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1MDB probe should include ‘breach of directors’ duties’

The authorities must investigate whether the directors of debt-ridden 1MDB had breached their fiduciary duties. Section 132(1) of the Companies Act 1965 stipulates that a board should exercise its powers for a proper purpose, in good faith and with reasonable care and skill in the best interest of the company.

However, according to media reports, 1MDB had allegedly paid financial advisers commission that was above market rates to raise bonds; joint-ventured with PetroSaudi under highly-questionable circumstances and sparked controversy with its purchase of independent power producers. These were some of the more common criticisms levelled at 1MDB, of which the explanation was found wanting.

These have also raised doubts about whether 1MDB's directors had acted with the shareholders’

interests in mind. If they had not, the directors had breached their fiduciary duties to shareholders, who in this case, are taxpayers.

Further, while Jho Low is not an official director of 1MDB, there is a question of whether he is a

shadow director, thus having the same duties as an official director. This is in accordance with Section 4 of the Companies Act.

If the directors were unsure if the decisions they were about to make was in the shareholders’ best interests, they should call an EGM to put the matter to rest, especially when billions of ringgit are involved. This is in line with good governance which Cenbet promotes.

CENBET is also supportive of the Malaysian Anti-Corruption Commission (MACC) advisory board’s suggestion to set up of a special task force to investigate the 1MDB controversy. It is also the duty of the Finance Ministry to ensure that the directors it nominates into 1MDB attend public accounts committee hearings and accord the PAC with utmost respect and importance. This includes not asking for postponements of hearings.

Directors who fail to do so ought to be relieved of their duties immediately.


GAN PING SIEU is co-president, Centre For A Better Tomorrow (Cenbet).

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