable
Energy (SCORE)
SSM invited officials/representatives of Sabah
Development Corridor (SDC) and Sarawak Corridor
of Renewable Energy (SCORE) to conduct a
walkthrough on the respective projects during the
Regional Dialogues. The officials/representatives of
the relevant corridors during their presentations
touched on the following aspects:
z The overview/dynamics of SDC and SCORE; and
z Highlights on the special business areas to be
developed in the respective economic regions.
Tuan Haji Ghazali Ismail, the Director of Marketing
and Business Development Division (MBDD)
delivered the updates on SSM’s e-info and e-
lodgement services.
Issues Raised By Stakeholders
The key issues raised by stakeholders and
responses provided by SSM during the said event
are reflected below.
Section 308 of the Companies Act 1965
The participants suggested that SSM should strike
off dormant companies which have ceased
operations and failed to then return Annual Returns
for more than five years under Section 308 of the
Companiies Act 1965 (CA 1965).
SSM replied that generally for companies which
have failed to lodge their Annual Return for more
than five years, a notice under section 308(1) of
the CA 1965 will be issued. However, as a matter of
practice a notice under section 7(11) of the CA
1965 will be issued to companies that have not filed
their Annual Returns for more than three years. The
issuance of the notice under section 7(11) (a) of the
CA 1965 is to request for information from
companies in order to update the companies’
information.
CPCF ISSUES
COMPANIES COMMISSION OF MALAYSIA
”
Section 113(2) of the Companies Act 1965
The participants highlighted the problem when a
company has fully settled loan for more than 10 to
20 years ago but discharge was not done. Charge
documents could not be traced but the existence of
the charge is shown in search report. Due to the
merger of several banks, companies now have
problems in discharging their charge documents.
There are times where Directors cannot be traced.
The issues regarding the charges should be
collectively overcome by the directors and the
company and the company secretaries should be
kept duly informed.
SSM acknowledge the issue and the problems faced
by the company secretaries. However the delegates
were informed it is not appropriate for SSM to
instruct banks that copies of the Memorandum of
Charge and Discharge of Charge should be
extended to the company secretaries.
The action that may be taken by the company
secretary in resolving the instances given are as
follows:
z To liaise with the lawyer in charge of the loan
documentation to obtain the information
pertaining to the charge and discharge of
charge;
z Company secretary to conduct a due diligence
exercise by getting confirmation from BNM of
the current status of a financial institution
whether it has merged with other financial
institution or otherwise;
z Company secretaries may also conduct a
special meeting with Sabah Law Association in
resolving the said issue.
z There is an onus to keep corporate records for
seven years under the Companies Act.
Compliance to this provision of the law should
help overcome this issue.
In addition SSM will consider holding a discussion
with Bank Negara Malaysia to resolve these issues.
SSM Bulletin | Vol 1. 2009 63
 CPCF ISSUES
COMPANIES COMMISSION OF MALAYSIA
Section 172A of the Companies Act 1965
The participants inquired our SSM’s stand on non-
compliance of section 172A of the CA 1965 when
the auditor himself is not aware that he has been
removed as an auditor of the company.
SSM explained that section 172A of the CA 1965
shall only be applicable to situations where an
auditor has resigned or was removed from his/her
office. In cases of removal, section 172A of the CA
1965 shall only be invoked when the auditor elects
to make a written representation to the Registrar.
If the company fails to give a copy of the special
notice of resolution to the auditor, the company is
liable to an offence under Section 369 of the CA
1965.
Lodgement of Annual Return
The participants asked SSM to allow companies to
lodge their Annual Returns without audited
accounts. SSM should consider granting amnesty
period until 31 December 2010 for all companies
64 Vol 1. 2009 | SSM Bulletin
to update its audited accounts. SSM
reiterate that is not able to grant an
amnesty period and companies are
advised to apply for an extension of time
under section 143(2) of the CA 1965.
Charges for late registration of Form
40A
The participants highlighted their
grievances as charges for late registration
of Form 40A for notice of assignment of
charge could be as high as RM200.00 per
notice. They appealed to SSM to reduce
the same considering that the charger
would be paying in most cases.
SSM notified the stakeholders that it
could not reduce the late lodgment fee of
RM200.00 as the fee is prescribed under
Schedule 2 of the CA 1965.
Lodgement of Annual Return and
Audited Account to SSM
The participants inquired whether they
are still required to update their Annual
Return and Audited Accounts after they
have paid the compound and the time
frame for the to lodge the same.
SSM explained that the payment of the
compound does not exonerate the liability
of the company from filing the annual
return and audited account. The need to
file annual return and audited account is a statutory
duty and must be complied with. SSM is entitled to
impose late lodgement fees under item 26A of the
2nd Schedule of the CA 1965 upon lodgement of
the document. ~
“
As such, enhancing business
efficiency through the application of
SSM’s e-Services represents another
viable approach in a moderately robust
”
economic scenario.
 BRIEF NEWS
COMPANIES COMMISSION OF MALAYSIA

One Family One Business

various panelists who are
acknowledged experts in their
own related fields. The response
and enthusiasm exhibited by
participants was very
encouraging.
The objectives of this campaign
amongst others, were to
incalculate entrepreneurship
values amongst Bumiputera,
increase the number of
Bumiputera owned companies in
Malaysia, develop a systematic
and efficient asset management
system, create awareness on the
role of SSM and the services
provided by it in terms of
registration of businesses and the
From Left: Minister of Entrepreneur and Cooperative Development YB Noh Omar, GABEM Chairman, YBhg Tan incorporation of companies, the
Sri Rahim Tamby Chik and SSM CEO, YBhg Datuk Abdul Karim Abdul Jalil during the press conference session.
need to comply with the law,
scale of chargeable fees and
A strategic collaboration between Development on 15 March 2009 sharing of information on grants
“Gagasan Badan Ekonomi at the Dewan Tun Hussein Onn, and funding by the government,
Melayu” (GABEM) and the Pusat Dagangan Dunia Putra banking and financial institutions.
Companies Commission of (PWTC), Kuala Lumpur. The It is hoped that this campaign
Malaysia (SSM) was initiated to strategic collaboration between would help to achieve its
organize a campaign known as SSM and GABEM was a success objective to increase
One Family One Company and approximately 800 Bumiputera’s equity participation
(“1F1C”) with the theme “Pewaris participants attended the in the economic cake of the
Penjana Pendapatan Berterusan campaign. country through their
Keluarga”. The campaign was participation in the various
The event organized was divided
officiated by YB Dato’ Noh Bin business sectors.
into four sessions Six
Haji Omar, Minister of
presentations were made by
Entrepreneur and Cooperative

BRMC Achievements in 2008-2009

In 2008, SSM has carried out a total of 1,297.00 State offices
business registrations through 82 BRMC placed at
various locations throughout Malaysia. As at 16
MONTH TOTAL LOCATION
March 2009, 52 BRMC have been organised.
Jan – Dec 2008 1,297
BRMC 2009
Jan - Feb 2009 143
z Total BRMC conducted :
HQ SSM envisages that the BRMC activities if carried out
aggressively throughout Malaysia will yield greater
buying in and registration of businesses amongst all
MONTH TOTAL LOCATION sectors of the business community.
Jan – Dec 2008 82
January 2009 16
February 2009 25
As at 16/3/2009 11

SSM Bulletin | Vol 1. 2009 65

 BRIEF NEWS
COMPANIES COMMISSION OF MALAYSIA

Strategic Direction Plan (2009 - 2013)

PricewaterhouseCoopers (PwC) was engaged on 29 October 2008 as consultants to develop the 2nd SDP
for the years 2009 -2013. PwC is expected to complete the study by 31 March 2009. The primary
objectives of the 2nd SDP are as follows:
(a) To formulate a clear future vision for SSM;
(b) To define in detail the vision of SSM by 2013;
(c) To develop key strategic thrusts and initiatives to enable the realization of the five year vision;
(d) To prioritize the strategic initiatives for the years 2009 - 2013;
(e) To develop a realistically timed transformation plan to achieve the Vision by 2013; and
(f) To ensure SSM is on par with other advanced corporate registrars globally.
The approach for the development and completion of the 2nd SDP is categorized into three stages:
Stage 1 - The review and assessment of the current state;
Stage 2 - A - Define and agree to be Vision
B - Refine and prioritize the strategic options; and
Stage 3 - Develop the transformation plan and final 2nd SDP document.
The high level project plans for the three stages with the some key deliverables are as shown in the
diagram below.

Opening & Project Status Completed

In progress
High level project plan

3/11/08 12/12/08 15/12/08 27/02/09 02/03/09 31/03/09

Stage
Sta
t ge 1 Stage
Sta
t ge 2 Stage 3
Review
v ew &
Revi Implementation
Assessment of Defi
Define
fine and Planning
Refine
Refi
fi n e &
Curr
rrent State
Current Sta
t te agree
agre “To-
r e “To
T - • Implementation
Priori
Pr r ti
tise
Prioritise planning
Be” Vi
Visio
i n
Vision
• Measures & targets
• Communications plan
Kick-Off
f Meeting
29 Oct 08

Executive
Management Visioning Prioritisation Follow-up Validate timings &
Workshop Workshop Workshop resource requirements
15 Dec 08 10-11 Feb 09 20 Feb 09

Commission
Members Update Update (Miri) Summary of Feedback Briefing on
16 Dec 08 22 Jan 08 workshop 3 Mar 09 implementation
output timing & needs
11 Feb 09

As at the end of February 2009, the 2nd stage of the study had been completed. The key deliverables,
upon the completion of the 2nd stage, are the finalized SSM Vision Statement, Strategic Thrusts, End-
States, End-State Descriptions, Strategic Thrust Sponsors and Owners as well as high level initiatives to
achieve the end state. A total of 56 projects and strategic initiatives have been identified under the 2nd
SDP.
The project managers for each project have been identified and the detailed project timeline, resources,
deliverables and key performance indicators are in the midst of being formulated.

66 Vol 1. 2009 | SSM Bulletin

 BRIEF NEWS
COMPANIES COMMISSION OF MALAYSIA

“Smart Consumer Campaign”

SSM’s roles in boosting up business sectors
Chief Executive Officer of SSM, Datuk Abdul Karim Abdul Jalil explaining the
operations of BRMC to the Prime Minister, Datuk Seri Abdullah Ahmad Badawi
during the launching of “Smart Consumer Campaign” at Mydin Mall, Subang Jaya,
16 January 2009.
Whilst the current global economic scenario will
have an adverse effect on Malaysian business, it will
on the other hand encourage Malaysian companies
to be more competitive as they strive to be the best
among one another in the local market.
In making this vision a reality, the Ministry of
Domestic Trade and Consumer Affairs recently
launched the “Smart Consumer Campaign” with one
of the campaign’s objective to encourage local
consumers to buy Malaysian products. In addition
to this, the Ministry further aimed to attract new
business registrations.
During the 5-day programme, the Companies
Commission of Malaysia (SSM) had been invited to
provide business registration mobile counters
(BRMC) to facilitate interested individuals to register
new businesses with SSM. This is also in line with
the BRMC’s objectives which aim to undertake a
proactive approach to encourage petty traders and
business owners to register their businesses,
educate petty traders and business owners on their
role and responsibilities under the Registration of
Businesses Act 1956, ensure compliance with the
provisions of the above Act and create awareness
and understanding of SSM products and services.
The benefits of using the BRMC services among
others is that SSM officers will provide assistance in
filling up the registration forms properly and this is
more cost effective and time saving as the
applicants do not need to personally visit SSM
offices to register their businesses.

Nationwide Networking
and Collaboration
ministries like the Ministry
of Entrepreneur and Co-
operative Development
(MeCD) which organized
the nationwide
Entrepreneur Movement
SSM provides BRMC at one of the programmes that was conducted Programme or “Program
by MeCD at MeCD office, Putrajaya.
Gerak Usahawan”. SSM
Taxi owners taking the opportunity to register their
provided the participants businesses during one of the BRMC sessions.
Being an active promoter in with briefing sessions on how and
entrepreneurship and in the need to register their
encouraging new business businesses with SSM. SSM
ventures, SSM has been facilitated registration of
consistently involved in regular businesses on site through the
exchange and collaboration with BRMC service.
professional bodies, regulatory
SSM had also carried out
agencies and international
collaborative initiatives with
corporate registries.
insurance agencies and taxi
SSM also participated in associations to facilitate their
exhibitions and trade fairs members to register their Insurance agents registering their businesses
during one of the BRMC sessions at their insurance
organized by other agencies and business with SSM. agency’s head office.

SSM Bulletin | Vol 1. 2009 67

Contact Us
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