INSTITUTE OF APPROVED COMPANY SECRETARIES (387525-X)
(A Company Limited By Guarantee – Incorporated Under The Companies Act, 1965)

MEMORANDUM TO THE COMPANIES COMMISSION OF MALAYSIA
1.
Introduction
1.1
First and foremost, we would like to congratulate Encik Abdul Karim Abdul
Jalil on your recent appointment as Chief Executive Officer (CEO) of the
Companies Commission of Malaysia (CCM).
1.2
We are as pleased as CCM to note that the compliance rate in terms of annual returns lodged with CCM has improved significantly from 44% in 2003 to
64% in 2004. The improvement is attributed to the various initiatives undertaken by CCM, notably the striking-off activities under Section 308 of the Companies Act, 1965, the enforcement drive, public awareness campaign through media advertisements complemented by numerous surveillance operations and statutory inspections to enhance the compliance rate, as stipulated in CCM’s 2004 Annual Report. Such publication by CCM, which contains various initiatives to enhance the compliance rate, is undoubtedly a laudable effort.
2 Purpose of the Memorandum
2.1
This Memorandum is initiated in response to views from our members who represent their corporate clients regarding the imposition of heavy fines for non-tabling of audited accounts at their Annual General Meetings. The
Institute of Approved Company Secretaries (IACS) is deeply concerned about this development. We understand that CCM has imposed the revision of fines upon companies for non-tabling of audited accounts in exercise of the power conferred by Section 371A(1) of the Companies Act, 1965. We believe that it would be more reasonable for CCM to regularize such revision of fines on companies by informing company secretaries in advance.
2.2
At the Inaugural Corporate Practice Consultative Form (CPCF) No.1/2005 held on 4 October 2005, when you have set as your prime objective in the
Terms of Reference for CPCF, being Company Secretarial Practitioners and
CCM to work together on matters pertaining to the Companies Act, 1965 and other specific corporate practice issues.
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2.3
The Terms of Reference of CPCF are: a.
to provide a platform among the representative of the professional bodies and other selected organizations with the Companies Commission of
Malaysia, specifically to deliberate on matters pertaining to the
Companies Act 1965 and its subsidiary legislations dealing with specific issues; b.
to promote active joint consultation, co-operation and assistance among
CPCF members and senior officers of the Companies Commission of
Malaysia on matters pertaining to company law practice issues; c.
to promote discussion and recommendations from the participants on matters pertaining to any pressing issues in company law and practice; d.
to discuss issues or provide inputs in relation to improvements that could enhance the Companies Commission’s services delivery to the public.
3.
Rationale
3.1 Firstly, the exercise of this power at this time is in fact problematic as many company secretaries are not made aware of such notification in advance. The rationale for such an argument is that their clients will need to be notified of such revision of fines to be imposed and the consequences of non-compliance of the relevant provisions of the Companies Act, 1965.
3.2
We also wish to seek clarification whether it is appropriate for CCM to embark on this revision of fine, which would ultimately enhance the level of compliance rate across the board?
3.3
Arising from the above, we therefore wish to enlighten you on the following problems: - a.
The compounds for non-tabling of audited accounts at AGMs are excessive without taking into account the period of delay in lodgement of the audited accounts. b.
This move is not in line with the concept of business-friendly as advocated by CCM. c.
We wish to bring to the notice of CCM the predicaments and problems faced by companies. In view of the present economic adversity and
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environment, they are facing numerous business problems ranging from poor cash flow, escalating operational costs, statutory costs to complement the enhancement of compliance rate, high labour turnover including debt collection problems. Presently, many companies are operating under very difficult business conditions. d.
There is no prior warning to us to enable our Association to take a proactive step to disseminate all relevant information on such revision of fines to our members.
4.
Suggestions
4.1 We therefore make the following suggestions to CCM: - a. If enhancement of compliance rate is one of the objectives which CCM wishes to achieve at the end of the day, may we suggest that CCM focuses on encouraging companies to come forward to lodge their Annual
Returns by taking the following initiatives: - i) To be lenient on the penalties levied on companies for various violations; ii) Reducing the RM150.00 annual prescribed fees for lodgement of
Annual Return. This is in line with CCM’s objective of reducing cost of doing business; and iii) Getting the co-operation of company secretaries, auditors and directors to solve this problem of non-compliance. By so doing, we should be able to beef up responses of defaulters to pay their compounds accordingly.
As we have stated in para 2.3., we are of the opinion that this matter be discussed and agreed in the CPCF meeting before implementation. As such we propose to convene an urgent
CPCF meeting for this purpose.
By so doing, we are confident that implementations, actions and process on the compliance rate would improve tremendously. Non-compliance companies will then be filtered out and dealt with subsequently. We further wish to reiterate that the compounded effects of the matter can be felt only after several years, if implemented.
4.2
From our understanding, the Corporate Law Reform Committee (CLRC) for
CCM is looking into the possibility of abandoning the audit requirements for small and medium-sized companies as was adopted by other South East
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Asian (S.E.A) countries. Malaysia is the only country in S.E.A where compulsory audit is required. In view of this, the present revised fines for non-tabling of audited accounts will be redundant in the future, whilst making its implementation now as questionable.
4.3
To encourage defaulters to come forward to comply with the provisions of the Companies Act, 1965 and Companies Regulations 1966, we wish to suggest that CCM reduce the compound rate and review the present system of penalising companies. A scale rate system with increasing time for repeated default would be preferred.
Example:
Offence Present Rate (RM) Proposed Rate (RM)
Non-tabling of audited accounts
Year of audited account
2001 1,000 400
2002 1,000 300
No violation
2003
2004
1,000
1,000
0
200
100
0
Previous Rates:
Offence
Non-tabling of audited accounts
Period
8 days – 3 months
3 months – 6 months
6 months – 12 months
More than 12 months
Previous Rate (RM) New Rate (RM)
50 150
100
150
200
250
500
1,000
4.4
A comprehensive study on violations can be carried out to identify the reasons of non-compliance, the information of which can be used in the formulation of penalties taking into account the feedback of auditors, secretaries and directors in your quest to enhance the compliance rate across corporate industry.
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5.
Conclusion
5.1
We applaud the fact that many company secretaries from all backgrounds are giving their views on this matter and offering various opinions on this subject. In view of this, a special committee can be established by CCM to carry out this comprehensive study, which include but not limited to a survey questionnaires. These questionnaires can be circulated to all stakeholders and compliance officers concerned and thereafter to make necessary recommendations to CCM.
5.2
We propose that a CPCF meeting be convened to study and implement the recommendation of the committee as referred in para 4.3(a)(iii).
5.3
We propose that CCM provide a concession period during which the old rates should remain in force.
We look forward to your reply in respect of the aforesaid matter in due course.
Dated at Kuala Lumpur this 13 January, 2006.
Thank you.
Submitted by:
……………………
Signature
Name: Bahari Bin Johari
Designation: President
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