KUALA LUMPUR: The Court of Appeal has ruled that directors who act “honestly, responsibly and in good faith” are protected from personal liability even if their business decisions later fail.
The ruling was highlighted in a report by The Edge Malaysia on Wednesday (Oct 1), which said the appellate court dismissed Iris Corporation Bhd’s appeal to recover RM11.72 million it had invested in Border Control Solutions Ltd (BCS), a United Kingdom firm, in 2016.
Justice Datuk Ahmad Fairuz Zainol Abidin, who delivered the written grounds, explained that directors are safeguarded under the “business judgment rule” if they have no personal interest, are reasonably informed, and genuinely believe their decision is in the company’s best interest.
He added that directors’ actions must be judged based on the circumstances they faced at the time and not through hindsight after an investment collapses.
“The ultimate failure of the BCS investment does not retrospectively invalidate the reasonableness of the board’s belief in February 2016,” he said.
The case centred on Iris Corp, a pioneer in identification technology and creator of the world’s first electronic passport, which joined the BCS venture hoping to be part of the UK Border Force privatisation.
Doubts about the investment emerged months later, leading Iris to withdraw, and BCS was eventually wound up by the UK High Court in 2018.
Iris later took legal action against nine of its former directors in 2019, but both the High Court in 2022 and the Court of Appeal in September this year found no breach of duty.
The COA panel, led by Justice P Ravinthran with Justices Ahmad Fairuz and Choo Kah Sing, concluded that the former directors had the knowledge and experience necessary to make an informed decision at the time.
Those cleared of liability include former chairmen Tan Sri Razali Ismail and Datuk Nik Azman Mohd Zain, former group managing director and CEO Datuk Tan Say Jim, Tunku Datuk Seri Shahabuddin Tunku Besar Burhanuddin, Datuk Hamdan Mohd Hassan, Datuk Eow Kwan Hoong, Syed Abdullah Syed Abd Kadir, Datuk Noor Ehsanuddin Mohd Harun Narrashid and Chan Feoi Chun.
