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INTRODUCTIONPROCEDURE OF INCORPORATIONEFFECT OF INCORPORATIONPOST INCORPORATION REQUIREMENTSDUTIES OF DIRECTOR AND OTHER

OFFICERS -Company Director, Company secretary,Auditors,Receivers,liquidators

INSIDER DEALINGWHISTLE BLOWINGCODE OF CORPORATE GOVERNANCECO DIRECTOR’S CODE OF ETHICS

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INTRODUCTION Types of Business OrganizationSole proprietorshipPartnershipCompany

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COMPANY LAW IN MALAYSIA The Companies Act 1965 and the

Companies regulations 1966 form the core in the regulation of companies in Malaysia.

The Act is modeled on the English Companies Act 1948 and the Australian Uniform Companies Act 1961.

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PROCEDURE FOR INCORPORATION

Pre-incorporation steps 1. Reservation of names - S.22(6) – before registration of

the co, the applicant shall apply to the registrar for reservation of the proposed name.

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Normally, the ROC will reply giving approval of the chosen name within one week but promoters often save time by submitting several names at the same time on Form 13Aof Companies Regulations 1996.

A separate form is required for each name with a separate filling fee also having to be paid.

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2. Documentation-among documents to be lodged with the Registrar:-

Memorandum of Association – signed by 2 subscribers, dated and witnessed, with each subscriber agreeing to subscribe for one share.

Article of Association – signed by the subscribers, dated and witnessed.

If no articles are lodge, the statutory articles in Table A will become the co’s articles.

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Form 48A – Statutory declaration by a person before appointment as Director, or by a promoter before incorporation.

Form 6 – Statutory Declaration of Compliance

Declaration Statement – by the First Secretary that he/she is not a bankrupt & is qualified under S 139A.

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3. FeesFees for incorporation must be

paid when documentation is lodged with the ROC.

ROC will certifies that the co is incorporated from the date specified on the certificate.

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EFFECT OF INCORPORATION S 16(5) – provides that on and from the

date of incorporation specified in the certificate of incorporation, the subscribers of the memorandum, together with such other persons as from time to time become members of the company, are a a body corporate by the name set out in the memorandum.

i.e: after the necessary steps leading to incorporation have been taken and a certificate of incorporation has been issued by the Registrar, a new legal entity is created.

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Body corporate – is a legal person created and recognized by the law.

The company is capable forthwith of performing all the functions of an incorporated company

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The company is capable of suing and being sued in its own name.

it may enforce rights by suing and conversely it may incur liabilities and be sued by others.

Requires the co itself to be the person enforcing its rights.

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The company has perpetual succession and shall have a common seal

A co does not exist for a specified period of time, it does not die but continues to exist until its name is struck off by the registrar of co. case: Re Noel Tedman Holdings Pty Ltd

Company seal – a co is required to have a common seal.

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The company has power to acquire, hold and dispose of property

The property of the co is its own, not that of the members. Case: Macaura lwn Northern Assurance Co Ltd

The liability of the members may be limited

If a co has incurred obligation it is primarily liable because its debts are separate from the debts of its members.

Only when the co has insufficient assets to pay its debt that members may be liable.

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The company as a separate legal entity

As long as the necessary formalities of incorporation are satisfied, a new entity comes into existence which is separate and distinct from its directors and shareholders.

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Case: SALOMON V. SALOMON & CO LTD [1897] AC 22

Facts: Salomon carried on business as a sole trader for 30 years,and his total assets were in excess of his liabilities.

He registered a co, S Ltd and transferred his business assets into the co.

Salomon took one share in the co and his wife and family took the other six(though holding them as niminee in a trust for S.

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When the co got into financial difficulties, Salomon lent money to the co on a secured debenture (loan certificate).

When the co went into liquidation, creditors argued that Salomon could not recover the loan because he really was the co and the seven members were not independent of the registered co.

Held: the co has a legal existence separate from the members so S could be a creditor of the co with the priority rights as a consequence of the debenture.

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Notes: Accordingly, while organizationally and operationally the business was managed solely by Salomon, in law he and the company were separate persons.

This separateness is an incident of the incorporation of a company, even if one person effectively owns and controls it.

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In Islam - Separate legal entity?In Islam is there is any concept of

separate legal entity?If there is so, what about the

religion of this entity. Can we say that a company has a religion too???

“Had We sent down this Quran on a mountain, verily, thou wouldst have seen it humble itself and cleave asunder for fear of God”. Al-Quran, surah al-Hashr:21

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LIFTING THE VEIL OF INCORPORATION

The recognition that a co is a separate legal entity distinct from its shareholders is often expressed as ‘the veil of incorporation’.

Once a co is duly incorporated, the ct usually do not look behind the veil to inquire why the com was formed or who really controls it.

In certain situations a court will ignore the separate legal entity of a com and look to the members or the controllers of the com.

Referred to as lifting the veil.

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This might be done to make the members of the controllers (primarily the directors) responsible for the act of the co.

Eg: the corporate veil has been lifted by the court – a com is used as a vehicle for fraud, to avoid a legal duty.

The Co Act makes an officer personally liable for debts incurred by the co.

Case: Aspatra Sdn Bhd v BBMB

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POST INCOPORATION REQUIREMENTS

Appointment of directors and secretary

S. 122(1) – every co must have at least two directors who must be natural persons.

Common seal S 16(5) – every co is required to have a

common seal; the co’s name must appear in legible characters on the seal.

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Registers S 141 – the co must establish a

register of its directors, managers and secretaries

Minutes books S 156(1) all the co must establish

minute books in which the minutes of general meetings and of directors and managers meeting must be entered.

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Allotment of shares S 18(2) – co limited by shares requires

each subscribers to the M & A state the number of shares he/she agrees to take.

Accounts and adults S 167 – a co must establish and

maintain accounting records in such manner enables a true and fair accounts

S 172(1) – a co’s director to appoint an auditor any time before the 1st AGM.

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DUTIES OF DIRECTORS & OTHER OFFICERS

Introduction2 Organizations I. BOD2. Members in general meeting In practice, articles usually confer

wide powers of management of a co’s affairs on the BOD.

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COMPANY DIRECTORThe definition of ‘director’ under – S

4(1) is wide.A person occupying the position of

directors even though he may described by another name.

The term used in the Act includes ‘shadow director’ – person who are not named as directors of the co but who act behind the scenes to exercise degrees of control over the co.

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An alternate, associate or substitute director - in practice, they may be treated a less than full directors but are nevertheless regarded legally as directors within the meaning of the Act and are subject to directors’ duties and liabilities.

Clearly, the co cannot manage itself, the law demands that every co has at least two directors. (S 122)

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The first directors of a co must be named in the memorandum or articles of association. (S 122(3))

If this is not done the co cannot be registered.

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DUTIES OF DIRECTORS The power of management of companies

is usually vested in the BOD. In HL BOLTON (ENGINEERING) CO

LTD. V. GRAHAM & SONS LTD (1957) 1 QB 159

Lord Denning stated: ‘ A co may in many ways be likened to a human body. It has a brain and nerve center which controls a what it does. It has hands which hold the tools and act in accordance with directions from center.’

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Some of people in the co are mere servants and agents who are nothing more than hands to do the work and cannot be said to represent the mind or will.

Others are directors who represent the directing mind and will of the co, and control what it does.’

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3 duties of director:-1. Fiduciary duties2. Statutory duties3. Duties of care, skill and

diligence.

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FIDUCIARY DUTIESFiduciary r/hip: r/ship between a

person in a position of trust, the fiduciary and the person for whose benefit the fiduciary acts.

Fiduciary duties of the director can be summarized as follows:-

1. To act bona fide in the interest of the company

2. To exercise power for their purpose

3. To avoid conflict of interest

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DUTY TO ACT BONA FIDE IN THE INTEREST OF THE COMPANY

The fiduciary duties of directors of a co require them to act bona fide in the best interest of a co as a whole.

Whilst the power of management are conferred on the BODs collectively, the fiduciary obligations are owed by the directors individually.

Whether a director is in breach of these fiduciary obligations depends on the particular circumstances of each cases.

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Lord Greene MR in RE SMITH AND FAWCETT LTD (1942) 1 ALL ER 542

‘they must exercise their discretion bona fide in what they consider – not what the court may consider to be in the interest of the company, and not for any collateral purposes.’

S 132(1) – officers must at all times act honestly in the exercise and discharge of the duties of their office.

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This duty is a subjective duty – there is no breach where the directors act in what they honestly believe to be the interest of the co

The court are generally reluctant to override the business judgment of the directors.

Directors are presumed to have acted bona fide for the benefit of their co and those persons alleging a breach of duty bear the onus of proving that this is in fact not the case.

Case:Fawziah Holding Sdn Bhd. v Metramac

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‘acting for the benefit of the co means that the director must act;

In the interest of the shareholders as a collective group

They interest of a group of coThe interest of employeesThe interest of shareholderThe interest of the creditors

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DUTY TO EXERCISE POWERS FOR PROPER PURPOSES

In exercising their powers bona fide, the directors also use them for a proper purpose.

If the purpose is collateral, the action will be invalid unless approved by the shareholders in general meeting.

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CASE: BISHOPGATE INVESTMENT MANAGEMNET LTD V. MAXWEL (1993)

Court: ‘if a director choose to participate in the management of the co and exercises powers on it behalf, he owes a duty to act bona fide in the interest of the co. he must exercise the power solely for the purpose for which it was conferred…’

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Where a director exercises the powers granted to him by the memorandum or articles in a manner other than for its proper purpose the action is beyond the actual authority of the director.

Any agreement with third party in such circumstances is binding on the co, however, unless the third party had notice that the directors were exercising their powers for purposes other than for the co.

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It is open to general meeting to ratify the actions of the directors.

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CASE: MILLS V MILLSDixon J: ‘ … a power conferred upon

them cannot be exercised in order to obtain some private advantage or for any purpose foreign to the power’.

CASE: ALEYN V BELCHIER (1758)Lord Worthington: …no [point is

better established than that, a a person having power, must execute it bona fide for the end designed, otherwise it is corrupt and void.’

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In cases where it is alleged that the directors have exercised their powers for improper purpose, the onus of establishing the directors acted improperly rest with those alleging the breach of duty.

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DUTY TO AVOID CONFLICT OF INTEREST

The general rule is that directors must not place themselves in a position where duty and interest are in conflict.

This is part of a wider rule that a trustee must not place himself in a position where conflict of interest may arise.

Directors are trustees in the sense that they owe fiduciary duties to the co.

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The rule can be summarized thus: if a director obtains a benefit while director of a co in circumstances where there could have been a conflict of interest, he is accountable to the company for that benefit unless he has disclosed it and obtained the approval of the co.

The rule effectively means – if a director is in doubt, he should disclose the possibility of conflict of interest.

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The courts have been strict on the matter – the director will to be able to plead actions were made bona fide or in the interest of the co and the fact that the co have made profit is irrelevant.

Where there is a conflict of interest, the contract is avoidable at the instance of the co but the right to avoid the contract is lost in certain circumstances, I.e:

The co affirms the contract, or Delays unduly before rescinding, or Restitution becomes impossible, The rights of bona fide parties

intervene.

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As well as setting aside the contract, the court can call upon the director to account for any gains he has made in the transaction.

In all such cases, it is not necessary to show that there has been an actual conflict of interest: it is enough to show there is a ‘real sensible possibility of one’.

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Particular instances where conflict of interest may arise:

o 1. A director may not use information obtained by virtue of his position to make a profit for himself.

S 132(2) – provides that any co officer may not made improper use of any information acquired by virtue of his position to gain direct or indirect advantage for himself or another, or to cause detriment to the co.

The penalty is that he will be liable to the co for damage suffered and is guilty of an offence punishable by imprisonment or fine.

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o 2. A director may not use co property or money to make a profit for himself.

If he does so, the director is in breach of his duty and the profit he makes will belong in equity to the co.

He may also be guilty of criminal breach of trust since he is regarded as a trustee of co property, to be used for the purposes of the co only.

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o 3. A director may not use his position to obtain profit for himself.

If he does obtain a profit by using his position he will be accountable to the co for that profit.

Accepting a bribe is clearly a breach of this rule and the co will then be able to recover the bribe or sue for damages.

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CASE:MAHESAN V.MALAYSIAN GOVERNMENT OFFICERS CO-OPERATIVE HOUSING SOCIETY(1978)

Facts: The director received a bribe amounting to one quarter of the profit made by a person who sold land to the Society.

Held: The society could recover the amount of the bribe, or they could sue the director for his breach of duty but not both.

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In the event, since the loss to the society was greater than the amount of the bribe, the director was ordered to pay damages to the Society.

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o 4. A director may not retain a secret profits made out of his fiduciary relationship with the co

A person in fiduciary position may not profit from that position.

Where he does so he may be called to account for his profit.

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The rule may be regarded as an element of the no conflict rule exist independently of each other.

CASE: REGAL (HASTING) LTD V GULLIVER (1976)

Facts: R owned a cinema and wanted to buy two more to sell all three as a group.

A subsidiary co was set up to buy the additional cinemas.

In order to raise the money required the directors agreed to subscribe for extra shares.

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When the transaction was completed, the directors had made a profit on the shares they held in the subsidiary co.

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Held: the directors had obtained their profits while acting as directors and managers of R and were thus liable to account for the profits, even though they had acted bona fide throughout the transaction.

Directors may be permitted to retain their profits where the co in general meeting approves the situation, band articles commonly provide for retention of profits in a Regal type of situation.

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o 5. A director cannot enter into a contract with his co without disclosing the fact he has an interest

The common law rule is reinforced by CA 1965 132E (substantial property transactions involving directors) and by CA 1965 S 131 which makes disclose of certain conflicts of interest mandatory.

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Under S 131, the following must disclosed:

The nature of the interest (including that of family members);

The nature, character and extent of any conflict that might arise by virtue of the director holding office;

The nature, character and extent of any conflict that might arise by virtue of the director holding any property.

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STATUTORY DUTY TO DISCLOSE Directors are required by the CA to

disclose certain information, as part of their duties.

S 131: demands disclosure of potential conflict of interest and also of interest in contracts with the co.

Additionally, S 135: places a general duty of disclosure on directors.

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They must give notice in writing to the co of certain matters, I.e:

particulars of interest in the shares, debentures, participatory interest, rights, options and contracts for the purpose of maintaining the register of directors’ shareholdings;

Particulars of any changes in the above; Particulars of events and matters

affecting compliance with the Act; In the case of a director of a public co or

its subsidiary the date on which he attains or will attain the age of 70.

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Table A, Art 72(h) ‘the office of director is vacated if

the director is directly or indirectly interested in any contract with the company and fail to declare the nature of that interest in the manner required by the Act’

The director could have protected themselves by making full disclosure to the general meeting

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Article 81: ‘ a director shall not vote on a matter in

which he or she is interested and if he or she does, the vote is not counted.’

Proceedings at board meeting only. A director who is also a shareholder is

not disqualified from voting at a general meeting of members on matters affecting his personal interest as shareholder.

CASE: NORTH-WEST TRANSPORTATION CO V BEATTY

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Henry J in NATIONAL MUTUAL LIFE NOMINEES LTD V WORN [1990]

‘the standard of care to be exercised by a director has been said as being to exhibit the degree of skill reasonably to be expected from a person of his knowledge and experience’.

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OTHER CORPORATE OFFICERSTHE COMPANY SECRETARY S 139(1) – every co is required to have

at least one secretary Each must be a natural person of full

age who has his or her principal or only place of residence in Malaysia.

S 139(1A) – the first secretary of the co to be named in the M & A

S 139(1B) – the office of secretary must not be vacant for more than one month at any one time.

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A CS is appointed by the directors and at least one CS must be present at the registered office of the co, by himself or by his agent or clerk, at times when the registered office is open to public.

The co secretary ship may be held by a a director but anything that is required to be done by a director and a secretary cannot be done by a single director acting in both capacities.

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A person may be a secretary of more than one co and may have other employment.

Anything required to be done by the CS may, where the secretary is absent of the office is vacant, be done by nay assistant or deputy secretary.

If there is no such assistant or deputy capable of acting, any officer of the co may undertake the task if so authorized generally or specifically by the directors.

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QUALIFICATIONS OF CS A member of a certain prescribed

professional body or any other body prescribed by the Minister

Licensed by ROC The prescribed bodies are: The Malaysian Association of the

Institute of Chartered Secretaries & Administrators;

The Malaysian Institute of accountant; The Malaysian Bras’ The Sabah Law association; and The Advocate Association of sarawak.

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DISQUALIFIED IF;An undischarged bankruptConvicted of prescribed offences

under the ActNo longer a member of a proof.

BodyNo longer holding a license

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DUTIES OF A SECRETARY To carry out the functions of the chief

administrative officer of the co To ensure that the necessary registers

required to be kept by the Act are established and property maintained

To ensure that all returns required to be lodged with the ROC are prepared and filed within the appropriate time limits

To organize and attend meetings of the shareholders and directors, including sending out of notices, the preparation of agendas etc.

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To be conversant with meeting procedures

To ensure that co’s book of account are kept in accordance with the Act

To supervise the co' share capital generally

To supervise the preparation tax return To attend the co’s insurance

requirements To be conversant with statutory

requirements

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AUDITORSINTRODUCTION Under Malaysian Law, the co or its

directors must ensure that when they appoint an auditor, the proposed auditor is properly qualified; I,e the person must be an ‘approved auditor.’

An approved auditor is one who has the necessary qualification and has applied to the Minister of Finance and has been granted approval to act (Form 3) or renewal of approval to act (Form 4) as auditor.

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In making the application, the person must show, he or she has the necessary qualification, is of good character and is competent to perform the duties of an auditor under the CA 1965.

The approval of Minister is renewable every two years.

In most cases, it is a firm that will be approved rather than an individual.

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CA 1965 S 9(7) recognizes such appointments as being the appointment of all the partners in the firm as joint auditors.

By CA 1965 S 8 – every partner of the firm must also individually be an approved co auditor.

Before a co appoints an auditor or audit firm, consent in writing to act as auditor must be obtained from the proposed auditor or audit firm. CA 1965 S 9(6).

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The function of an auditor is to carry out an audit and present a reliable, independent report on the accounts and financial position of a co.

An auditor’s report contain a professional opinion based on the audit of the co’s accounts.

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DUTIES OF AN AUDITORSContractual r/ship with the coExpress/implied terms in such

contracts that the auditor will;1. Carry out an audit2. Report to members his opinion

based on the audit, whether the accounts give a true and fair view of the position of the co.

3. Be independent of the co

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4. Exercise a reasonable degree of care and skill

5. Statutory dutiesS 174 – powers and duties of

auditors as to reports on account

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RECEIVERINTRODUCTION A receiver is appointed as a remedy for the

debenture holders in the event of a breach by the co of the conditions attached to the debentures.

Typically, he is appointed to a co by secured creditor ,such as debenture holder under floating charge, and his function is to pay off the debt of that secured creditor.

The appointment of receiver is an early method by which a creditor could safeguard his equitable interest in the secured property.

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Powers of receivers A receiver can be appointed either by

debenture-holders or by order of the court.

Once appointed, he supersedes the authority of the directors (although their actual appointment are north terminated) in the conduct of the business.

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The directors will still be liable to default of the co, however, in respect of compliance with the Act,for instance, or making returns to the ROC.

Where the receiver is appointed by the debenture holders,he is their agent, so they will be liable on any contracts he enters unless the terms of issue provide otherwise.

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Disqualification for appointments as receiver

CA 1965 S 182 provides that the following are not qualified to be appointed as receiver of the property of a co:

A corporation, (unless authorized by law)

An undercharged bankrupt A mortgage of the co property An auditor of the co An officer of the co which is a mortgage

of co property Any person who is not an approved

liquidator or the Official Receiver.

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DUTIES OF RECEIVERCommon law dutiesPrimary duty to the appointing

debenture-holdersCASE: RE B JOHNSON & CO

(BUILDERS) (1995) 1 CH 634Obliged to get in the property

charged to manage the co’s business and ultimately to sell the charged property for the purpose of discharging the secured debt.

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STATUTORY DUTIES 1. S 188(1)- to notify the co and other

relevant authorities of his appointment 2. S 186(1) – to notify the ROC within 7

days 3. S 190(1) – to prepare accounts of the

receipts and payments and an estimate of the total value of the property in respect of which he was appointed.

4. S 191 – payment of certain debts out of assets subject to floating charge in priority to claims under charge.

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LIABILITIES OF RECEIVERLiability for contractsLiability for tortsLiability for breach of dutyS 192(2) – the court has a

discretionary powers to examine the conduct of a receiver

Liable to compensate the co for any loss or damage

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LIQUIDATORS Where a compulsory winding up order is

made, it will appoint a liquidator. In a compulsory winding up,a liquidator

is appointed by order of the court In a member's voluntary winding up, the

liquidator is appointed by the general meeting of members.(s 258)

In any case, a person shall not be appointed as liquidator of a co unless prior to the appointment he has consented in writing so to act. CA 1965 S 10(4).

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DUTIES OF LIQUIDATORS General duties Agency r/ship – fiduciary dutiesRE PARTRIDGE ‘…the liquidator’s principal duties are to

take possession of and protect the assets,to make lists of contributories,to have disputed cases adjudicated upon, to release the assets and to apply the proceeds in due course of administration amongst the creditors and contributories.’

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Specific duties of liquidatorsProper administrationCollect the co' assetsPreserve assetsRelease assetsDistribute assetsAcquaintance with the co’s affairsReport of breaches of an ActEffect dissolution

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INSIDER TRADING (IT) IT is a process whereby a person

connected with a co uses information not generally available to the public when dealing in securities.

It is the use by an insider of price-sensitive information, not available to the general public, to trade to his advantage in the shares of his co.

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Securities fraud that are governed by the Securities Industry Act

The information in question must have been obtained by the insider by reason of his connection with the corporation

Eg – trade secrets,co strategy and plants

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The price sensitive information includes anything held by virtue of the connection which it would be reasonable to expect would not be disclosed except for proper performance of the functions attached to the position of the individual concerned.

It is necessary to show the person knew it was unpublished price sensitive information in relation to the co securities in question.

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Corporate insiders are:A DirectorA secretaryAn executive officerAn employeeA receiver/managerA liquidatorA trustee

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THE PROHIBITON ON INSIDER TRADING

S 89 – ‘no person except a co or an agent of a co authorized in that behalf under the seal of the co shall issue or offer to the public for subscription or purchase or shall invite the public to subscribe for or purchase any interest.’

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S 91(1) – ‘ a person shall not issue or offer to the public for subscription or purchase or invite the public to subscribe for or purchase any interest unless, at the time of the issue, offer or invitation, there is in force, in relation to the interest, a deed that is an approved deed.’

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WHISTLE BLOWINGThe voluntary release of non public

information, as a moral protest, by a member or former member of an organization outside the normal channels of communication to an appropriate audience about illegal and or immoral conduct in the organization that is opposed in some significant way to the public interest.

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CRITERIAS It can be done only by a member of an

organization There must be non public information The information is generally evidence of

misconduct of an org or some of its members The information must be release outside

normal channels of communication The release of info must be done voluntarily It must be undertaken as moral protest. I.e

to correct some wrong & not to take revenge.

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TRADE SECRETS Include those information an knowledge

to which a firm has proprietary right, which it can legally and morally protect and refuse to reveal.

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CORPORATE GOVERNANCEDEFINITIONThe process and structure by which

the business affairs of the co are directed and managed, in order to enhance long term shareholder valued through enhancing corporate performance and accountability, whilst taking into account the interest of other shareholder.

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Corporate governance refers to the rules of the game that enables shareholders to exercise appropriate oversight of a company to maximize its value and profits. It is a set of provisions that enable the shareholders through voting power compel those in operating control of the firm to respect their interests (Scott, 1998).

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OBJECTIVES

To ensure that directors and managers, to whom the running of large corporations has been entrusted by the shareholders, carry out their responsibilities faithfully, placing the interests of the corporation ahead of their own.

To essentially secure sufficient disclosure so that investors and others can access co’s performance and governance practices and respond in an informed way.

To realize long term shareholder value, including the minority shareholders.

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The 1997 Asian crisis exposed the hazards of corruption and cronyism and business conducted led to misallocation of fund (Engardio and Clifford, 1999).

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In M’sia, Petronas has helped buy debt-burdened shipping assets controlled by the Malaysian Prime Minister eldest son and is also preparing to buy the cash strapped national car maker, Proton (Jayasankaran, 1999). The buy back of Malaysian Airline (MAS) over twice the current market price of MAS’s shares by the government is another example of politically connected business behaviour (Holland, 2001).

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In HK Stock Exchange provides board guidelines to public listed companies and they believe that self-regulations by boards of directors is more effective and efficient than the imposition of excessive and rigid regulations in enhancing good corporate governance practices.In promoting good corporate governance, HK Company Registry monitors closely and enforces the disclosure of information timely on directors and companies.

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CODE OF CORPORATE GOVERNANCE

THE BOARD OF DIRECTORSPrincipal responsibilities of the BoardReviewing and adopting a strategic

plan for the coOverseeing in the conduct of the co’s

business to evaluate whether the business is properly managed

Identifying principal risks and ensure the implementation of appropriate systems to manage these risks

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Succession planning, inclosing appointing, training , fixing the compensation of and where appropriate, replacing senior management

Reviewing the adequacy and the integrity of the co’s internal control and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines.

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Compliance of the Code

The existence of a Code, however, does not ensure that directors, officers and employees will comply with it or act in a legal and ethical manner.It has no legal force. If there is any non-compliance, the law will only take action if there is any breach of existing act e.g. Companies Act, SC etc.

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AOL Time WarnerThe world’s largest media company allowed a British company to buy advertising instead of paying arbitration award in a large dispute. It made false and misleading statements about the company’s business and financial condition and it generated advertising and commercial revenue as a result of unconventional transactions.

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TYCOThis company evaded more than one million dollars in sales taxes on art masterpieces. The CEO and the CFO defrauded the company and investors by taking more than $170 million in improper bonuses and unauthorised loans and fraudulently obtained more than US$430 million from selling Tyco stock over more than seven years.