INSTITUTE OF APPROVED COMPANY SECRETARIES (387525-X)
(A Company Limited By Guarantee – Incorporated Under The Companies Act, 1965)
THE COMPANIES COMMISSION OF
MALAYSIA ON THE COMPOUND
IMPOSED FOR NON-TABLING OF
To: The Chief Executive Officer,
Companies Commission of Malaysia
MEMORANDUM TO THE COMPANIES COMMISSION OF MALAYSIA
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
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.
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
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.
3.1 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
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
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 pro-
active step to disseminate all relevant information on such revision of
fines to our members.
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
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
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.
Offence Year of audited Present Rate (RM) Proposed Rate (RM)
Non-tabling of 2001 1,000 400
2002 1,000 300
2003 1,000 200
2004 1,000 100
No violation 0 0
Offence Period Previous Rate (RM) New Rate (RM)
8 days – 3 50 150
Non-tabling of 3 months – 6 100 250
audited accounts months
6 months – 12 150 500
More than 12 200 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
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.
Name: Bahari Bin Johari