No hiding behind the veil: Directors are now personally liable for unpaid EPF contributions

The Federal Court in Mohd Abdul Karim Abdullah & Ors v Lembaga Kumpulan Wang Simpanan Pekerja [2025] has sent a clear message: company directors can no longer shield themselves behind the corporate veil when it comes to Employees Provident Fund (EPF) obligations.

Key takeaways every director should know

Personal Liability: Under Section 46 of the EPF Act 1991, directors are personally and directly liable for unpaid EPF contributions—even if the company itself is not sued.
No “Sleeping Directors”: All directors, regardless of their involvement in daily operations, share equal responsibility for compliance.
Bypassing Liquidation: The EPF Board can pursue directors directly, without waiting in line with other creditors during liquidation.
High stakes for new directors, taking on a directorship without due diligence could expose you to liabilities. Safeguarding employees’ retirement savings is not just a corporate duty, it’s a personal one.

Implications

Directorship now carries immediate personal risk. Directors must ensure robust internal controls for EPF compliance and carefully assess any company before stepping into a leadership role. It is imperative to take proactive steps to prevent non-compliance.

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