ACT 125

Section 133A. Prohibition of loans to persons connected with directors.
(1) Subject to the provisions of this section, a company (other than an exempt private company) shall not—

    (a) make a loan to any person connected with a director of the company or of its holding company; or

    (b) enter into any guarantee or provide any security in connection with a loan made to such person by any other person.

(2) This section shall not apply—

    (a) to anything done by a company where the loan is made, or the guarantee or security is provided in relation to a loan made, to a subsidiary or holding company or a subsidiary of its holding company;

    (b) to a company whose ordinary business includes the lending of money or the giving of guarantees in connection with loans made by other persons, or to anything done by the company in the ordinary course of that business, if the activities of that company are regulated by any written law relating to banking, finance companies or insurance or are subject to supervision by Bank Negara Malaysia; or

    (c) to any loan made to a person connected with a director who is engaged in the full-time employment of a company or its related corporation, as the case may be—

      (i) for the purpose of meeting expenditure incurred or to be incurred by him in purchasing or otherwise acquiring a home; or

      (ii) in accordance with a scheme for the making of loans to employees approved by the company in general meeting.

(3) Nothing in this section shall operate to prevent the company from recovering the amount of any loan or the amount for which it becomes liable under any guarantee entered into or in respect of any security provided in contravention of this section.

(4) Where a company contravenes this section, any director who authorizes the making of any loan or the entering into of any guarantee contrary to this section shall be guilty of an offence against this Act.

Penalty: Ten thousand ringgit.