The Impact of COVID-19 on Corporations and Corporate Law in Malaysia PDF
Preview The Impact of COVID-19 on Corporations and Corporate Law in Malaysia
Loganathan Krishnan Wai Meng Chan Editors The Impact of COVID-19 on Corporations and Corporate Law in Malaysia The Impact of COVID-19 on Corporations and Corporate Law in Malaysia · Loganathan Krishnan Wai Meng Chan Editors The Impact of COVID-19 on Corporations and Corporate Law in Malaysia Editors Loganathan Krishnan Wai Meng Chan Department of Business Law and Taxation Faculty of Business and Economics Monash University Malaysia University of Malaya Bandar Sunway, Selangor, Malaysia Kuala Lumpur, Malaysia ISBN 978-981-19-5518-1 ISBN 978-981-19-5519-8 (eBook) https://doi.org/10.1007/978-981-19-5519-8 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 This work is subject to copyright. 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The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore I dedicate this book to my mother, Sarojinee Rajoo, who always believed in my capabilities, my dearest late father, Krishnan Govindan, who instilled confidence and self-esteem in me, my wife, Hema Malini Tharman, who is a constant pillar of strength for me, my twin children, Mahilavan and Maadhavi, who are my inspirations, my teachers, particularly Prof. Dr. Choong Yeow Choy, who was my PhD supervisor, for giving me all the guidance I need in this journey of life. –Dr. Loganathan Krishnan I dedicate this book to my late parents, Chen Yee Kow @ Chan Yee Khow and Cheah Kwai Mei @ Cheah Kwai May, who showered me with their unconditional, unfettering and unfailing love, as well as gave me invaluable lessons on life; to my mentor, the late Prof. Dato’ P. Balan, who took me under his wings and showed me the ropes in research and writing; and to my friends and students, who supported, encouraged and cheered me on, especially during the COVID-19 pandemic. –Assoc. Prof. Dr. Wai Meng Chan Foreword The pandemic of COVID-19 came without a warning and hit us like a tsunami. Many succumbed to the consequences brought forth by COVID-19, be it individuals or businesses. Some lost their lives, some saw their finances in tatters. The government initiated various incentives and moratoriums to ease the financial burdens borne by businesses and people. Many pondered then if there would be light at the end of the tunnel. Thankfully, after two years, many countries including Malaysia have learnt to live with the virus and transited to the endemic stage. Businesses are beginning to get back on their feet. This is much welcomed as the calm after a rough storm and it is timely to reflect on the lessons learnt. In light of all that, this book is timely for it captures the impact of the pandemic on corporations in Malaysia and the application of the Companies Act 2016 to deal with the situation. Thus, I am delighted that Dr. Loganathan Krishnan of Monash University Malaysia and Assoc. Prof. Dr. Wai Meng Chan of University of Malaya together with academicians and practitioners of diverse backgrounds and experience, brought about this book entitled “The Impact of the COVID-19 on Corporations and the Companies Act 2016.” This book provides a thorough discussion of the impact of the pandemic on busi- nesses in Malaysia from various perspectives. It explored how the pandemic affected or would affect directors’ duties, auditors’ roles, board meetings, general meetings, shareholder activism, compliance with laws, companies’ duties, capital market and corporate rescue mechanisms. Each of these perspectives must be reassessed to ensure businesses withstand future challenges and where necessary reforms must be made to the current legal framework so that Malaysia is able to withstand another like situation. This book will be useful to policymakers, legislators, practitioners and researchers to assist them in their work in exploring and ensuring a sustainable and comprehensive legal framework. vii viii Foreword I heartily commend and congratulate the authors/contributors of all book chapters on the publication of this book and I wish them the best for future research endeavours. YAA Tun Tengku Maimun Tuan Mat Chief Justice of Malaysia Palace of Justice Putrajaya, Malaysia Preface This book is timely since Malaysia has now moved to an endemic phase and thus it is pertinent to reflect on the impact of the pandemic on corporations and Companies Act 2016. Essentially, many lessons can be gleaned from this unfortunate episode. As each country has different sets of issues and tackles them in different ways depending on the country’s culture, environment and resources, Malaysia is no exception. In the beginning, the focus of most nations was on health and ways to curb the spread of COVID-19. Not many realized that the pandemic may also have an impact on the legal framework governing businesses. On this note, businesses are affected the most, as there were total lockdowns in some cases and subsequently partial lockdowns. The aim of this book is to carry on a discourse on the impact of COVID-19 on corporations in Malaysia. Challenges faced by corporations and their responses to them will be discussed. The relevant provisions in the Companies Act 2016 will be examined, and where necessary reforms will be proposed. Thus, it is anticipated that this book will be helpful for practitioners who are in need of a guide to manage the impact of COVID-19 on corporations and the Companies Act 2016. The book will also be a reference point for regulators and policymakers on the issues raised by the authors on the initiatives and measures taken by regulators and policymakers in combating the impact of COVID-19. Judges may also refer to this book for solutions offered by the authors in addressing the challenges caused by COVID-19. Other researchers may develop research gaps pointed out by the authors and elevate the research to greater heights and seek greater attention from regulators and policy- makers. Researchers from other jurisdictions involved in comparative studies may refer to this book to obtain a clear picture of the circumstances faced by the corpo- rations in Malaysia. Last but not least, the industry players themselves may take a leaf from this book in managing the impact of COVID-19 on their businesses. Chapter 1 gives an overview of the issues that arise as a result of the impact of the pandemic on businesses. As companies are managed by the Board of Directors, Chaps. 2 and 3 focus on how directors had to carry out their duties in light of the pandemic. Chapter 4 proceeds to explore the challenging role of the auditors in auditing a company due to the lockdowns. Chapter 5 then examines the interplay of the challenging roles played by board meetings, general meetings and shareholder ix x Preface activism. As all companies in Malaysia are regulated by the Companies Commission of Malaysia, a company that sources funds from the public is also regulated by the Securities Commission of Malaysia and if the company’s shares are listed on the stock exchange, by Bursa Malaysia too, Chaps. 6 to 9 explore the roles played by the regulators to facilitate companies in the fulfilment of their statutory obligations, as well as providing lifelines to tide them over the crisis brought by the pandemic. We observe the relaxation of rules, the easing of financing and the increase in the threshold of insolvency. Nevertheless, the pandemic has also revealed some weaknesses. Some of the laws are rigid. Some laws place importance on the company’s responsibilities towards its shareholders. The pandemic exposed the need to acknowledge the impact of a company towards its other stakeholders such as its employees, suppliers and creditors, both secured and unsecured, as well as its surrounding community. Thus, one of the positive outcomes of the pandemic is the relevance of corporate social responsibility has been brought to the fore. Another positive outcome is the forced adoption of information and communication technology (ICT). People who resisted ICT prior to the pandemic had to adopt ICT or be left behind. This also applies to companies and all matters related to them. Due to the movement control orders and the strict standard operating procedures, virtual meetings became the new norm. Digitalized documents are preferred. All these will reduce carbon footprint and prayerfully heal the world. Though COVID-19 has ravaged the world, it has given us valuable lessons which should not be forsaken nor forgotten. Actions should be taken to overcome weak- nesses exposed by the pandemic. It is hoped that the discourses put forth in this book by the various contributors of diverse backgrounds, training and experience will provide fodder for law reforms. We would like to thank the contributors Assoc. Prof. Dr. Usharani Balasingam, Ms. Wei Fong Wong, Ms. Li Chen Mah, Assoc. Prof. Dr. Yusramizza Md Isa, Dr. Anis Shuhaiza Md Salleh, Ms. Shanti Geoffrey and Prof. Dr. Hasani Mohd Ali for their contribution towards this book. We also wish to record our sincere appreciation to Springer, particularly to Ms. Anushangi Weerakoon, Mr. Rajasekar Ganesan and Mr. Vishnu Muthuswamy, for giving us this opportunity and their tremendous support. Bandar Sunway, Malaysia Loganathan Krishnan Kuala Lumpur, Malaysia Wai Meng Chan Contents 1 The Pandemic, Businesses and the Companies ................... 1 Loganathan Krishnan 2 Directors’ Fiduciary Duties .................................... 21 Wai Meng Chan 3 Directors’ Duty to Exercise Due Care, Skill and Diligence ......... 43 Usharani Balasingam 4 Auditors’ Duties and Obligations in Light of COVID-19 Pandemic ..................................................... 69 Loganathan Krishnan 5 Board Meetings, General Meetings and Shareholder Activism ..... 87 Wei Fong Wong 6 Compliance with Statutory Requirements During the COVID-19 Pandemic ....................................... 109 Li Chen Mah and Wai Meng Chan 7 State Intervention to Oblige Corporations’ Measures to Prevent COVID-19 Diffusion: A Truly Justified Matter? ........ 131 Yusramizza Md Isa and Anis Shuhaiza Md Salleh 8 The Effect of COVID-19 on the Capital Market .................. 151 Shanti Geoffrey 9 Impact of COVID-19 on Corporations in Malaysia from a Corporate Restructuring and Insolvency Law Perspective ................................................... 171 Hasani Mohd Ali 10 The Way Forward ............................................. 197 Wai Meng Chan xi
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