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isks. 112 In addition, the CLRC felt that there must be a clear statement of law
regarding directors‟ responsibilities and protection, and proposed adoption of the
provisions similar to the Australian business judgment rule. 113 When the Act was
amended in 2007, the business judgment rule in the statute was almost an exact copy
of the Australian provisions.
Although the CLRC recommended that the rule should be only applicable to
situations where decisions have actually been made by the directors, and does not
apply when directors fail to exercise judgment or abdicate responsibilities, the final
version of the provision is similar to Australia. 114 The definition of business
judgment in section 180(3) of the Australian Corporations Act 2001 suggests that it
applies to both positive action and omission in making the decisions on relevant
matters pertaining to corporation‟s business operation. 115 In this aspect, the position
in Malaysia will be the same.
As such, there are two main differences between the Australian and the Malaysian
provisions:
a) on who can benefit from the rule; the provision in the Australian
Corporations Act 2001 applies to directors and other officers of the company
while the Malaysian provision applies to directors only;
b) on the usage of the words 'rational and reasonable' in respect of the fourth
condition that must be fulfilled before reliance can be placed; the Australian
provision states that directors or officers “rationally believe that the judgment
is in the best interests of the company." The section then continues and points
112 CLRC Clarifying and Reformulating the Directors‟ Role Duties above n98 at [3.18].
113 The said proposal was adopted in section 132(1B) of the Companies Act 1965 with effective date
of enforcement on 15.08.2007.
114 See CLRC Clarifying and Reformulating the Directors‟ Role Duties above n98 at. [3.20-3.21] and
compare with definition provided in the Companies Act 1965- “business judgment” means any
decision on whether or not to take action in respect of a matter relevant to the business of the
company.”
115 Austin and Ramsay above n26 at [8.310].
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