What penalties apply under the Companies Act for poor accounting records?
Failing to keep proper accounting records under section 245 of the Companies Act 2016 is an offence by the company and every officer. On conviction, the fine can be up to RM500,000, imprisonment up to three years, or both. Late financial statements or annual returns are separate offences.
Records (section 245)
- The company and every officer who contravenes it commit an offence
- Penalty on conviction: a fine of up to RM500,000, imprisonment of up to three years, or both
- This covers not keeping records, not recording within 60 days, and not retaining them for seven years
Financial statements and returns
- Late circulation (section 258): fine up to RM50,000, plus up to RM500 a day after conviction
- Late lodgement (section 259) or a late annual return (section 68): fine up to RM50,000, plus up to RM1,000 a day after conviction
- Not preparing financial statements on time (section 248): a director faces a fine up to RM500,000, imprisonment up to one year, or both
- SSM runs an e-Compound service for compounding some offences, so check its current notices
Other consequences
- Directors can face personal liability and difficulty in disputes
- Banks, investors and regulators lose confidence
- Auditors may qualify or be unable to complete their work
In practice
The law allows prosecution, so do not assume leniency. Fix gaps quickly and keep proof of what you did.
Legal basis
- Companies Act 2016, s.245(9)
- Companies Act 2016, s.248(3)
- Companies Act 2016, s.258(3)
- Companies Act 2016, s.259(3)
- Companies Act 2016, s.68(9)
Sources
Applies to 2026 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- How do I catch up on bookkeeping that has been neglected for a year or more?Gather every document and all bank statements, set a cut-off date, then record month by month starting from the oldest period, reconciling banks as you go. Fix the biggest gaps first and get professional help for anything unclear. File overdue statements and returns as soon as the books are ready.
- What happens if my company has years of unrecorded accounts or unfiled statements?The company and its officers may face compounds or prosecution for missing records and late filings, and LHDN may raise estimated assessments. The usual way forward is to rebuild the books, file the overdue statements and returns, and settle compounds. Get professional help early.
- What is wrong with using business money for personal expenses?A company is a separate legal person, so its money is not the owner's. Paying personal bills from company accounts muddles the books, may breach restrictions on loans to directors, and can lead LHDN to disallow expenses or treat payments as income. Use a director's account or proper salary instead.
- What can LHDN do if my business records are missing or insufficient?LHDN can disallow expenses you cannot support, estimate your income and raise an assessment, and impose penalties. Failing to keep sufficient records is also an offence: LHDN's public ruling gives a fine of RM300 to RM10,000, imprisonment of up to 12 months, or both.
- What if I lost a receipt or invoice for a business expense?First ask the supplier for a duplicate copy or statement. If that fails, assemble alternative evidence such as the bank record, a written explanation and any correspondence. Alternative evidence may support the entry, but tax deduction is not guaranteed, so do not create fake documents.