Section 241 of the Companies Act 2016 (CA 2016) has come into force today on 15 March 2019 (see P.U.(B) 138/2019). This is the last provision of the CA 2016 to be brought into force. Under this section, all qualified persons who wish to act as a company secretary must register with the Registrar of Companies.
With the coming into force of section 241, the Companies (Practising Certificate for Secretaries) Regulations 2019 and Guidelines Relating to Practising Certificate for Secretaries Under Section 241 of the Companies Act 2016 have also come into force on 15 March 2019. There is also a FAQ section on the Companies Commission of Malaysia website.
Key Query: Extensive List of Duties
There was a consultative document on this area. I wrote about this earlier on the purpose behind requiring the registration of a company secretary and some of my thoughts on the consultative document. Instead of having a single set of regulations, we now have to examine the new regulations and the new guidelines. Many of my comments still apply.
However, my key query arises from the Guidelines. Paragraph 26 of the Guidelines sets out that in addition to the duties and responsibilities to a secretary in the CA 2016 or other written laws, a company secretary must comply with the duties and responsibilities under the Guidelines.
First, under paragraph 27 of the Guidelines, there is a duty in relation to the registered office and registers. Essentially, to be present at the registered office of the company and to maintain and keep updated all the registers, records and books required to be kept at the registered office.
Secondly, under paragraph 28 of the Guidelines, a duty to act honestly and use reasonable diligence in the discharge of the duties as a company secretary. In particular, a duty to advise the board of directors on statutory requirements under the CA 2016 and other disclosure and governance requirements relevant to the company. There is also a duty to manage, attend and record the proceedings of the meetings of shareholders.
Thirdly, under paragraph 29 of the Guidelines, the company secretary must comply with the anti-money laundering laws.
Fourthly, under paragraphs 31 to 33 of the Guidelines, the company secretary has a duty to designate one approved body for the purpose of applying for a practising certificate and updating the Registrar of Companies on changes.
Fifthly, under paragraphs 34 to 36 of the Guidelines, there is the requirement to meet the minimum continuing professional education hours.
Lastly, under paragraph 37 of the Guidelines, a duty to state the practising certificate number when executing any document in his or her capacity as a company secretary or when lodging any document with the Registrar of Companies.
Does this Expand a Company Secretary’s Liability for Breach of Duties?
Paragraph 28 of the Guidelines in particular set out the duty to act honestly and use reasonable diligence. An uncertainty may be to whom is this duty owed to?
Do the list of duties now impose on a company secretary an express duty owed to the company, to the directors, or even to the shareholders?
So would a breach of this duty amount to a claim that the company, the directors or the shareholders can bring against a company secretary?
The legal uncertainty about this is also on the legal effect of these Guidelines. These express duties have not been codified into the CA 2016 or into other Acts. These express duties are not even codified into the Regulations that was issued by the relevant Minister and has been gazetted.
These Guidelines are issued under section 20C of the Companies Commission of Malaysia Act 2001. This section 20C allows the Companies Commission of Malaysia (SSM) to issue guidelines, practices notes, notices or circulars. The legal effect of such guidelines are set out in section 20C(2): “The person to whom the guidelines, practice notes, notices or circulars referred to in subsection (1) applies shall comply and give effect to such guidelines, practice notes, notices or circulars.”
Therefore, it appears unclear whether the legal effect of the Guidelines are to create codified duties in law or whether these are merely obligations owed to SSM.
Nonetheless, a breach of these Guidelines could result in SSM taking action under section 20E of the Companies Commission of Malaysia Act 2001. This section 20E is used where a person has failed to comply with, among others, any guidelines issued under section 20C. Such a breach would allow SSM to direct the person to comply, impose an administrative penalty, reprimand the person or direct the person to take the necessary steps to remedy the breach.