Maintaining stable profits while ensuring business development is the first objective of any entrepreneur. In the long term, it is also important to take into account the interests of society, shareholders, investors, and employees. It is, as a result essential, to put in place effective management tools. The following topics are also essential to accomplish an activity in Malaysia: financial and accounting standards, corporate taxation, e-commerce and Internet, protection of personal data, intellectual property rights, commercial litigation, and also legal actions.
Business governance in Malaysia
The Malaysian Code on Corporate Governance 2012 created for the Malaysian Code on Corporate Governance is aimed at listed companies. However, all companies are encouraged to adopt the principles and recommendations of the above-mentioned text, in particular, so that the concept of “good corporate governance” is an integral part of business culture.
The board of directors is required to formulate principle through a code of conduct, to ensure company strategies and to promote sustainability. It must also draw up a charter intended for the smooth running of the board of directors.
Composition of the board of directors
The board of directors should establish a nominating committee, chaired by a senior independent director, to oversee the selection and assessment of directors.
The Nominating Committee is responsible for developing a set of criteria, including policies formalizing an approach to increase diversity on the Board of Directors.
Independence of directors
Independent directors can be appointed for a maximum of a cumulative period of nine years. After nine years, the latter can be re-designated as non-independent directors. However and in exceptional circumstances, a director may continue to serve as an independent director, if approved by the shareholders.
The separation of the functions of Chairman of the Board of Directors and the Chief Executive Officer.
The position of President of the company and that of Chief Executive Officer must be held by separate persons and the President must be a member of the non-executive board. If the Chairman is not an independent director, the board of directors must be composed of a majority of independent directors.
The Managing Director may or may not be a member of the board of directors. The responsibilities of the President include directing and overseeing the board, while the Chief Executive Officer or CEO will focus on day-to-day business management. The sharing of responsibilities must be clearly defined in the board charter. Listed companies that do not comply with these recommendations set out in the 2012 MCCG Code, must indicate the reasons and their justifications in the annual report.
The board of directors is required to define the expectations in terms of the time commitment for its members and to establish a protocol for the acceptance of new terms. Directors must inform the Chairman before accepting a new directorship. This notification should include an indication of the time to be spent on this new designation.
Relations between the business and the shareholders
The board of directors should encourage shareholder participation in general meetings and the passing of secret ballot resolutions. The chairman informs the shareholders of their rights to request a vote at the start of the general meeting.
The board of directors is encouraged to submit substantive resolutions to a shareholder vote and to announce the results, including the number of votes cast for and against each resolution.
See also: How to Register Company Malaysia
Accounting in Malaysia
Article 167 of the Companies Act of 1965 imposes the obligation for each company to keep all the books of account and others, to explain all the operations and the financial situation of the company. The accounts must reflect a true picture of the financial position of the business to allow the financial statements to be easily and properly audited.
All transactions must be recorded within 60 days of the end of the fiscal year. The registers and other documents must be kept at the company’s registered office in Malaysia for a minimum period of seven years.
Financial reporting framework in Malaysia
The Malaysian Accounting Standards Board (MASB) recognizes the following accounting standards:
- Malaysian Financial reporting standards (MFRS);
- Financial Reporting Standards (FRS);
- Malaysian Private Entities Reporting Standards (MPERS).