Beyond Salomon in Asean Context: Director Liability, Lifting Corporate Veil and Insolvent Trading in Malaysia and Indonesia

The article establishes a comparative and doctrinal analysis of director liability in insolvency in both Malaysia and Indonesia, using the United Kingdom as a reference point jurisdiction. It asserts that Malaysian law is not yet inclusive in its approach since it continues to rely upon a regime based on fraud to determine liability pursuant to section 540 of the Companies Act 2016, whereas the Indonesian law is conceptually open-ended and relies on fault and negligence found in Law No. 40 of 2007 and Law No. 37 of 2004. Both systems do not control the grey area between legitimate commercial judgment and misjudgement of risk-taking in the near vicinity of insolvency. Based on the wrongful trading regime in the United Kingdom in section 214 of the Insolvency Act 1986, this article postulates the introduction of objective standard of the liability in an ASEAN-oriented system. This kind of reform would improve the protection of creditors, increase the level of doctrinal coherence and bring regional standards of corporate governance to parity with international best practices.

Separate Legal Entity, Director Liability

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