What Are the Penalties for Not Submitting Audited Financial Statements?

Failing to submit audited financial statements in Malaysia is a serious offense under the Companies Act 2016. All companies (except exempt private companies that meet specific criteria) are legally required to prepare and lodge audited financial statements annually with the Companies Commission of Malaysia (SSM). Failure to do so may result in the following consequences:

1. Monetary Fines and Compounds
   SSM has the authority to impose monetary fines on both the company and its directors. Under Section 259(1) of the Act, companies can be fined up to RM50,000, and a further fine of RM1,000 for every day the offense continues. Directors who neglect their duties may also face personal penalties.
2. Legal Proceedings and Prosecution
   If a company repeatedly fails to comply, SSM may initiate legal proceedings against the company and its responsible officers. This can lead to criminal charges, court summons, and potential imprisonment in extreme cases.
3. Disqualification of Directors
   Directors who persistently default in submitting audited statements can be disqualified from holding directorships in other companies. This action is enforced under Section 198 of the Act.
4. Suspension or Striking Off of the Company
   SSM may suspend the operations of a non-compliant company or strike it off the register altogether. This action is especially likely if the company is inactive or fails to respond to compliance notices.
5. Reputational Damage
   Public records maintained by SSM show compliance history. A company known for non-compliance may suffer reputational harm, damaging trust with investors, clients, suppliers, and lenders.

To avoid these risks, it’s essential to engage a licensed auditor and ensure timely submission of audited reports. Jamal Amin & Partners supports businesses in managing audit timelines and meeting all statutory obligations under Malaysian law.

In conclusion, the cost of non-compliance far exceeds the cost of conducting a proper audit. Regular audits not only fulfill legal duties but also enhance business credibility and operational resilience.