First Published in Business Times, April 16, 2014
Letter to the Editor
IT is heartening to learn that the regulators are making directors more accountable by increasing the sanctions for directors who breach basic statutory requirements (“Stiffer penalties for directors in tax, AGM cases”, BT, April 15).
As noted, these statutory requirements are important to ensure transparency in our market. However, breaches of such administrative duties by directors are relatively easy to detect and enforce – a bit like offences relating to parking and misuse of bus lanes. What is harder to enforce but arguably more important breaches by directors are those relating to their substantive duties, such as the duty to act honestly and to use reasonable diligence in the discharge of their duties under section 157 of the Companies Act.
It is important for our regulators to investigate and enforce breaches of substantive duties while they continue to enforce breaches of administrative duties. There is an urgent need to review the penalties for breaches of substantive duties. Currently, section 157 provides for a maximum fine of $5,000 or an imprisonment term not exceeding 12 months, which is far too low in today’s context and disproportionately low when compared with the penalties now being imposed for breaches of administrative duties.
In the report, “Aussie regulator wants tougher corporate fines” (BT, April 10), the Australian Securities and Investment Commission (ASIC) has called for substantial increases in penalties for corporate misconduct in Australia, highlighting a substantial gap compared to countries such as US, UK, Canada and Hong Kong. We should similarly review our penalties for corporate misconduct to ensure that they act as sufficient deterrents.
Mak Yuen Teen
