Corporate liability outlines the extent to which a corporation as a legal body can be made liable for the wrongdoings of the natural persons it employs. Corporate liability rules had emerged from the English case of Lennard’s Carrying Co. Ltd v Asiatic Petroleum Co. Ltd. The facts of the case stated that a corporate ship-owner could be made liable for the loss of his cargo due to the negligent navigation of one of its ships director.
In Malaysia, the topic of holding a corporation criminally liable does not appear to have arisen often in the local case law. This is despite the potential that corporate activity has for causing severe harm in areas such as environmental pollution, food and drug adulteration, transport safety and workplace conditions. When corporate activity causes harm, prosecutor seems to proceed on the basis of regulatory offence instead of a more serious Penal Code offence or to proceed against the individuals concerned instead of the corporation behind them.
Corporation in Malaysia may only be vicariously liable for any conduct of its employees acting within the scope of their authority or employment. Under the identification approach, the acts of the employee are viewed as the act of the corporation itself provided that the employee is sufficiently high up in the corporate hierarchy or is a person to whom the functions of the board of directors have been delegated.
On 1st June 2020, Section 17A of the Malaysian Anti-Corruption Commission Act 2009 (“MACCA”) came into force. Section 17A introduces an offence by commercial organizations, which has its sights aimed squarely at the private sector. In 2021, the Malaysian Anti-Corruption Commission brought charges under section 17A for the very first time, against a local company and its director.
Under Section 17A, a commercial organization can be charged with a criminal offence if an associated person (e.g. employees, directors, partners, external service providers etc.) commits an act of bribery or corruption for the benefit of the commercial organization, even if the bribe was not authorized by the commercial organization.
Furthermore, directors or other persons concerned with the management of the commercial organization at the time of commission of the offence will also be deemed liable.
Based on the above, we can see that the law on corporate liability only subjected to corruption offences in Malaysia. It is hoped that the legislatures and courts in Malaysia will undertake and formulate new basis for corporate criminal liability. This is to ensure that the corporations may be just as deserving of conviction and punishment as individual persons for serious infringements of the criminal law.
Sources: Section 17A MACC Corporate Liability: A Compliance Case Study, https://dnh.com.my/section-17a-macc-corporate-liability-a-compliance-case-study/