When a Partner Misuses Your Company Account

How does a partner misuse a company account?

It happens when one partner or director uses the company account without the others knowing. They may receive money from scam victims, pay for illegal operations, or pass money through the company to hide where it came from.

Joint venture accounts can carry more risk because more than one person can use them. ^[f3] A partner who runs the day-to-day finances can misuse the account for weeks or months unnoticed. Sometimes it only comes out when the bank or police freeze the account.

The freeze hits the whole company. ^[f5] When a company account is frozen under AMLA or CPC s116D, wages and supplier payments stop and the business can quickly stall. Every director is affected, not only the one who caused it.

What duties and risks do you have as a director?

Directors in Malaysia have duties under Sections 213 and 214 of the Companies Act 2016. ^[f1] They must act in good faith, take reasonable care and use their powers for a proper purpose. A director who does not watch the company’s finances may be seen as breaking these duties.

The Penal Code adds personal criminal risk. ^[f2] If the company account was used as a mule account, directors can face charges under Section 424B (giving someone control of an account) or Section 424C (making transactions through an account without a lawful purpose). Whether you face charges depends on your own part, including what you knew and why you acted, even if you made no transfers.

So you face two problems at once: what happens to the company, and what happens to you personally.

How is the company’s liability different from yours?

This difference is at the centre of your defence. The company may face penalties, fines and limits on how it operates. Whether you are personally liable is a separate question.

Whether you are charged personally depends on your own involvement. What you knew and whether you agreed matter to your defence. ^[f4] If you can show your partner acted alone, controlled the account and hid what they were doing, the case against you may be weaker.

Useful evidence includes the bank’s signing authority records, internal messages, board minutes and records of your part in the company’s finances. A lawyer who handles mule account defence can put this evidence together.

How do you show you did not know?

What you knew about the transactions, and whether you agreed to them, matters to your defence. You need records, not only your word.

Bank records of who could sign. If your partner was the only signatory, or the only one with online banking access, the bank’s documents will show it. Ask your bank for them now.

Messages between you. Emails and WhatsApp messages with your partner that show ordinary business talk, with no mention of the suspicious payments, support your account that you were not involved.

Board minutes and company records. Records of your role, who handled what, and any concerns you raised about the finances all matter. If you questioned unusual activity before the freeze, that can help.

What should you do right now?

Secure the company records. Get copies of all bank statements, board minutes, partnership agreements and accounts. If your partner holds these, act before they can be changed or destroyed.

Separate your own money. If you have personal funds in the company account, record what is yours. A lawyer can advise whether to ask for it to be released.

Do not discuss the case with your partner. Anything you say to them about the investigation can be used as evidence. Speak through lawyers if needed.

Apply to keep essential payments going. A lawyer can apply to vary the AMLA freeze so the company can pay wages and existing bills while the investigation continues. This can protect your staff and the business.

Get advice before you speak to the police. As a director, your police statement can shape your legal position. Get legal advice on it first from a lawyer who knows company law and mule account defence.

Sources

1. Companies Act 2016, Sections 213, 214
2. Penal Code (Amendment) 2024, Sections 424B, 424C
3. Criminal Procedure Code (Amendment) 2024, Section 116D
4. Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLA)
5. Low & Partners, “Keldai Accounts: When Helping a Friend Becomes a Criminal Offence” (2024)
6. Suruhanjaya Syarikat Malaysia (SSM), Companies Act 2016 Framework