PPB 3233 COMPANY LAW

ASSIGNMENT 1

THE INVOLVEMENT OF COMPANY EMPLOYEES IN FRAUDULENT

OF COMPANIES

GROUP: B

NO NAME MATRIC NO

1 DASHINI VIGNESWARAN D20181081790

2 MOHANARAJ A/L SUBRAMANIAM D20181084817

Lecturer’s Name: DR. SASLINA BINTI KAMARUDDIN

TABLE OF CONTENT
NO CONTENT PAGE

1 Titles & Abstract 3

2 Keyword 3

3 Introduction 4

4 Body 5 - 10

5 Conclusion 11

6 References 12 - 13

The involvement of company employees in Fraudulent of Company.

Dashini Vigneswaran*
Mohanaraj Subramaniam **
Faculty of Economies & Management, Universiti Pendidikan Sultan Idris, Tanjong Malim,
Perak, Malaysia

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 ABSTRACT
This paper aims to investigate the factors that influence the intention to fraud among the
company employees of the Malaysian public listed companies in their ordinary course of
duties as a company employee. This research was carried out to study the influence of
seriousness of wrongdoings, retaliation, loyalty and trust and rewards on the tendencies to
whistle blow among the external company secretaries of public listed companies in Malaysia.
A recent research conducted by PricewaterhouseCoopers (2018) revealed that the abusers of
managing the financial caused economic losses of between US$100,000 and US$5,000,000 to
my company's employees in Malaysia over the year. In contrast to economic losses,
businesses have suffered substantial financial harm, including disruption to workers' morale,
brand, credibility and business connections (PricewaterhouseCoopers, 2018). Creative
accounting causes businesses to lose trust in future customers and partners. Based on the
survey done on the external company secretaries the regression results indicate that the
seriousness of the issue at hand is the strongest push factor for them to come out and fraud as
compared to other factors such as recrimination, loyalty and trust and reward. Thus,
company employee of public listed companies in Malaysia is the source of collective
conscience of the company. The outcomes of this research help to explain the important
factors influencing the decisions among the external company secretaries to involve with
fraud. These factors should be present in order to ensure the elimination of fraud and
wrongdoings with the public listed companies. In the meantime the data supporting and
presented in this study can provide valuable insights for scholars, company owners and
authorities to facilitate good corporate governance practises in Malaysian listed companies.
This paper uses theistic legal review and secondary sources from 15 articles as the prime
source. Secondary sources for this study contain case studies, publications in scholarly
journals, textbooks and internet resources.

KEYWORDS: Company employee, Public Listed Company, Fraudulent, Company Law,

Financial losses.

1. INTRODUCTION

There are numerous fraudulent activities and unethical practises that may take place within an
organisation, from actually falsifying a medical exemption to supplying prospective bidders

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with knowledge of proposals from others. Such practises are no longer restricted or limited to
those sectors or occupations. The increased risk to employers has reflected for the need for
new measures to be placed in place to ensure enforcement within the company. The goal of
this article is to highlight the important aspects of Malaysian law with regard to the laws of
corruption and fraud and what the employer wants to take into account in the prevention and
control of such scenarios at the work environment. Despite the proven want of corporate
ethics, the wave of corruption fraud in Malaysia seems to be on the increase. Malaysia is
exceptional as an Asian nation because of its institutional setting. The presence of fraud and
other serious infringements of the law will impede the interest and trust of investment firms
in any professional setting. In order to ensure on-going support for investors, a robust
framework of identification and mitigation of fraud and some other misconduct must be
implemented. In the case of corporations, the board members, auditors, legal advisors and the
Companies Commission of Malaysia, to claim a few, provide an authority for companies to
maintain the integrity of companies complies with the law. Although these as such 'monitors'
of corporations are only capable of detecting or preventing any misconduct if the company
concerned provides them with the requisite details. However, natural law seems to be that the
board of directors does not want to include the required information, for risk of serious
consequences on the credibility of the company, if any investigation is conducted. Thus, there
can be cases when the company's misconduct happens. There will be times where the
company's misconduct goes unreported. Some other potentially better way of detecting
misconduct would be to rely on leaking information by employees who usually have first-
hand knowledge about any seeks to investigate by their company. If these workers are willing
to come forward and notify their concerns of potential misconduct by their boss, this will lead
in an even earlier identification or, possibly, avoidance of fraud. There is a wide range of
prejudice against workers who share suspicious details about their company. Their company's
potential revenge against them led them to fear that they should remain quiet. As such, the
Country needs the requisite efforts to eliminate such prejudice as far as practicable by
offering legal security to workers who report the misconduct of their employer in order to
increase their faith and credibility that the law system is capable of protecting them.

2. Fraudulent Domestic Inquiry

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Under Malaysian law, if an employee is liable to the Employment Act 1955 ("Act"), it is the
contractual employer ’s duty to perform a "due investigation" to decide if the employee is
innocent of perjury before the employee can be fired but before some other significant
penalty is levied (see section 14(1) of the Act). However, Section 14(1) of the Act does not
clarify what the volume of the "due investigation" is as well as how the investigations were
being performed. Although "due inquiry" has a particular perspective than "domestic
inquiry," several individuals use both terms correctly. Although a domestic investigation, if
carried out correctly, may lead to a "due investigation" under the law, it still does not
immediately imply that a full domestic investigation must be undertaken in each case. It is
normal to find employers (especially those with less effective Human resource guidance) who
have no idea of how to perform a domestic investigation. The effect can be significant, as a
failing to fully perform an investigation may lead in an adverse decision by the Industrial
Court in the situation that the workers lodge a product liability lawsuit. As a general rule, it is
necessary to note how no employee can be fired for wrongdoing until the employee involved
was being provided the chance to justify him or herself or has been provided the opportunity
to respond Through order to encourage workers to protect their self effectively, companies
should perform a domestic investigation to allow them to know if the law was broken and
what kind of discipline can be applied. We set out beyond the essential measures to be
followed to conduct a domestic investigation. Again this is significant to mention that the
statute does not mandate a company to comply with any of these provisions until it amounts
to a 'due investigation,' because these are the steps that should be followed as best practise.

It is necessary to make the claims of wrongdoing transparent and truthful to the employee.
This letter is intended to provide an interpretation of the alleged fraud and to help the

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company to justify or clarify the case, and perhaps to indicate why and how the employee
feels that enforcement proceedings should not have been chosen to take. The timetable for
reacting to an even more query must always be set out in the report. The case report should
always be written in a simple and unmistakable script. Where applicable, the specific
provisions of the law and/or employer and employee of the company should indeed be
highlighted. If required, the employer can put the employee on probation due to insufficient
evidence of the accusation of corruption. The probation can be given in compliance with the
provisions of reason or prior to the domestic investigation. Probation can be authorized if the
company is of the opinion that it will avoid interfering with the inquiry or even further fraud.
Under the Act, the current limit of review and analysis be no upwards of two weeks of partial
salaries and benefits. Even though the company must pay an additional compensation to the
employee if he or she is subsequently found not sentenced to death. This maximum amount
of time of interruption shall extend only to workers subject to the Act. The execution of a
domestic investigation would obviously be a time-consuming affair for those concerned. That
might not be appropriate in all situations, particularly in which the fraud is insignificant. But
even if the claims are significant and/or multiple, it is desirable for the organisation to devote
resources and time to correct the domestic investigation.

3. Prevention of Fraudulent

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The anti-corruption legislation in Malaysia consists of a range of laws, including the
Malaysian Anti-Corruption Commission Act 2009 (MACCA), the Penal Code, the
Development Financial Institutions Act 2002, the Customs Act 1967 and the Election
Offences Act 1954. The MACCA is Malaysia's leading legislation which refers to the federal
and state governments, agencies, shareholders and those with legal responsibilities. Section
16 of the MACCA states that every person whom takes issue to obtain, grant or deliver any
compensation as an incentive to conduct or avoid commenting on almost any particular issue
or action all by himself and in collaboration with some other individual, will face criminal
prosecution. As one and the same, the MACCA refers to more than just the supplier and the
beneficiary of many of these financial incentives. In addition, the MACCA places an
obligation on any individual who has been granted, threatened or presented a compensation to
notify such an occurrence including the identity, if recognized, of the person giving to the
nearby officer of the Commission or the police officer, and the refusal to comply with that
requirement will result in disciplinary action or incarceration or sometimes both. The Penal
Code, and from the other side, is a combination of criminal offences in Malaysia and allows
for specific requirements in relation to acceptance and accomplishment. Through general, the
Penal Code always declares it a crime for a person to be deceived and to take dishonest
conduct. The Development Financial Institutions Act 2002 also specifies that perhaps an
individual who earns a compensation approaching RM100 in worth, or perhaps even
intangible benefits, to obtain a credit facility will be considered to only have committed the
crime. There are different measures made by companies to reduce the possibility of bribery or
unethical practises in their companies.

The Malaysian Anti-Corruption Commission has made the promise to brave soldier in which
a corporation would make a public supplier code of conduct the concepts of anti-corruption.
Companies must begin to move towards enforcing company procedures. These increasing

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doses occur as a result of an employment contract or guideline or inner correspondence or
notes. Mostly with implementation of educational and development programmes, workers
can be notified of their responsibilities and their duty to act in the way that is not harmful to
the interests of the company. Stronger complaints policies support and encourage persons to
make a complaint. The general rule and for company is that any regulations or practises must
not be established in a similar predicament. That was because circumstances and cases can
vary between cases to case. This will entail various modes of effort on behalf of the company.
Throughout the case that the regulation is too restrictive and the company's requirement goes
across a variety of steps, this will preclude the company from taking decisive action as a
result of fraudulent activity. Regulations should indeed be designed with a level of flexibility
to enable the company to adapt to various cases.

4. Key challenges faced by employers in managing fraud

In the case that a company believes that his employee has conducted fraud or fraudulent
behaviour, it might not that in and of itself be necessary to fire the employee. That was
because of the support granted by Section 20 of the 1967 Industrial Relations Act which
provides that all resignations would be with valid reason and justification. Furthermore the
query that the company will query before firing the employee must be, "Will I have
substantial proof?” Generally due investigation will include the lawful act taken by the
company. Next, there has to be an initiation of a project. In most cases, this will include
questioning victims and gathering photographic proof. It would indeed be necessary to record
all of this in documentation for proof usage. According to the conditions of the inquiry, the
company must therefore accept whether there is any basis for disclosing the case to the
regulators. The company may decide to terminate the employee. Within that respect, the
company must determine yet if the growing involvement of the perpetrator at the company
will negatively impact the investigation process. Also in case that the inquiry reveals here
that employee has done anything illegal, the employee must be told of the specific allegations
of wrongdoing against him by means of an evidence-based report as well as the employee is
required to include his or her additional comments.

Provides an overall domestic investigation could be conducted out. This domestic

investigation shall be an unstructured investigation held before a commission company
secretary. This investigation will be carried out according to the clarification given by the

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employee in the case report. Upon this light of the recommendations of the panel of
investigation, an effective penalty can be levied on the employee. While fraud and corruption
are of a criminal act, the Industrial Courts have in several jurisdictions ruled that the
presumption of proof of the company's wrongdoing in the event of illegal discharge will be a
calculation of probability but never a requirement of criminal investigation beyond sufficient
evidence. Employers who fight fraud and corruption at the company are likely to experience
a variety of market volatility and potential problems. Delay in performing an inquiry into a
suspected criminal an employer who has awareness of wrongdoing or fraud but wishes to
delay or remain unknown to the public shall be considered to have instigated cheating or
fraud behaviour. Faulty claims towards workers can even be troublesome for companies. The
theory of intentional disregard, again from factor of perspective of company law, basically
means that the company, by refusing to implement acts to against employee, is considered to
have reserved his power to take action. Under the law, companies, when undertaking criminal
charges towards workers, are obliged to adequately lay down the charges of wrongdoing by
guaranteeing that the claims comprise adequate information to allow the employee to provide
a fair investigation. In the former, extraordinary case, the employee was made to pay with
fraud. Even though the judge ruled that the termination was unjust, primarily on the grounds
that the claim to against employee seemed faulty in existence. Many companies will find the
challenge of correctly highlighting a fraud charge to be overwhelming, though most of the
cases are drawn generated by different human resources staff that would never be properly
eligible. Since fraud or corrupt practises which constitute a violent act, the complaints should
be accurate, explicit and involve appropriate details, including certain period, date, location
of the accused, and the purpose of the fraud. A faulty penalty in itself can even make the
whole termination unjust.

Confidentiality problems may also disrupt a case of fraud. Employees may pose questions
about confidentiality in the procedures used by companies to curtail or track such actions.
The Personal Data Protection Act 2010 (PDPA), which governs the gathering and
management of important and sensitive private data, specifies, as a rule of thumb, that no
privacy information can be carried out unless permission is acquired and a private

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information reminder is given to the data controller. The PDPA specifies that the private
information notification must reveal evidence such as the kinds of information obtained the
purpose for analysing the information and the classification of unauthorized individuals with
which the information may be exchanged. It will also be appropriate for the company to
collect the relevant information within the scope of the law. A regulation such as those of the
PDPA and the Financial Services Act 2013 (FSA) limits or restricts the gathering, use and
sharing of private. Such instance, the ASF prohibits the reporting of bank account data, but
only under restricted circumstances. In addition, as with many other illegal acts, one will be
presented with the question of the avoidance of information by the suspect. In this respect,
most companies actually do not have the understand exactly to engage with the finer details
of investigating certain types of fraud. Companies also must pursue the guidance of
investigating officers or third-party audit firms. In the end, failure to properly determine what
happened at legal procedures could have catastrophic implications for the inquiry.
Proceedings also including lacking or insufficient records, or the failure to identify evidence,
can seriously hinder the company's opportunity to plead his legal argument.

5. Conclusion

Only in area of company law, the Fraudulent Domestic Inquiry has become one of the
promising options for regulating and tracking workers within the company. The traditional

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method of handling executive directors by naming auditors and general meetings has
frustrated us. There are a few other instances of corruption frauds which might have been
stopped by fraud as early identification. This study demonstrates that there has been a
substantial association between bonus compensation, retribution, loyalty and confidence and
the severity of the fraud with the company secretary's judgement on reporting. The results of
the study can then be used to promote the reduction of fraud among company employees and
in particular, the company secretary in Malaysia, as they play an independent judgement in
compliance with the applicable and regulatory requirements. In contrast, the Code of Ethics
provided by the Companies Commission of Malaysia is a realistic framework for company
workers as it sets out the standards of openness and accountability. Current whistle blowing
laws and regulations in many other parts of the world, unlike Malaysia provides immunity to
workers who review any proven or alleged wrongdoing to their company. In conclusion, the
level of legal security provided to employees in Malaysia by investigative journalists is
insufficient and demands an increase in the protection of law for employees who have
recourse to the independent whistle-blower process that instead making disclosures to the
compliance agency as needed. If in case in future I conduct another research, I would like to
research more about the whistle-blowers and the law and roles of Company Secretaries.

6. References

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