ACT 125

COMPANIES ACT 1965 (REVISED - 1973)

PART V - MANAGEMENT AND ADMINISTRATION

DIVISION 2 - DIRECTORS AND OFFICERS

Section 136. Prohibition of tax-free payments to directors.

(1) A company shall not pay a director remuneration (whether as director or otherwise) free of income tax, or otherwise calculated by reference to or varying with the amount of his income tax, or the rate of income tax, except under a contract which was in force before the commencement of this Act, and which provides expressly, and not by reference to the articles, for payment of such remuneration. (2) Any provision contained in a company's articles, or in any contract other than a contract referred to in subsection (1) or in any resolution of a company or of a company's directors for payment to a director of remuneration free of income tax or otherwise calculated by reference to or varying with the amount of his income tax or the rate of income tax shall have effect as if it provided for payment as a gross sum subject to income tax, of the net sum for which it actually provides. (3) This section shall not apply to remuneration due before the commencement of this Act or in respect of a period before the commencement of this Act. (4) Where a company contravenes this section the company and every officer of the company who is in default shall be guilty of an offence against this Act. Penalty: Imprisonment for three years or ten thousand ringgit.