In the current difficult operating environment of government-linked companies and the reported incidents of hidden corporate scandals in Malaysia, new corporate leaders and incoming board of directors are faced with the risks of personal liability for breach of director’s duties and breach of employment contracts for failing to act in the best interests of their companies.

Ticking time bombs in the form of undisclosed illegal conduct and ongoing offences are of primary concern.

Some of the ways in which risks can be managed, minimized and or hopefully avoided are as follows:

  1. Encourage employees to speak up about any wrongdoings they are aware of.
  2. Implement a Whistleblower Program and Hotline.
  3. Undertake an Internal Compliance Review.
  4. Undertake Corporate Internal Investigations based on reported or discovered wrongdoing or misdeeds.

Even with a new CEO and Board of Directors, much of the old management and employees will remain in the company. How do we ensure that an independent compliance health check and or an internal investigation is truly transparent and independent?

Conflicts of interest will be a major minefield to navigate. It is tough to expect culprits to admit to wrongdoing. The tendency will be to hide the misdeeds and shred incriminating documents ala the Enron saga. Hence the need for independent outside counsel and financial accountants to undertake compliance health checks and internal investigations.

When choosing outside counsels and financial accountants, conflicts of interest will arise at two levels:

  1. Transactional Conflicts of Interests

Existing panels of outside lawyers and financial accountants may have acted in some of the transactions and are thus conflicted from acting due to transactional conflicts of interest.

  1. Relational Conflicts of Interests

Existing panels of outside lawyers and financial accountants may have built relationships with the past management of the company and are ethically subject to relational conflicts of interest.

In 2003, the Conference Board issued a report  Commission on Public Trust and Private Enterprise – which stated:

In the event an independent investigation is reasonably likely to implicate company executives, the board — not management — should retain special counsel for this investigation. Special investigations of company activities that may implicate the conduct of company executives require independence from management.  Typically, lawyers and law firms are in the best position to conduct investigations, and care must be taken that these investigations are conducted thoroughly, vigorously, and objectively. It is important, therefore, that investigative counsel is chosen by, and reports directly to the board. To ensure that special counsel’s interests are not aligned with, or influenced by, management, the Commission believes that special counsel should not be one of the corporation’s regular outside counsel or a firm that receives a material amount of revenue from the company.


While the above statement is applicable to corporate internal investigations where there is no change of CEO or directors, it is even more applicable where a change of corporate leadership has occurred as the new management and board have no historical knowledge of what happened in the company and the remaining management and employees will have an advantage if they are so inclined to hide wrongdoings and misdeeds.

The solution then is to engage truly independent outside counsels and financial accountants free from transactional and relational conflicts of interest to assist in corporate internal investigations and compliance healthchecks.

Posted by Jeff Leong

I am the senior partner of Messrs Jeff Leong, Poon & Wong, Malaysia and a Consultant at Justlaw LLC, Singapore. I am also actively serving with the Law Association For Asia And The Pacific (LAWASIA), the peak body for national bar associations and law societies in more than 40 jurisdictions in the Asia Pacific region as Chair of the Corporate, Securities & Investment Law and Co Chair of the Belt And Road Initiative Standing Committees. I lead a Special Projects team, structure and run complex M&A deals, resolve critical problems faced by clients such as crisis management, regulatory investigations, shareholder fights and board tussles and advise founders, business owners and senior management on business transactions. With numerous IPOs and M&A deals over 30 years, I am often consulted by clients in Shipping and Logistics, Technology and Digital Economy, Oil & Gas and other heavily regulated industries on complex, urgent and critical matters. I founded JLPW in 1999 during the 1997 Asian Financial Crisis with 2 other founders. We were deep into corporate rescues and mergers of banks, insurance companies and stockbrokers to resuscitate the bleeding Malaysian economy, working on some of the major corporate rescues of the 1997 Asian Financial Crisis. Affiliations with Deacons Graham & James 2001- 2012 and Dacheng (now Dentons China) 2012-2016 quickly followed. In 2012, we founded JLPW CROSSBORDER ASIA, a regional law firm network. In JLPW, we developed the current due diligence system adopted and used by industry participants in capital markets transactions in 1999. I am currently drafting sections of a new Due Diligence Guide for Malaysia with investment bankers, accountants, capital market lawyers and other industry participants. I currently lead our Japan Services Group, assisting Japanese companies venturing into Malaysia and South East Asia with market entry strategies, M&As and post merger integration advisory together with our Japanese speaking team. I am also leading our China Services Group and regional JLPW Belt and Road Services Group assisting Chinese companies investing and undertaking Belt and Road projects in Malaysia and other ASEAN countries. As leader, strategist, chief talent scout, builder and problem solver, I have initiated and developed various practice groups in JLPW and am now leading our Legal Tech initiatives to better support our clients in the new Digital Economy.

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