Extent of Responsibilities of Corporate Organisations for Bribery Acts of Their Employees

Enlcosed below is the full speech from a Corporate Governance on Corrupt Practices by YBhg Datuk Tun Abd Majid b. Tun Hamzah, Deputy Solicitor General 1, Malaysia held on 2 Dec 2014 in Concorde Hotel

Bismillahir Rahmanir Rahim, Assalamualaikum,

Salam Sejahtera and Salam 1Malaysia.

Distinguished guests,

Ladies and gentlemen,


A corporation is an abstraction. It has no mind of its own any more than it has a body of its own. Its active and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation.[1]

Generally, a corporation consists of a board of directors, a company secretary, shareholders and employees. In Malaysia, there are various types of corporations such as private companies, public companies, government-linked companies (GLCs) and limited liability partnerships.

The objective of a corporation is generally to achieve profitability. However, the manner in which they use resources and the extent to which they are sensitive to the needs and aspirations of a nation is also critical to their long-term survival and growth. Sustainability of businesses therefore includes not only economic sustainability but it embraces social and environmental sustainability as well.

Corporations play an important role in a country’s development. They have provided employment and contributed to the country’s economic and social development. In contributing to social development, the role of a corporation goes beyond safeguarding the interest of its shareholders and maximization of profits. Corporations must be cautious that the operation of their business does not adversely affect the community in which they operate, be it from the economical or environmental perspective. Therefore, the idea of corporate social responsibility was developed as a management concept which allows companies to integrate social and environmental concerns in their business operations and interactions with their stakeholders. [2]

In achieving their financial goals, corporations might be tempted to resort to corrupt practices such as bribery in order to capitalize on their profits. Bribery is defined in the Black’s Law Dictionary as offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or other person in charge of a public or legal duty. The act of bribery can take many forms, for example, to secure or keep a contract, to gain an advantage over a competitor and to disregard health safety issues and poor performance.

In the local context, several statutes criminalise the act of bribery. For example the Customs Act 1967, Excise Act 1976 and the most prominent of all, the Malaysian Anti-Corruption Commission Act 2009 (MACC Act 2009). The MACC Act 2009 does not define the word bribery but instead defines the word “gratification” to include financial benefit, valuable consideration of any kind and service of favour of any description.[3]

The MACC Act 2009 only makes it possible for an individual and not a corporation, to be charged for an act of bribery. However, other jurisdictions such as the United Kingdom provides for corporations as well to be charged for acts of bribery committed by persons associated to it.

Section 7 of the UK Bribery Act introduces a corporate offence of failing to prevent bribery. The said section is designed specifically to provide a form of liability to a corporation if it can be shown that an “associated person” of the commercial organisation bribes another intending to obtain or retain a business advantage for the commercial organisation.

Persons associated with a company include an employee, director, agent, and many more. The general rule is based on the Latin doctrine of “respondeat superior” which translates to “let the master answer”. In Malaysia, the MACC Act 2009 defines the term “agent” to include any person employed by or acting for another, a trustee, an administrator or executor of the estate of a deceased person and a subcontractor as well. [4]



The liability of companies, as a corporation distinct from its members, for criminal acts of its members is what gave rise to the concept of corporate criminal liability. The concept of corporate criminal liability proceeds from the assumption that a corporation is a legal entity distinct from its owners, officers or members. The principle of separate legal entity allows a corporation to shield behind its employees to evade criminal liability.

Allow me to define the concept of corporate criminal liability. Corporate criminal liability is defined as the legal responsibility of a corporation for criminal actions, or the failure to act in some cases, committed by the corporation’s employees for the benefit of the corporation.

Historically, the concept of corporate criminal liability can be traced from the case of New York Central & Hudson River Railroad Co v. United States [5]. There, the Supreme Court of the United States imposed criminal liability unto a corporation by establishing an agent-principal relationship with its employee. In this case, the Supreme Court of the United States expressed its view that criminal liability can be extended to a corporation as long as it could be established that the criminal act or omission concerned was “committed by its’ officers, employee, or agents within the scope of their authority and at least in part for the benefit of the corporation”.[6]

Allow me to draw your attention to the crux of the concept of corporate criminal liability. There are two ways in which a corporation can be held liable for the acts of its employees which are, firstly by applying the vicarious liability approach and, secondly, using the identification approach.

Under the doctrine of vicarious liability, a corporation can be held vicariously liable for the criminal conduct of its employee if the said employee has acted within the scope of his authority or employment. The legal justification for this approach is to enable the courts to extend the reach of criminal liability to corporations.

The doctrine of vicarious liability in the context of corporate criminal liability can arise in two situations[7]. Firstly, if an employer delegates to another person the performance of duties cast on him by statute, the employer may be held liable for the acts of that other person.

Secondly, an employer can be held liable for the physical act done by its employee if that act is held in law to be the act of the employer. In this regard, Lord Atkins, in the case of Mousell Bros Ltd v London and Northwestern Railway Co [8] held that an employer can be vicariously liable for the criminal conduct of its employee as long as the said conduct was committed in the course of his employment and the relevant statutory provision criminalising such conduct does not state that it may only be committed by a natural person. This means that a corporation can be held liable for the offence committed by its employee if it was done in the course of his employment.

As I have laid down earlier, the second approach of establishing corporate criminal liability is the identification theory. The essence of this theory is that the corporation attains criminal liability through a direct connection between the company and the person responsible for the criminal harm. It must be an individual or individuals who are of sufficient standing that they are ‘identified’ with the company. This model of criminal liability is often referred to as the ‘controlling mind theory’ or the ‘alter ego’ doctrine.[9]

The first of a trio of cases which established this theory was DPP v Kent and Sussex Contractors Ltd [10] where the Crown Court ruled that the knowledge of its employee, who has committed the wrongful conduct, can be imputed to the body corporate as long as the employee in question is sufficiently high up in the corporate hierarchy.

A different approach was taken in the case of Meridian Global Funds Management Asia Ltd v Securities Commission[11] where the Privy Council held that the knowledge of a junior employee would be sufficient for the purpose of imposing criminal liability unto the corporation.

In the United States, a distinct theory known as the aggregation theory was developed in the United States to impose corporate criminal liability. Under this theory, the corporation aggregates the composite knowledge of different employees to determine liability. The company aggregates all the acts and mental elements of the relevant employees within the company to determine whether as a whole they would amount to a crime if they had all been committed by a single individual.

The leading case which applied this theory is United States v Bank of England[12]. In this case, the bank was convicted for failing to report to the Treasury Department a series of withdrawals exceeding $10000 made by a specific individual. In affirming the decision of the lower court, the Court of Appeal imputed knowledge to the bank by aggregating the knowledge of its employees and stated:

“If employee A knows one facet of the currency reporting requirement, and B knows another facet of it, and C a third facet of it the bank knows them all…A collective knowledge is entirely appropriate in the context of corporate criminal liability…”

An examination of the various approaches adopted by courts in imputing corporate criminal liability reveals a fine line between the doctrine of vicarious liability and identification approach. The former incriminates the corporation if its employee is acting on its behalf or the corporation delegates the duty cast on it by statute to its employee. The latter approach, on the other hand, requires a mental element and places emphasis on the concept of “a directing mind”. These concepts have been adapted into Malaysian law which I shall touch on shortly. The United States, on the other hand, has developed the aggregation theory to further impose corporate criminal liability by looking at the collective knowledge of several employees.



The Doctrine of Vicarious Liability And Corporate Criminal Liability: A Fine Line

             There is a fine line between the doctrine of vicarious liability and corporate criminal liability. These two concepts may complement each other; however, both stand independently. There are two circumstances where corporate criminal liability can be established, either a corporation is held vicariously liable for offences committed by its employee or it has personally committed the offence. Whereas the concept of vicarious liability is only confined to offences committed by the employee of a corporation and do not apply in situations where the offence is committed by the corporation itself. Although an act is committed by the employee, it is the corporation’s own failure to prevent the harm that renders it liable.


One has to understand that the person committing the act does not himself commit the offence because it can only be committed by the person fixed with the duty. Such duties have been described as non-delegable not because the person fixed with the duty must carry it out personally (which is impossible In the case of a corporation), but because the responsibility cannot be delegated.[13]


The distinction between both of these concepts can be seen in an event of who commits the criminal offence. Corporate criminal liability will be imposed if a corporation is liable for the offence committed by its employees (vicarious liability) or for its own personal criminal conduct (personal liability). The concept of vicarious liability comes into play only when an offence is committed by the employee of a corporation.


For example, where a personal duty is imposed on a corporation under a statute and the breach of the duty is done by the employee instead, the corporation is personally liable for breaching the duty imposed on it. This amounts to corporate criminal liability in the corporation’s personal capacity. However, if a duty is not imposed on a corporation and there is a breach of duty by the employee, the corporation may liable. This amounts to corporate criminal liability where the corporation is vicariously liable.


BUT the real distinction is – an offence (corporate liability) will be committed only if that agent, subsidiary or person intended to obtain or retain business or an advantage in the conduct of business for the organisation.[14]



 Ladies and gentlemen,


The law in Malaysia has seen gradual development in recognising that a corporation is capable of committing an offence.


Strict Liability

             The offence of strict liability can be committed by a corporation. Since there is no need for proof of mens rea, then there is no difficulty in establishing blameworthiness on the corporation. [15]


Ever since 1948, the local courts have recognised corporate criminal liability in respect to strict liability, which can be observed in the case of PP v Ginder Singh & Chet Singh[16]. In that case the company was held liable for an overloading offence committed by its employee due to the fact that a statutory obligation was placed on the owners to hold responsibility pursuant to the Motor Vehicles Commercial Use (Amendment) Regulations 1948.The court explained the imputation of liability on the company in the following words:

It matters not that their vehicles be overloaded by an employed driver or even on the direction of a third party as in this case; or that the overloading be done without the knowledge of the owner; it may even be against his express commands. If the motor vehicle is found carrying a load in excess of the permitted maximum set out in the haulage permit, then the owner bears the responsibility. His only safeguard is to ensure that his vehicle is in the charge of a responsible person who appreciates the regulations and conditions of transport. If a third party interferes then the owner can only cease in future to do business with that third party; he cannot evade his absolute liability.”

 Deeming Provisions

 Domestic legislation in Malaysia has also imposed corporate criminal liability. For example, the Securities Commission Act 1993, in section 138(3), provides that when an employee of a body corporate infringes any provision under the Act, the body corporate shall also be deemed to have committed an offence. Besides, the Consumer Protection Act 1999 (CPA 1999), in section 144, provides that where an offence is committed under the Act by an employee, agent or employee of the agent of a principal, the principal shall be deemed to have committed that offence unless the contrary is proved. Therefore, this Act imposes a statutory obligation on a corporation, being the principal, to be accountable for the acts of its employee, agent or employee of the agent. As Victor Hugo wrote in his 1862 masterpiece Les Misérables (pronunciation: lay-mee-zay-rahbl), “The guilty one is not he who commits the sin, but he who causes the darkness.”


One may also find, in a number of legislation, provisions in relation to “Offences by body corporate”, such as section 244 of the Communications and Multimedia Act 1998 (Act 588). When an offence is committed by a body corporate, the employees of the corporation such as its director, manager, secretary or any officer responsible for the management of any of the affairs of the body corporate or was assisting in such management, shall be deemed guilty of committing the offence as well, unless proven otherwise. In a way, provisions of this nature are the opposite of corporate criminal liability where employees are liable for the offences committed by the corporation. Nevertheless, one must bear in mind that, in the first instance, the offence deemed to be committed by the corporation was primarily committed by a natural person on behalf of the corporation.

 Defences Available to a Corporation


In imposing corporate criminal liability, corporations must also be given a chance to defend themselves. Generally, defences available to corporations are statutory in nature, in that the defences may be provided in the statute creating the offence. If the corporation is able to establish the defence provided under the statute, it may escape liability. Many statutes that impose corporate criminal liability would not hold a corporation liable if the offence committed by an employee was done out of his course of employment. To impose culpability on the corporation merely because they have employed someone who has committed an offence would be unreasonable and unjust to the corporation. [17]


There are also statutes which presume “knowledge” on the part of the employer or corporation in order to prove that the offence was committed.[18] When the employer is able to prove that he had no knowledge of the employee’s act, the employer is not to be held accountable. However for strict liability offences, the element of mens rea need not be established and therefore by proving that the employer had no “knowledge” of the offence committed by the employee, does not at all constitute a defence for the employer.

Another defence would be where the employer is able to prove that he has taken reasonable precautions to prevent the commission of the offence, for example, as mentioned earlier section 144 of the Consumer Protection Act 1999 (CPA 1999) which punishes an employer who is the principal, for acts done by his employee, agent or employee of the agent. One of the defences is, if the employer is able to prove that he had taken “reasonable precautions to prevent its commission”, he will not be held liable. It can be seen that section 144 of the Malaysian CPA 1999 does have elements comparable to section 7 of the UK Bribery Act which imposes a duty on a corporation to have adequate measures to prevent an offence of bribery which has been discussed in the earlier session.


However, early English cases have also pointed out that a corporation can still be convicted for breach of duty even if it did not encourage or has tried to prevent the commission of the offence. Allow me to quote a passage from the judgment of Lord Russell C.J. in the 1898 case of Coppen v Moore (No.2)[19], where it was held that:


The Court in fact came to the conclusion that, having regard to the language, scope, and object of those Acts, the Legislature intended to fix criminal responsibility upon the master for acts done by his servant in the course of his employment, although such acts were not authorized by the master, and might even have been expressly prohibited by him.”

Thus, it very much depends on the statute to provide defences for the corporation when the said statute imputes corporate criminal liability. However, it is wise to provide due diligence defences available to a corporation under a statute, allowing the corporation to prove that it had taken all reasonable steps to avoid the commission of an offence.[20]


“Adequate Procedures” in the UK Bribery Act 2010  

Section 7 of the Bribery Act in criminalizing the failure of corporations to prevent bribery also gives room for the corporations to defend themselves by proving that they had adequate procedures set in place to prevent bribery. The Bribery Act provides that the UK Government must publish guidance about what constitutes ‘adequate procedures’. On September 22, 2010, the UK Ministry of Justice published a draft guidance as required by Section 9 of the Act, on what constitutes such “adequate procedures”.

The said guidance however does not provide detailed descriptions of the design and implementation of anti-bribery policies and procedure.[21] They are intended to be used as a flexible guide in deciding what procedures are suitable for a corporation. However, a corporation should be mindful that what actually constitutes “adequate procedures” depends on the courts to decide. [22]


Where a corporation or employer has played an active role in an act of bribery, for example, where the act is instigated or authorised by the employer, it is the owner, director, manager or supervisor will be prosecuted for “abetment” under the Penal Code.[23] In any event, the corporation would not be held liable. Abetment is deemed to have been committed when; firstly the employer has instigated an employee to commit an offence of bribery. Secondly, where it has engaged with the employee in a conspiracy to commit an offence of bribery. Thirdly, where the employer has intentionally aided an act or illegal omission in the commission of a bribery offence.

Currently, Malaysian law does not impose corporate criminal liability on corporations for acts of bribery committed by their employees. For example, section 17 of the MACC Act 2009 only punishes the agent who commits an offence and no accountability is imposed upon the corporation. This would be applied as a shortcoming of the Act because a corporation would stand to benefit (usually financially) from an act of bribery done in its favour by its employee. There is also an absence of a statutory provision which imposes responsibility on a corporation to prevent bribery within the corporation.

The prominent French novelist Honoré de Balzac (pronunciation: on-uh-rey duh Bawl-zak) once said “Laws are spider webs through which the big flies pass and the little ones get caught.” However, this should certainly not be the case in contemporary society today. An absence of a statutory provision imposing corporate criminal liability does not essentially mean that employers (for example the owner, director, manager or supervisor) are immune to prosecution and are not to be held responsible for bribery acts committed by their employees.

On another note, a question which arises is whether liability can be imputed on part of the corporation for acts done by the employee, if there is an absence of express wordings in the statute imposing liability on the employer. This issue was addressed in a most recent case of Projek Lebuhraya Utara-Selatan Bhd v Permas Forwarding Agency Sdn Bhd [24] , where the Court of Appeal ruled that:

…..we are concerned with breach of a statutory liability and as such the common law principle of vicarious liability cannot be imported into an area of law which is covered by a statute. As pointed out earlier, only clear words within the legislation itself can affix liability on the respondent.”

Hence, it appears that the principle of corporate criminal liability can only be imputed on the employer only if the legislation clearly provides for it. Therefore, imposing liability on the corporations for acts of bribery committed by their employees under the Malaysian Anti-Corruption Commission Act 2009 is not conceivable as the words used in the MACC Act 2009 do not clearly attach liability on corporations.

In recent times, a number of individuals have been charged under the MACC Act 2009 for bribery offences but none so for corporations. Let us take a situation where an employee actually commits an act of bribery on behalf of the corporation so that the corporation obtains an advantage in its favour. For example in one of the cases prosecuted under this Act,   the accused who was the owner of a private limited company bribed a public official to evade action from being taken against him for modifying the electric meter of his company. He was convicted and sentenced to one day imprisonment and a fine. In this case, the company would have benefited financially from the modified electric meter, by enjoying a reduced overhead costs or expenses. Ultimately, the company profits, while the owner is punished. The other owners of the company would not feel the effect of the sanction until and unless Tenaga Nasional Berhad replaces the meter or cuts off the electric supply under section 38 of the Electric Supply Act 1990 [Act 447].[25]



The concept of corporate criminal liability has proven to be challenging because the original purpose for which criminal law was developed is to convict and punish wrongdoings by natural persons.[26] A corporation, being an artificial person, makes it incapable of receiving bodily punishments such as imprisonment or canning. Consequently, it has been long established that a corporation can only be prosecuted for an offence which is solely punishable with a fine.


A case on point is Dunlop Malaysian Industries Bhd v Public Prosecutor[27], in which the appellant, a corporation, had pleaded guilty to a pollution offence and consequently was convicted and fined. The learned Magistrate sentenced the factory manager who represented the appellant to a one day imprisonment at the hearing. An appeal was lodged against this order. On appeal, the sentence was set aside and the court held that the factory manager who represented the company cannot be sentenced to jail because it was the company which was charged and not the factory manager. Therefore in cases of this nature, corporations will be let off with the sentence of a fine and nothing else.[28]

It is observed that in recent times, the legislature is under a perception that companies are only capable of being punished with fines. Therefore a separate clause is created to differentiate punishments imposed on corporations as opposed to a natural person. For example, if an offence is committed under the Competition Act 2010 by a body corporate, the penalty is only limited to a fine whereas if an offence is committed by a person other than a body corporate, the penalty would include imprisonment or fine or both. [29]

However, in the Indian case of Standard Chartered Bank v Directorate of Enforcement [30], the court acknowledged that it is possible to charge a corporation with an offence that prescribes a mandatory fine and imprisonment term. In such cases, the penalty will be limited to only in the case of the corporation, a fine, because to decide otherwise, would render the provision inapplicable to the corporation and defeat the intention of the legislature. This approach appears to correspond with the maxim “lex non cogit ad impossibilia” which means that the law does not contemplate something which cannot be done. The maxim applies, in persuading the court to hold that it is impossible to imprison a corporation.

There have been criticisms that when corporations are convicted for an offence, the court’s hands are tied to merely inflict a monetary penalty. This only imposes a financial burden on the corporation. If the corporation is large or its revenue is high enough, fines are easily absorbed as overhead costs. On the other hand, if a corporation is a minor enterprise or is facing difficulties financially, a fine may cause it to collapse and innocent employees as well as shareholders are the ones who suffer.

Perhaps, exceptions can be introduced to exclude sole proprietorship and small businesses such as grocery shops and restaurants. This is because, in small businesses, the act of bribery can occur, for example, selling illegal cigarettes where the owner of the business may have colluded with smugglers. However, the issue is whether such small businesses should be sentenced with fine, as same as corporations / on par to corporations / equivalent to corporations?

These shortcomings call for the development of a newer form of penalty. It is intriguing that the United States’ had for the many years formulated what is known as Deferred Prosecution Agreements (DPAs), when it comes to deciphering this conundrum. This notion has been accepted in the UK in recent times.[31] In general, DPA is an agreement between an offender and the prosecutor. Where a corporation is suspected of committing a criminal offence, the prosecutor may invite the organisation to enter into negotiations to agree to a DPA as an alternative to prosecution. If no agreement is reached, the prosecution may proceed as usual.[32]

DPAs can be said to be a form of “plea bargain” which is aimed to ensure a corporate misconduct is handled in a way where a corporation will evade any immediate prosecution if there is acceptance of the wrongdoing. The range of sanctions that can be imposed on a company includes financial penalties, compensation, charitable donations, disgorgement of profits, compliance undertakings and payment of prosecution costs.[33]

In the Malaysian legal landscape, a question that needs to be pondered upon is whether Malaysia is prepared and bold enough to introduce another form of sanction besides the conventional monetary penalties imposed on a corporation? If the company obtains a contract or an award through an act of bribery, should such contract or award be cancelled or terminated rather than imposing a fine?



 Some of you may raise the question of how mens rea is attributed to a corporation which is an artificial person. Allow me, before I proceed further, to briefly explain the elements required in order for the commission of an offence to be proved. In general, the commission of an offence requires a guilty act known as the actus reus, to go hand in hand with a particular state of mind in law known as the mens rea. However where the accused is a company, proving such a measure runs counter when the mens rea of the company is involved, for example proving the mens rea of a company can be a difficult task. A company being an artificial person is said to be “unable to perform the acts or form the intent which are a prerequisite of criminal liability”. [34]

The concept of corporate criminal liability is premised on the view that a company is not immune to prosecution by the very fact that the nature of the offence committed by the corporation can only be committed by a natural person. As such, the courts are ready to find corporations liable by attaching the “mens rea” of its officers to the corporation.

In Tesco Ltd v Nattrass [35], the House of Lords held that a corporation can be held liable for an offence committed by its employee as long as the employee is considered as the “directing mind” of the corporation. As such, in order for an offence to be constituted, the individual concerned has to be considered the living “embodiment” of the company.

In the case of Iridium India Telecom Ltd. v. Motorola Inc.[36], Iridium India Ltd together along with other public institutions was induced to invest a large sum of cash in a project run by Iridium Inc., a subsidiary of Motorola Inc. The project was a business failure and Iridium Inc. filed for liquidation. Consequently, Iridium India Ltd filed a criminal complaint against Motorola Inc. alleging offences of cheating and criminal conspiracy under the Indian Penal Code. Since Motorola was the dominant personality behind the operation of Iridium Inc., the complaint as such was directed to Motorola Inc.

The Bombay High Court quashed the proceedings against Motorola Inc. on the grounds that, inter alia, Motorola Inc., being a corporation, was incapable of committing the offence of cheating as it has no mind of its own. The High Court further held that a corporation could only be a victim of deception and not a perpetrator of deception.

The Supreme Court, in setting aside the decision of the High Court, held that a corporation could be made liable for an offence that involves mens rea. It endorsed and agreed to the principle established laid down in the case of Tesco v. Nattrass. Mens rea of a corporation is practically in the same position as an individual and it may be convicted for offences requiring mens rea. The criminal liability of a corporation would arise when an offence is committed in relation to the business of the corporation by a person or body of persons in control of its affairs. In such circumstances, “it would be necessary to ascertain that the degree and control of the person or body of persons is so intense that a corporation may be said to think and act through the person or the body of persons. Mens rea is attributed to corporations on the principle of ‘alter ego’ of the company.”[37]

The Supreme Court also held that companies are not immune against criminal prosecution on the ground that they are incapable of possessing the necessary mens rea for the commission of criminal offences.

The ratio in Tesco’s [38] case was adopted by the Malaysian Federal Court in the case of Yue Sang Cheong Sdn. Bhd. v Public Prosecutor [39] where the court held that the knowledge imputed upon the company would be of those that were entrusted with the exercise of the company’s power.

On another note, the UK has passed the Corporate Manslaughter and Corporate Homicide Act 2007 which allows a corporation to specifically be held liable for the death of a person in which the corporation owes a duty to. We can see that the UK has gone beyond corporate offences in applying mens rea unto a corporation for serious offences such as manslaughter.



A further issue likely to arise if corporate criminal liability for corrupt practices as found in other jurisdictions is introduced in Malaysia is whether the liability of a corporation would extend to bribery acts done by persons not directly associated with it. An example of such person would be a subcontractor. The extent of corporate criminal liability of a corporation for the acts of its subcontractor in Malaysia appears to be a grey area. The MACC Act 2009 provides that a subcontractor falls within the meaning of an agent. However, the Act does not specify that an agent’s conduct would directly cast liability on the principal. Therefore, while subcontractors can be personally liable for their act of bribery, but the corporate organisations, who are in fact principals of these subcontractors, cannot be held liable for the subcontractor’s acts.

Nevertheless, there are reported English cases that have dealt with the issue of liability for acts of a subcontractor. The law in the UK is that a company will be held liable for the negligent act of a subcontractor if the method in which the subcontractor has to perform his work is determined and controlled by the company. In Mersey Docks and Harbour Board v Coggins & Griffith (Liverpool) Ltd [40], the Court held:

“I think that the most satisfactory, by which to ascertain who is the employer at any particular time, is to ask who is entitled to tell the employee the way in which he is to do the work upon which he is engaged. If someone other than his general employer is authorized to do this he will, as a general rule, be the person liable for the employee’s negligence. But it is not enough that the task to be performed should be under his control, he must also control the method of performing it.”

 It is also interesting to note that English law makes a slight distinction when the agent or servant of an employer is an independent contractor. If the employer controls the manner of the performance of the work, the person performing it is considered to be a servant or an agent of the employer and consequently, the employer would be liable for the act of his agent. However, if the employer leaves the manner to perform the work to the contractor, the latter is considered as an independent contractor, in which case the employer is not liable.

Allow me to quote a passage from the judgment of Lord Justice Slesser in Honeywill and Stein, Limited v Larkin Brothers (London’s Commercial Photographers), Limited [41]:

It is well established as a general rule of English law that an employer is not liable for the acts of his independent contractor in the same way as he is for the acts of his servants or agents, even though these acts are done in carrying out the work for his benefit under the contract. The determination whether the actual wrongdoer is a servant or agent on the one hand or an independent contractor on the other depends on whether or not the employer not only determines what is to be done, but retains the control of the actual performance, in which case the doer is a servant or agent; but if the employer, while prescribing the work to be done, leaves the manner of doing it to the control of the doer; the latter is an independent contractor.”

As I have said earlier, the UK Corporate Manslaughter and Corporate Homicide Act 2007 (CMCHA) makes it possible for a corporate entity to be prosecuted for negligent manslaughter. This Act provides that the offence applies to all companies and employing partnership, including those in a contracting chain. This Act also provides that whether a contractor is liable for the offence depends on whether they owe a relevant duty of care to the victims and the offence applies to subcontractors as well as in respect of existing obligations of the main contractor and the subcontractor regarding the safety of worksites, employees and other workers whom they supervise.

Under English law, what would determine the extent of liability of the employer is the nature of the relationship between a contractor and his employer. In brief, if the employer retains control over the manner of the performance of the work, the employer would be liable for the act of its contractor or subcontractor. On the other hand, so far, the Malaysian position regarding the extent of criminal liability when a subcontractor is acting on behalf of the employer has not been sufficiently discussed.


Ladies and gentlemen,


Another matter that ought to be considered is whether the act of giving gifts or entertainment constitutes an act of bribery. The practice of giving gifts or entertainment to clients by companies is not uncommon. It has almost become a part of Malaysian culture. Some might consider such gifts as bribes or kickbacks in order to gain benefit or advantage for the company. Others, meanwhile, may be of the opinion that entertaining clients is an act of corporate hospitality, pleasantness and a part of human interaction. In this regard, what is the position at law with regard to the act of entertaining clients for business purposes? Does it fall within the meaning of bribery or is it to be considered as an act of corporate hospitality?

In Malaysia, the MACC Act 2009 does not specifically make provision on the acceptance of gifts, although it lays down the definition of gratification in an extensive manner. The issue of acceptance of gifts however has been addressed in several cases. Generally, the Courts in Malaysia scrutinizes the circumstances of a case as a whole in determining whether the giving of gifts amounts to a corrupt practise. In several cases, the Courts ruled that it is the “intention” behind the gift which determines whether the giving of gift amounted to a corrupt practise or otherwise.[42] In Ng Kok Lian & Anor v Public Prosecutor [43], the court held that “If the acceptance of any gift is made innocently or without any corrupt motive, the acceptance will not change the character of the gift as illegal.”

In the context of public servant, there are specific government regulations and circulars applicable to public officers with regards to acceptance of gifts, hospitalities and other courtesies governing public officers. The Public Officers (Conduct And Discipline) Regulations 1993[44] prohibit a public officer from receiving, directly or indirectly, a gift from any person if the receipt of that gift is connected to the execution of the officer’s public duties and/or if the type, amount and value of such gift is not proportionate with the intention for which the gift is made.[45]

In the UK, there have been concerns about the impact of the UK Bribery Act 2010 on corporate hospitality and other promotional expenses. It is alleged that the term “financial or other advantage” covers a broad spectrum of acts. It appears that providing or accepting corporate hospitality might fall under this term and thus illegal under the Act.[46] However, it is not the intention of the legislation to criminalize genuine acts of hospitality. The determinant of whether it is an act of bribery or otherwise is the intention behind the act.

In a nutshell, it is observed that the position in Malaysia and the UK is similar in this respect. Generally, the genuine act of hospitality which could be the giving or accepting of gifts, entertainment and other benefits, does not necessarily amount to an act of bribery. It is the intention of the act which determines whether an act of bribery has been committed or otherwise. Further, the gift or benefit must commensurate with the generally accepted standards for hospitality.


 Malaysia became a party to the “United Nations Convention against Corruption” in 2003, which was later ratified in 2008. The Convention introduces a comprehensive set of standards, measures and rules that all countries can apply in order to strengthen their legal and regulatory regimes to fight corruption.[47] Article 39 of the said Convention promotes cooperation between national authorities and the private sector.

In meeting its obligations under the said Article, as reported in the United Nations Office on Drugs and Crime’s Country Review Report of Malaysia, published in February 2010, collaboration between the MACC and the private sector has been encouraged through, inter alia, the signing of memorandums of understanding (MoU) between MACC and Government-owned companies and the introduction of corporate integrity pledges with the private sector. [48]

The Malaysian Government too has taken steps to fulfil its obligations under the Convention by enacting the Witness Protection Act 2009 and the MACC Act 2009.[49] It is hoped that the signing of the Convention will enhance the economic and social development of the country by making efforts to eradicate corruption.



The MACC has proposed amendments to the MACC Act 2009 which has yet to be tabled in Parliament. In a press statement on 17th February 2014, MACC has emphasised that the proposed amendments will impose corporate criminal liability unto the corporations in regards to offences related to corrupt practices by persons associated with it. With that objective in mind, MACC has urged companies to introduce adequate preventive systems, training, education and instructions prohibiting corrupt practices. It is hoped that these measures will help change business ethics and culture in our country.

In this regard, we need to consider whether imposing corporate criminal liability for corrupt practices by persons associated with a corporation, is feasible in the Malaysian context. The proposed amendments would have a positive impact on foreign direct investment in Malaysia. The sustainability of the Malaysian economy depends, to some extent, on foreign investments and having such laws in place will encourage foreign investors to venture into the Malaysian market

On the contrary, innocent minority shareholders of corporate organisations who have no controlling power, could be victims if the proposed amendments come into force. They may suffer losses because of the depreciation in the share price of the corporate organisation. More importantly, the employees of a corporate organisation may lose their livelihood if the company becomes insolvent due to the fines imposed. In addition to that, Government-Linked Companies (GLC) are corporations where the government is a majority shareholder. When a GLC is convicted after the enforcement of the proposal, it will have an adverse effect on the government itself and eventually disrupt economic development of the nation on the whole because the Government being the majority shareholder will suffer losses due to depreciation in share prices.



             A question that many would ponder, is whether defences available to commercial organisations should be parallel as defences that are available to a director for acts of bribery? Usually, a director of a company will only be prosecuted if he himself has breached his fiduciary duty. Defences available to directors closely relate to the duties conferred upon them. A director is able to defend himself if he is able to prove that he has executed his duties in compliance with the law.

Duties of a director include fiduciary duties and duties imposed under the Malaysian Companies Act 1965. Section 132 of the Companies Act 1965 has codified many of the fiduciary duties developed under common law. These duties include duty to act in good faith in the best interest of the company and duty to exercise reasonable care, skill and diligence. Thus, if a director is able to show that he has performed these duties, he will not be liable.



In conjunction with the nation’s aspiration towards vision 2020 and creating a corrupt free society, the Malaysian government has made fighting corruption a priority which needs to be addressed by both the public and private sectors.

The Government Transformation Programme (GTP) was set in place with the noble aim, amongst others, to combat corruption. Eradicating corruption ought to be an integral part of any plan to transform a nation and ensure that economic growth is achieved. With this in place, it is hoped that public trust is restored, good governance is ensured, investor confidence is encouraged and a fair market place and competitive platform is provided for all.

In the absence of a legal duty for corporations to prevent corrupt practices, it should nevertheless be their moral obligation to do so. Good corporate governance practices are crucial to create an atmosphere that is conducive to success. It plays an important role for all corporations to have a good underlying business strategy for their businesses to prevail. With such practices and measures set in place, it is hoped that corporations will be able to prosper without resorting to corrupt practices.

Allow me to end my speech by quoting Ernest Hemingway’s “For Whom the Bell Tolls”-

He did not care for the lying at first. He hated it. Then later he had come to like it. It was part of being an insider but it was a very corrupting business.”


Thank you.



[1] Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705.

[2]United Nation Industrial Development Organization, <http://www.unido.org/en/what-we-do/trade/csr/what-is-csr.html >, accessed on 25 November 2014.

[3] Section 3 of the Malaysian Anti-Corruption Commission Act 2009.

[4] Ibid.

[5] 212 U.S. 481, 494-95 (1909).

[6] Ibid.

[7] Yeo. Stanley, Morgan. Neil & et.al, “Criminal Law in Malaysia and Singapore “, 2nd Ed., Singapore: Lexis Nexis, 2012, at page 1021.

[8] [1917] 2 KB 836.

[9] Mays. Richard, “Towards Corporate Fault as the Basis of Criminal Liability of Corporations”, <http://ssudl.solent.ac.uk/965/1/1998_2_2.pdf>,accessed on 24 November 2014.

[10] [1944] KB 551.

[11] [1995] 2 AC 500.

[12] (1987) 821 F. 2d 844 (1st Cir.).

[13] Pinto, Amanda and Evans, Martin, Corporate Criminal Liability, 3rd Edition 2013, Sweet and Maxwell.

[14] The Bribery Act 2010, Guidance, Ministry of Justice UK.

[15] Ormerod. David, “Smith and Hogan’s Criminal Law”, 13th ed., New York: Oxford University Press, 2011, at page 258.

[16] [1948] 1 MLJ 194b.

[17] Defenses of this nature can be seen in section 91 of the Central Bank of Malaysia Act 2009, section 133(2) of the Personal Data Protection Act 2010 and Section 63(2) of the Competition Act 2010 and section 59(2) of the Price Control and Anti-Profiteering Act 2011.

[18] For example section 17(3) of the Registration of Business Act 1956 [Act 197].

[19] [1898] 2 Q.B. 306

[20] Ormerod. David, “Smith and Hogan’s Criminal Law”, 13th ed., New York: Oxford University Press, 2011, at page 258.

[21] “Guidance on the UK Bribery Act”, The Network Integrated GRC Solutions, <https://www.tnwinc.com/resources/uk-bribery-act-guidance/> accessed on 27 November 2014.

[22] “Adequate Procedures under the Bribery Act 2010”, C’M’S’ Cameron McKenna, <http://www.law-now.com/law-now/adequateproceduresbriberyactjuly2010.htm?cmckreg=true>, accessed on 27 November 2014.

[23] Chapter V of the Penal Code.

[24] [2014] 2 MLJ 893.

[25] “Pemilik Syarikat Dipenjara 1 Hari dan Denda RM15,000.00”, Portal Rasmi Suruhanjaya Pencegahan Rasuah Malaysia, <http://www.sprm.gov.my/km-pemilik-syarikat-dipenjara-denda.html>, 2012, accessed on 25 November 2014.

[26] Yeo. Stanley, Morgan. Neil & et.al, “Criminal Law in Malaysia and Singapore “, 2nd Ed., Singapore: Lexis Nexis, 2012, at page 1017.

[27] [1985] 1 MLJ 313.

[28] Yeo. Stanley, Morgan. Neil & et.al, “Criminal Law in Malaysia and Singapore “, 2nd Ed., Singapore: Lexis Nexis, 2012, at page 1019.

[29] Section 61 of the Competition Act 2010.

[30] (2005) 4 SCC 530.

[31] Section 45 and Schedule 17 of the Crime and Courts Act 2013.

[32] Kingsley Napley, <http://www.kingsleynapley.co.uk/news-and-events/blogs/criminal-law-blog/deferred-prosecution-agreements-proposal-on-how-peculiarly-british-dpas-will-work-in-practice>, accessed on 25 November 2014.

[33] Shriver. F.H. Fried, LLP. Jacobson, et. Al, “UK deferred prosecution agreements: new enforcement tool or blunt instrument?”, 2013 <http://www.lexology.com/library/detail.aspx?g=6a15add3-0a6d-47da-8c34-6e6e43341b25>, accessed on 24 November 2014.

[34] Yeo. Stanley, Morgan. Neil & et.al, “Criminal Law in Malaysia and Singapore “, 2nd Ed., Singapore: Lexis Nexis, 2012, at page 1018.

[35] [1972] A.C 154.

[36] 2011(1) SCC 74

[37] 2011(1) SCC 74

[38] Ibid

[39] [1973] 2 MLJ 77

[40] [1947] AC 1.

[41] [1933] AC 191.

[42] Public Prosecutor v. Choong Oi Choo [1986] 2 CLJ 231.

[43] [1983] 2 MLJ 379.

[44] [P.U. (A) 395/1993].

[45] Regulation 8(1) of the Public Officers (Conduct and Discipline) Regulations 1993

[46] Reid. Ron, “Corporate hospitality and the Briber Act”, <http://www.shoosmiths.co.uk/client-resources/legal-updates/Corporate-hospitality-and-the-Bribery-Act-1891.aspx> 2011, accessed on 23 November 2014.

[47] https://www.unodc.org/documents/treaties/UNCAC/Publications/Convention/08-50026_E.pdf

[48] United Nations Office on Drugs and Crime’s Country Review Report of Malaysia at page 257.

[49] Sim Leoi Leoi, “Malaysia ratifies UN Convention against corruption”, <http://www.thestar.com.my/story/?file=/2008/9/17/nation/20080917183950&sec=nation>, 2008, accessed on 24 November 2014.

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