The Legal Imperative for Press Releases in Malaysia

The Legal Imperative for Press Releases in Malaysia

In the realm of public relations, a press release is typically a strategic tool—a voluntary communication used to generate buzz, build brand reputation, or announce a milestone. However, for certain entities and under specific circumstances in Malaysia, issuing a press release (or a formal public announcement) becomes a strict legal obligation. Failure to comply can result in severe penalties, including hefty fines, suspension of trading, and even imprisonment for company directors. Understanding the legal purpose of press releases is crucial for publicly listed companies, financial institutions, and any organization handling sensitive public data.

The primary driver for legally mandated announcements is the need to maintain market integrity and protect investors. The Malaysian capital market is regulated by the Securities Commission Malaysia (SC) and Bursa Malaysia Securities Berhad (Bursa Malaysia). Their core principle is that all investors should have equal access to material information that could influence their investment decisions. This principle of timely disclosure prevents insider trading and ensures a fair and orderly market.

The Primary Arena: Listed Companies and Bursa Malaysia

For companies listed on Bursa Malaysia, the Main Market Listing Requirements and the ACE Market Listing Requirements provide a comprehensive framework that mandates the immediate public disclosure of material information.

What Constitutes "Material Information"?

The Listing Requirements define material information as any news that is reasonably expected to have a material effect on:

The price, value, or market activity of the company’s securities.

The financial condition of the company.

The business operations of the company.

Shareholders’ decision on how to vote.

Common examples of events that legally necessitate an immediate announcement include:

Corporate Transactions: This is the most common category. It includes mergers, acquisitions, and disposals of significant assets. If a company is buying another firm that will contribute significantly to its earnings, the market must be informed. Similarly, selling a major division or asset requires disclosure.

Financial Performance Deviations: If a company expects its quarterly or annual results to deviate significantly (e.g., a major profit drop or a surprising windfall) from market expectations or previous corresponding periods, it must issue a profit warning or an update.

Changes in Corporate Structure: This includes the appointment or resignation of key personnel like the Chairman, Chief Executive Officer, or Chief Financial Officer. A major change in board composition or senior management is considered material information.

Legal Proceedings: The commencement of significant litigation or a material judgment against (or in favour of) the company must be disclosed. For example, a lawsuit that threatens the company's financial stability is unequivocally material.

Defaults: Any default on loans or other credit agreements, especially if it impacts the company's ability to continue as a going concern, requires immediate announcement.

The standard practice is for the company to make this announcement through Bursa Malaysia’s dedicated online platform, Bursa LINK. This ensures the information is disseminated to all market participants simultaneously. While this formal announcement is the primary legal requirement, companies often simultaneously issue a press release to the general media to ensure broader public understanding.

Beyond the Stock Market: Other Legal Triggers

While listed companies face the most rigorous rules, other situations can create a legal duty to inform the public.

Takeovers and Mergers Regulated by the SC: The Malaysian Code on Take-overs and Mergers 2016 mandates strict disclosure timelines. When a party acquires a certain percentage of voting rights (triggering a mandatory takeover offer), detailed documents must be sent to shareholders, and public announcements are required at various stages of the process. The press release becomes a formal part of this regulatory compliance.

Data Breaches under the PDPA: The Personal Data Protection Act 2010 (PDPA) does not explicitly mandate a public press release for every data breach. However, Section 9 of the PDPA imposes a duty on data users to take "practical steps" to protect personal data. The regulatory body can issue directives, and best practices are evolving towards mandatory disclosure. In the event of a significant data breach that affects a large number of individuals, the Commissioner of Personal Data Protection may order the organization to notify the affected data subjects. A public press release is often the most efficient and transparent way to fulfill this directive, mitigate reputational damage, and guide affected individuals on protective steps. Failure to comply with the Commissioner's directive is an offence.

Product Recalls and Public Safety: While often managed by specific ministries (e.g., the Ministry of Health for pharmaceuticals, the Ministry of Domestic Trade and Cost of Living for consumer goods), a serious product defect that poses a public safety hazard creates a legal and ethical duty to warn the public. Although the specific mechanism may be guided by sectoral regulations, a press release is the standard and expected channel for communicating a widespread recall to protect consumers and limit liability.

The Consequences of Non-Compliance

The cost of staying silent when the law requires speech is high. For listed companies, Bursa Malaysia has the power to:

Issue public reprimands.

Impose compoundable fines of up to RM 1,000,000 or more for severe breaches.

Suspend or de-list the company’s securities from trading.

Take action against the directors themselves for breaching their fiduciary duties.

For violations under the PDPA or other statutes, companies and their officers can face significant financial penalties and, in some cases, imprisonment.

Conclusion: From PR Strategy to Legal Duty

In Malaysia, the purpose of a press release can indeed be legally required. For listed companies, this obligation is a daily reality underpinning the integrity of the financial markets. For others, it arises in critical situations involving public safety, data privacy, or major corporate actions regulated by statutes like the SC's code. In these contexts, the press release is no longer about generating positive publicity; it is a fundamental instrument of corporate governance, legal compliance, and public accountability. Recognizing these legal triggers is not just a PR best practice—it is a essential component of risk management and legal adherence for any responsible organization operating in Malaysia.

Frequently Asked Questions (FAQs)

1. Is a legally required announcement the same as a press release?

Not exactly, but they are closely linked. The primary legal requirement for a listed company is to make a formal announcement through Bursa Malaysia's Bursa LINK system. This is the official, timestamped method of disclosure to the market. A press release is then often issued to the general media and published on the company’s website to present the same information in a more narrative format for a broader audience (including retail investors, customers, and the public). The press release supports and amplifies the formal legal announcement.

2. Are private companies ever legally required to issue a press release?

Yes, but the triggers are different from those for listed companies. A private company would typically be required to make a public announcement in situations such as:

A major data breach: As directed by the Personal Data Protection Commissioner.

A public safety issue: Such as a widespread product recall.

When involved in a regulated takeover: If a private company is the subject of a takeover offer by a public company, disclosure rules will apply.

Their obligations stem from general laws affecting public welfare and specific sectoral regulations, not stock exchange rules.

3. Who is legally responsible if a required press release contains false or misleading information?

Liability is severe and typically falls on the company as a legal entity and its directors and officers. Under the Capital Markets and Services Act 2007, making a false or misleading statement in a disclosure document (which includes a mandatory announcement) is an offence. Directors can be held personally liable if they authorized the release of the information knowing it was false or were negligent in verifying its accuracy. This underscores the critical need for due diligence before issuing any legally mandated communication.

4. What about "insider information" before it is announced?

This is a critical aspect of the law. Material information that has not been publicly disclosed is considered "insider information." It is illegal for anyone with access to this information (e.g., directors, employees, advisors) to trade the company's securities or tip off others to trade before the information is formally announced to the public. This is the foundation of insider trading laws, which carry severe penalties including imprisonment.

5. Can a company be sued for issuing a press release that causes a drop in its share price, even if it's legally required?

This is a complex area. Generally, a company is protected if it makes a legally required disclosure that is factually accurate and made in good faith. Shareholders cannot successfully sue a company for a share price drop caused by the truthful disclosure of negative news (e.g., a profit warning). In fact, the greater legal risk is failing to disclose such information. However, if a shareholder can prove that the press release contained knowingly false statements or omissions designed to manipulate the market, then a lawsuit for damages could be successful. The law protects truthful disclosure, even when the news is bad.