1

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INTRODUCTION
PROCEDURE OF INCORPORATION
EFFECT OF INCORPORATION
POST INCORPORATION REQUIREMENTS
DUTIES OF DIRECTOR AND OTHER
OFFICERS -Company Director, Company
secretary,Auditors,Receivers,liquidators
INSIDER DEALING
WHISTLE BLOWING
CODE OF CORPORATE GOVERNANCE
CO DIRECTORS CODE OF ETHICS
3
INTRODUCTION
Types of Business Organization
Sole proprietorship
Partnership
Company




4
COMPANY LAW IN MALAYSIA
The Companies Act 1965 and the Companies
regulations 1966 form the core in the
regulation of companies in Malaysia.
The Act is modeled on the English Companies
Act 1948 and the Australian Uniform
Companies Act 1961.
5
PROCEDURE FOR INCORPORATION
Pre-incorporation steps
1. Reservation of names
- S.22(6) before registration of the
co, the applicant shall apply to the
registrar for reservation of the
proposed name.
6
Normally, the ROC will reply giving
approval of the chosen name within one
week but promoters often save time by
submitting several names at the same
time on Form 13Aof Companies
Regulations 1996.
A separate form is required for each
name with a separate filling fee also
having to be paid.

7
2. Documentation-among documents to
be lodged with the Registrar:-
Memorandum of Association signed by 2
subscribers, dated and witnessed, with each
subscriber agreeing to subscribe for one
share.
Article of Association signed by the
subscribers, dated and witnessed.
If no articles are lodge, the statutory articles
in Table A will become the cos articles.
8
Form 48A Statutory declaration by a
person before appointment as Director,
or by a promoter before incorporation.
Form 6 Statutory Declaration of
Compliance
Declaration Statement by the First
Secretary that he/she is not a bankrupt
& is qualified under S 139A.
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3. Fees
Fees for incorporation must be paid
when documentation is lodged with the
ROC.
ROC will certifies that the co is
incorporated from the date specified on
the certificate.



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EFFECT OF INCORPORATION
S 16(5) provides that on and from the date
of incorporation specified in the certificate of
incorporation, the subscribers of the
memorandum, together with such other
persons as from time to time become
members of the company, are a a body
corporate by the name set out in the
memorandum.
i.e: after the necessary steps leading to
incorporation have been taken and a
certificate of incorporation has been issued by
the Registrar, a new legal entity is created.
11

Body corporate is a legal person
created and recognized by the law.
The company is capable forthwith of
performing all the functions of an
incorporated company
12
The company is capable of suing
and being sued in its own name.
it may enforce rights by suing and
conversely it may incur liabilities and be
sued by others.
Requires the co itself to be the person
enforcing its rights.

13
The company has perpetual
succession and shall have a
common seal
A co does not exist for a specified
period of time, it does not die but
continues to exist until its name is
struck off by the registrar of co. case:
Re Noel Tedman Holdings Pty Ltd
Company seal a co is required to have
a common seal.
14

The company has power to acquire, hold
and dispose of property
The property of the co is its own, not that of
the members. Case: Macaura lwn Northern
Assurance Co Ltd
The liability of the members may be limited
If a co has incurred obligation it is primarily
liable because its debts are separate from the
debts of its members.
Only when the co has insufficient assets to
pay its debt that members may be liable.


15
The company as a separate legal
entity
As long as the necessary formalities of
incorporation are satisfied, a new
entity comes into existence which is
separate and distinct from its directors
and shareholders.
16
Case: SALOMON V. SALOMON & CO LTD
[1897] AC 22
Facts: Salomon carried on business as a sole
trader for 30 years,and his total assets were
in excess of his liabilities.
He registered a co, S Ltd and transferred his
business assets into the co.
Salomon took one share in the co and his
wife and family took the other six(though
holding them as niminee in a trust for S.
17
When the co got into financial difficulties,
Salomon lent money to the co on a secured
debenture (loan certificate).
When the co went into liquidation, creditors
argued that Salomon could not recover the
loan because he really was the co and the
seven members were not independent of the
registered co.
Held: the co has a legal existence separate
from the members so S could be a creditor of
the co with the priority rights as a
consequence of the debenture.
18
Notes: Accordingly, while
organizationally and operationally the
business was managed solely by
Salomon, in law he and the company
were separate persons.
This separateness is an incident of the
incorporation of a company, even if one
person effectively owns and controls it.

19
In Islam - Separate legal entity?
In Islam is there is any concept of
separate legal entity?
If there is so, what about the religion of
this entity. Can we say that a company
has a religion too???
Had We sent down this Quran on a
mountain, verily, thou wouldst have
seen it humble itself and cleave asunder
for fear of God. Al-Quran, surah al-
Hashr:21
20
LIFTING THE VEIL OF
INCORPORATION
The recognition that a co is a separate legal
entity distinct from its shareholders is often
expressed as the veil of incorporation.
Once a co is duly incorporated, the ct usually
do not look behind the veil to inquire why the
com was formed or who really controls it.
In certain situations a court will ignore the
separate legal entity of a com and look to the
members or the controllers of the com.
Referred to as lifting the veil.
21
This might be done to make the
members of the controllers (primarily
the directors) responsible for the act of
the co.
Eg: the corporate veil has been lifted by
the court a com is used as a vehicle
for fraud, to avoid a legal duty.
The Co Act makes an officer personally
liable for debts incurred by the co.
Case: Aspatra Sdn Bhd v BBMB
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POST INCOPORATION
REQUIREMENTS
Appointment of directors and secretary
S. 122(1) every co must have at least two
directors who must be natural persons.
Common seal
S 16(5) every co is required to have a
common seal; the cos name must appear in
legible characters on the seal.
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Registers
S 141 the co must establish a register of
its directors, managers and secretaries
Minutes books
S 156(1) all the co must establish minute
books in which the minutes of general
meetings and of directors and managers
meeting must be entered.
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Allotment of shares
S 18(2) co limited by shares requires each
subscribers to the M & A state the number of
shares he/she agrees to take.
Accounts and adults
S 167 a co must establish and maintain
accounting records in such manner enables a
true and fair accounts
S 172(1) a cos director to appoint an
auditor any time before the 1
st
AGM.
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DUTIES OF DIRECTORS & OTHER
OFFICERS
Introduction
2 Organizations
I. BOD
2. Members in general meeting
In practice, articles usually confer wide
powers of management of a cos affairs
on the BOD.
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COMPANY DIRECTOR
The definition of director under S
4(1) is wide.
A person occupying the position of
directors even though he may described
by another name.
The term used in the Act includes
shadow director person who are not
named as directors of the co but who
act behind the scenes to exercise
degrees of control over the co.
27
An alternate, associate or substitute
director - in practice, they may be
treated a less than full directors but are
nevertheless regarded legally as
directors within the meaning of the Act
and are subject to directors duties and
liabilities.
Clearly, the co cannot manage itself,
the law demands that every co has at
least two directors. (S 122)

28
The first directors of a co must be
named in the memorandum or articles
of association. (S 122(3))
If this is not done the co cannot be
registered.

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DUTIES OF DIRECTORS
The power of management of companies is
usually vested in the BOD.
In HL BOLTON (ENGINEERING) CO LTD.
V. GRAHAM & SONS LTD (1957) 1 QB
159
Lord Denning stated: A co may in many
ways be likened to a human body. It has a
brain and nerve center which controls a what
it does. It has hands which hold the tools and
act in accordance with directions from
center.
30
Some of people in the co are mere
servants and agents who are nothing
more than hands to do the work and
cannot be said to represent the mind or
will.
Others are directors who represent the
directing mind and will of the co, and
control what it does.


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3 duties of director:-
1. Fiduciary duties
2. Statutory duties
3. Duties of care, skill and diligence.

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FIDUCIARY DUTIES
Fiduciary r/hip: r/ship between a person
in a position of trust, the fiduciary and
the person for whose benefit the
fiduciary acts.
Fiduciary duties of the director can be
summarized as follows:-
1. To act bona fide in the interest of the
company
2. To exercise power for their purpose
3. To avoid conflict of interest
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DUTY TO ACT BONA FIDE IN THE
INTEREST OF THE COMPANY
The fiduciary duties of directors of a co
require them to act bona fide in the best
interest of a co as a whole.
Whilst the power of management are
conferred on the BODs collectively, the
fiduciary obligations are owed by the
directors individually.
Whether a director is in breach of these
fiduciary obligations depends on the
particular circumstances of each cases.
34
Lord Greene MR in RE SMITH AND
FAWCETT LTD (1942) 1 ALL ER 542
they must exercise their discretion
bona fide in what they consider not
what the court may consider to be in
the interest of the company, and not for
any collateral purposes.
S 132(1) officers must at all times act
honestly in the exercise and discharge
of the duties of their office.


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This duty is a subjective duty there is no
breach where the directors act in what they
honestly believe to be the interest of the co
The court are generally reluctant to override
the business judgment of the directors.
Directors are presumed to have acted bona
fide for the benefit of their co and those
persons alleging a breach of duty bear the
onus of proving that this is in fact not the
case.
Case:Fawziah Holding Sdn Bhd. v Metramac
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acting for the benefit of the co means
that the director must act;
In the interest of the shareholders as a
collective group
They interest of a group of co
The interest of employees
The interest of shareholder
The interest of the creditors
37
DUTY TO EXERCISE POWERS FOR
PROPER PURPOSES
In exercising their powers bona fide,
the directors also use them for a proper
purpose.
If the purpose is collateral, the action
will be invalid unless approved by the
shareholders in general meeting.
38
CASE: BISHOPGATE INVESTMENT
MANAGEMNET LTD V. MAXWEL
(1993)
Court: if a director choose to
participate in the management of the co
and exercises powers on it behalf, he
owes a duty to act bona fide in the
interest of the co. he must exercise the
power solely for the purpose for which
it was conferred

39
Where a director exercises the powers
granted to him by the memorandum or
articles in a manner other than for its
proper purpose the action is beyond the
actual authority of the director.
Any agreement with third party in such
circumstances is binding on the co,
however, unless the third party had
notice that the directors were exercising
their powers for purposes other than for
the co.
40
It is open to general meeting to ratify
the actions of the directors.
41


CASE: MILLS V MILLS
Dixon J: a power conferred upon
them cannot be exercised in order to
obtain some private advantage or for
any purpose foreign to the power.
CASE: ALEYN V BELCHIER (1758)
Lord Worthington: no [point is better
established than that, a a person having
power, must execute it bona fide for
the end designed, otherwise it is
corrupt and void.
42
In cases where it is alleged that the directors
have exercised their powers for improper
purpose, the onus of establishing the
directors acted improperly rest with those
alleging the breach of duty.
43
DUTY TO AVOID CONFLICT OF
INTEREST
The general rule is that directors must
not place themselves in a position
where duty and interest are in conflict.
This is part of a wider rule that a
trustee must not place himself in a
position where conflict of interest may
arise.
Directors are trustees in the sense that
they owe fiduciary duties to the co.
44
The rule can be summarized thus: if a
director obtains a benefit while director
of a co in circumstances where there
could have been a conflict of interest,
he is accountable to the company for
that benefit unless he has disclosed it
and obtained the approval of the co.
The rule effectively means if a
director is in doubt, he should disclose
the possibility of conflict of interest.

45
The courts have been strict on the matter
the director will to be able to plead actions
were made bona fide or in the interest of the
co and the fact that the co have made profit
is irrelevant.
Where there is a conflict of interest, the
contract is avoidable at the instance of the co
but the right to avoid the contract is lost in
certain circumstances, I.e:
The co affirms the contract, or
Delays unduly before rescinding, or
Restitution becomes impossible,
The rights of bona fide parties intervene.




46
As well as setting aside the contract, the
court can call upon the director to account for
any gains he has made in the transaction.
In all such cases, it is not necessary to show
that there has been an actual conflict of
interest: it is enough to show there is a real
sensible possibility of one.
47
Particular instances where conflict of
interest may arise:
o 1. A director may not use information
obtained by virtue of his position to
make a profit for himself.
S 132(2) provides that any co officer may
not made improper use of any information
acquired by virtue of his position to gain
direct or indirect advantage for himself or
another, or to cause detriment to the co.
The penalty is that he will be liable to the co
for damage suffered and is guilty of an
offence punishable by imprisonment or fine.
48
o 2. A director may not use co
property or money to make a profit
for himself.
If he does so, the director is in breach
of his duty and the profit he makes will
belong in equity to the co.
He may also be guilty of criminal breach
of trust since he is regarded as a
trustee of co property, to be used for
the purposes of the co only.
49
o 3. A director may not use his position to
obtain profit for himself.
If he does obtain a profit by using his position
he will be accountable to the co for that
profit.
Accepting a bribe is clearly a breach of this
rule and the co will then be able to recover
the bribe or sue for damages.
50
CASE:MAHESAN V.MALAYSIAN
GOVERNMENT OFFICERS CO-
OPERATIVE HOUSING
SOCIETY(1978)
Facts: The director received a bribe
amounting to one quarter of the profit
made by a person who sold land to the
Society.
Held: The society could recover the
amount of the bribe, or they could sue
the director for his breach of duty but
not both.


51
In the event, since the loss to the
society was greater than the amount of
the bribe, the director was ordered to
pay damages to the Society.

52
o 4. A director may not retain a
secret profits made out of his
fiduciary relationship with the co
A person in fiduciary position may not
profit from that position.
Where he does so he may be called to
account for his profit.

53
The rule may be regarded as an element of
the no conflict rule exist independently of
each other.
CASE: REGAL (HASTING) LTD V
GULLIVER (1976)
Facts: R owned a cinema and wanted to buy
two more to sell all three as a group.
A subsidiary co was set up to buy the
additional cinemas.
In order to raise the money required the
directors agreed to subscribe for extra
shares.
54
When the transaction was completed,
the directors had made a profit on the
shares they held in the subsidiary co.

55
Held: the directors had obtained their
profits while acting as directors and
managers of R and were thus liable to
account for the profits, even though
they had acted bona fide throughout
the transaction.
Directors may be permitted to retain
their profits where the co in general
meeting approves the situation, band
articles commonly provide for retention
of profits in a Regal type of situation.
56
o 5. A director cannot enter into a
contract with his co without disclosing
the fact he has an interest
The common law rule is reinforced by CA
1965 132E (substantial property transactions
involving directors) and by CA 1965 S 131
which makes disclose of certain conflicts of
interest mandatory.
57
Under S 131, the following must
disclosed:
The nature of the interest (including
that of family members);
The nature, character and extent of any
conflict that might arise by virtue of the
director holding office;
The nature, character and extent of
any conflict that might arise by virtue of
the director holding any property.

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STATUTORY DUTY TO DISCLOSE
Directors are required by the CA to disclose
certain information, as part of their duties.
S 131: demands disclosure of potential
conflict of interest and also of interest in
contracts with the co.
Additionally, S 135: places a general duty of
disclosure on directors.
59
They must give notice in writing to the co of
certain matters, I.e:
particulars of interest in the shares,
debentures, participatory interest, rights,
options and contracts for the purpose of
maintaining the register of directors
shareholdings;
Particulars of any changes in the above;
Particulars of events and matters affecting
compliance with the Act;
In the case of a director of a public co or its
subsidiary the date on which he attains or will
attain the age of 70.


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Table A, Art 72(h)
the office of director is vacated if the
director is directly or indirectly
interested in any contract with the
company and fail to declare the nature
of that interest in the manner required
by the Act
The director could have protected
themselves by making full disclosure to
the general meeting
61
Article 81:
a director shall not vote on a matter in
which he or she is interested and if he or she
does, the vote is not counted.
Proceedings at board meeting only.
A director who is also a shareholder is not
disqualified from voting at a general meeting
of members on matters affecting his personal
interest as shareholder.
CASE: NORTH-WEST TRANSPORTATION
CO V BEATTY
62
Henry J in NATIONAL MUTUAL LIFE
NOMINEES LTD V WORN [1990]
the standard of care to be exercised by
a director has been said as being to
exhibit the degree of skill reasonably to
be expected from a person of his
knowledge and experience.
63
OTHER CORPORATE OFFICERS
THE COMPANY SECRETARY
S 139(1) every co is required to have at
least one secretary
Each must be a natural person of full age
who has his or her principal or only place of
residence in Malaysia.
S 139(1A) the first secretary of the co to be
named in the M & A
S 139(1B) the office of secretary must not
be vacant for more than one month at any
one time.

64
A CS is appointed by the directors and
at least one CS must be present at the
registered office of the co, by himself or
by his agent or clerk, at times when the
registered office is open to public.
The co secretary ship may be held by a
a director but anything that is required
to be done by a director and a
secretary cannot be done by a single
director acting in both capacities.
65
A person may be a secretary of more
than one co and may have other
employment.
Anything required to be done by the CS
may, where the secretary is absent of
the office is vacant, be done by nay
assistant or deputy secretary.
If there is no such assistant or deputy
capable of acting, any officer of the co
may undertake the task if so authorized
generally or specifically by the directors.

66
QUALIFICATIONS OF CS
A member of a certain prescribed professional
body or any other body prescribed by the
Minister
Licensed by ROC
The prescribed bodies are:
The Malaysian Association of the Institute of
Chartered Secretaries & Administrators;
The Malaysian Institute of accountant;
The Malaysian Bras
The Sabah Law association; and
The Advocate Association of sarawak.
67
DISQUALIFIED IF;
An undischarged bankrupt
Convicted of prescribed offences under
the Act
No longer a member of a proof. Body
No longer holding a license

68
DUTIES OF A SECRETARY
To carry out the functions of the chief
administrative officer of the co
To ensure that the necessary registers
required to be kept by the Act are established
and property maintained
To ensure that all returns required to be
lodged with the ROC are prepared and filed
within the appropriate time limits
To organize and attend meetings of the
shareholders and directors, including sending
out of notices, the preparation of agendas
etc.

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To be conversant with meeting procedures
To ensure that cos book of account are kept
in accordance with the Act
To supervise the co' share capital generally
To supervise the preparation tax return
To attend the cos insurance requirements
To be conversant with statutory requirements

70
AUDITORS
INTRODUCTION
Under Malaysian Law, the co or its directors
must ensure that when they appoint an
auditor, the proposed auditor is properly
qualified; I,e the person must be an
approved auditor.
An approved auditor is one who has the
necessary qualification and has applied to the
Minister of Finance and has been granted
approval to act (Form 3) or renewal of
approval to act (Form 4) as auditor.

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In making the application, the person must
show, he or she has the necessary
qualification, is of good character and is
competent to perform the duties of an auditor
under the CA 1965.
The approval of Minister is renewable every
two years.
In most cases, it is a firm that will be
approved rather than an individual.
72
CA 1965 S 9(7) recognizes such appointments
as being the appointment of all the partners
in the firm as joint auditors.
By CA 1965 S 8 every partner of the firm
must also individually be an approved co
auditor.
Before a co appoints an auditor or audit firm,
consent in writing to act as auditor must be
obtained from the proposed auditor or audit
firm. CA 1965 S 9(6).
73
The function of an auditor is to carry
out an audit and present a reliable,
independent report on the accounts and
financial position of a co.
An auditors report contain a
professional opinion based on the audit
of the cos accounts.


74
DUTIES OF AN AUDITORS
Contractual r/ship with the co
Express/implied terms in such contracts
that the auditor will;
1. Carry out an audit
2. Report to members his opinion based
on the audit, whether the accounts give
a true and fair view of the position of
the co.
3. Be independent of the co

75
4. Exercise a reasonable degree of care
and skill
5. Statutory duties
S 174 powers and duties of auditors
as to reports on account

76
RECEIVER
INTRODUCTION
A receiver is appointed as a remedy for the
debenture holders in the event of a breach by
the co of the conditions attached to the
debentures.
Typically, he is appointed to a co by secured
creditor ,such as debenture holder under
floating charge, and his function is to pay off
the debt of that secured creditor.
The appointment of receiver is an early
method by which a creditor could safeguard
his equitable interest in the secured property.

77
Powers of receivers
A receiver can be appointed either by
debenture-holders or by order of the court.
Once appointed, he supersedes the authority
of the directors (although their actual
appointment are north terminated) in the
conduct of the business.
78
The directors will still be liable to default of
the co, however, in respect of compliance
with the Act,for instance, or making returns
to the ROC.
Where the receiver is appointed by the
debenture holders,he is their agent, so they
will be liable on any contracts he enters
unless the terms of issue provide otherwise.

79
Disqualification for appointments as
receiver
CA 1965 S 182 provides that the following are
not qualified to be appointed as receiver of
the property of a co:
A corporation, (unless authorized by law)
An undercharged bankrupt
A mortgage of the co property
An auditor of the co
An officer of the co which is a mortgage of co
property
Any person who is not an approved liquidator
or the Official Receiver.


80
DUTIES OF RECEIVER
Common law duties
Primary duty to the appointing
debenture-holders
CASE: RE B JOHNSON & CO
(BUILDERS) (1995) 1 CH 634
Obliged to get in the property charged
to manage the cos business and
ultimately to sell the charged property
for the purpose of discharging the
secured debt.
81
STATUTORY DUTIES
1. S 188(1)- to notify the co and other
relevant authorities of his appointment
2. S 186(1) to notify the ROC within 7 days
3. S 190(1) to prepare accounts of the
receipts and payments and an estimate of the
total value of the property in respect of which
he was appointed.
4. S 191 payment of certain debts out of
assets subject to floating charge in priority to
claims under charge.
82
LIABILITIES OF RECEIVER
Liability for contracts
Liability for torts
Liability for breach of duty
S 192(2) the court has a discretionary
powers to examine the conduct of a
receiver
Liable to compensate the co for any
loss or damage

83
LIQUIDATORS
Where a compulsory winding up order is
made, it will appoint a liquidator.
In a compulsory winding up,a liquidator is
appointed by order of the court
In a member's voluntary winding up, the
liquidator is appointed by the general meeting
of members.(s 258)
In any case, a person shall not be appointed
as liquidator of a co unless prior to the
appointment he has consented in writing so
to act. CA 1965 S 10(4).

84
DUTIES OF LIQUIDATORS
General duties
Agency r/ship fiduciary duties
RE PARTRIDGE
the liquidators principal duties are to take
possession of and protect the assets,to make
lists of contributories,to have disputed cases
adjudicated upon, to release the assets and
to apply the proceeds in due course of
administration amongst the creditors and
contributories.
85
Specific duties of liquidators
Proper administration
Collect the co' assets
Preserve assets
Release assets
Distribute assets
Acquaintance with the cos affairs
Report of breaches of an Act
Effect dissolution
86
INSIDER TRADING (IT)
IT is a process whereby a person
connected with a co uses information
not generally available to the public
when dealing in securities.
It is the use by an insider of price-
sensitive information, not available to
the general public, to trade to his
advantage in the shares of his co.

87
Securities fraud that are governed by
the Securities Industry Act
The information in question must have
been obtained by the insider by reason
of his connection with the corporation
Eg trade secrets,co strategy and
plants


88
The price sensitive information includes
anything held by virtue of the connection
which it would be reasonable to expect would
not be disclosed except for proper
performance of the functions attached to the
position of the individual concerned.
It is necessary to show the person knew it
was unpublished price sensitive information in
relation to the co securities in question.
89
Corporate insiders are:
A Director
A secretary
An executive officer
An employee
A receiver/manager
A liquidator
A trustee

90
THE PROHIBITON ON INSIDER
TRADING
S 89 no person except a co or an
agent of a co authorized in that behalf
under the seal of the co shall issue or
offer to the public for subscription or
purchase or shall invite the public to
subscribe for or purchase any interest.
91
S 91(1) a person shall not issue or offer to
the public for subscription or purchase or
invite the public to subscribe for or purchase
any interest unless, at the time of the issue,
offer or invitation, there is in force, in relation
to the interest, a deed that is an approved
deed.
92
WHISTLE BLOWING
The voluntary release of non public
information, as a moral protest, by a
member or former member of an
organization outside the normal
channels of communication to an
appropriate audience about illegal and
or immoral conduct in the organization
that is opposed in some significant way
to the public interest.
93
CRITERIAS
It can be done only by a member of an
organization
There must be non public information
The information is generally evidence of
misconduct of an org or some of its members
The information must be release outside
normal channels of communication
The release of info must be done voluntarily
It must be undertaken as moral protest. I.e
to correct some wrong & not to take revenge.
94
TRADE SECRETS
Include those information an knowledge
to which a firm has proprietary right,
which it can legally and morally protect
and refuse to reveal.
95
CORPORATE GOVERNANCE
DEFINITION
The process and structure by which the
business affairs of the co are directed
and managed, in order to enhance long
term shareholder valued through
enhancing corporate performance and
accountability, whilst taking into
account the interest of other
shareholder.
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Corporate governance refers to the
rules of the game that enables
shareholders to exercise appropriate
oversight of a company to maximize its
value and profits. It is a set of
provisions that enable the shareholders
through voting power compel those in
operating control of the firm to respect
their interests (Scott, 1998).
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OBJECTIVES
To ensure that directors and managers, to whom the
running of large corporations has been entrusted by
the shareholders, carry out their responsibilities
faithfully, placing the interests of the corporation
ahead of their own.
To essentially secure sufficient disclosure so that
investors and others can access cos performance
and governance practices and respond in an
informed way.
To realize long term shareholder value, including the
minority shareholders.
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The 1997 Asian crisis exposed the
hazards of corruption and cronyism and
business conducted led to misallocation
of fund (Engardio and Clifford, 1999).

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In Msia, Petronas has helped buy debt-
burdened shipping assets controlled by
the Malaysian Prime Minister eldest son
and is also preparing to buy the cash
strapped national car maker, Proton
(Jayasankaran, 1999).
The buy back of Malaysian Airline (MAS)
over twice the current market price of
MASs shares by the government is
another example of politically connected
business behaviour (Holland, 2001).
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In HK Stock Exchange provides board
guidelines to public listed companies
and they believe that self-regulations by
boards of directors is more effective
and efficient than the imposition of
excessive and rigid regulations in
enhancing good corporate governance
practices.
In promoting good corporate
governance, HK Company Registry
monitors closely and enforces the
disclosure of information timely on
directors and companies.
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CODE OF CORPORATE GOVERNANCE
THE BOARD OF DIRECTORS
Principal responsibilities of the Board
Reviewing and adopting a strategic plan
for the co
Overseeing in the conduct of the cos
business to evaluate whether the
business is properly managed
Identifying principal risks and ensure
the implementation of appropriate
systems to manage these risks
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Succession planning, inclosing appointing,
training , fixing the compensation of and
where appropriate, replacing senior
management
Reviewing the adequacy and the integrity of
the cos internal control and management
information systems, including systems for
compliance with applicable laws, regulations,
rules, directives and guidelines.
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Compliance of the Code
The existence of a Code, however, does
not ensure that directors, officers and
employees will comply with it or act in a
legal and ethical manner.
It has no legal force. If there is any
non-compliance, the law will only take
action if there is any breach of existing
act e.g. Companies Act, SC etc.
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AOL Time Warner
The worlds largest media company
allowed a British company to buy
advertising instead of paying arbitration
award in a large dispute. It made false
and misleading statements about the
companys business and financial
condition and it generated advertising
and commercial revenue as a result of
unconventional transactions.
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TYCO
This company evaded more than one
million dollars in sales taxes on art
masterpieces. The CEO and the CFO
defrauded the company and investors
by taking more than $170 million in
improper bonuses and unauthorised
loans and fraudulently obtained more
than US$430 million from selling Tyco
stock over more than seven years.