Lending and Taking Security in Malaysia Overview

{\rtf1 \ansi
{\colortbl;
\red0\green0\blue0;
\red255\green255\blue255;
}
{\fonttbl {
\f0 Arial;}{
\f1 Symbol;}{
\f2 Times New Roman;}{
\f3 georgia;}{
\f4 sans-serif;}{
\f5 serif;}{
\f6 Source Sans Pro;}
}
{\*\generator Apache XML Graphics RTF Library;}
\fet0 \ftnbj
{\*\listtable
{\list\listtemplateid-
780693573\listsimple{\listlevel\leveljc\levelfollow0\levelspace0\levelindent0{\leve
ltext\'01\u8226\'3f}{\levelnumbers}}{\listname ;}\listid-2003475686}
1770232559\listsimple{\listlevel\leveljc\levelfollow0\levelspace0\levelindent0{\lev
eltext\'01\u8226\'3f}{\levelnumbers}}{\listname ;}\listid-1325690593}
{\list\listtemplateid405897877\listsimple{\listlevel\leveljc\levelfollow0\levelspac
e0\levelindent0{\leveltext\'01\u8226\'3f}{\levelnumbers}}
{\listname ;}\listid1366506619}
ltext\'01\u8226\'3f}{\levelnumbers}}{\listname ;}\listid1893926212}
eltext\'01\u8226\'3f}{\levelnumbers}}{\listname ;}\listid54400760}
86103582\listsimple{\listlevel\leveljc\levelfollow0\levelspace0\levelindent0{\level
text\'01\u8226\'3f}{\levelnumbers}}{\listname ;}\listid-398318972}
{\list\listtemplateid1916520402\listsimple{\listlevel\leveljc\levelfollow0\levelspa
ce0\levelindent0{\leveltext\'01\u8226\'3f}{\levelnumbers}}
e0\levelindent0{\leveltext\'01\u8226\'3f}{\levelnumbers}}{\listname ;}\listid-
825411496}
ce0\levelindent0{\leveltext\'01\u8226\'3f}{\levelnumbers}}{\listname ;}\listid-
499270842}
116466374}
1936913009}
2059136540}
1159413758}
733239951}
604069532}
2125357391}
1948789076}
895131117}
1023893664}
1793966105}
1921488981}
1431305726}
{\list\listtemplateid27052384\listsimple{\listlevel\leveljc\levelfollow0\levelspace
0\levelindent0{\leveltext\'01\u8226\'3f}{\levelnumbers}}{\listname ;}\listid-
1539299938}
1258830601}
175310874}
1231895552}
57707\listsimple{\listlevel\leveljc\levelfollow0\levelspace0\levelindent0{\leveltex
t\'01\u8226\'3f}{\levelnumbers}}{\listname ;}\listid-1779198384}
517053286}
751137504}
}
{\*\listoverridetable
{\*\listoverride{\listid-2003475686\listoverridecount0\ls1}}
{\*\listoverride{\listid1366506619\listoverridecount0\ls3}}
}
\paperw12240 \paperh15840 \margt1080 \margb1080 \margl1080 \margr1080
\headery720 \footery720 \itap0 \cols1
\sectd {\header {
{\trowd \ltrrow \trleft0
\clpadb60 \clpadfb3 \clpadl400 \clpadfl3 \clbrdrt \clbrdrb \brdrw20 \brdrcf17
\brdrs \clbrdrl \trql \clvertalb \clwWidth9380 \cellx9380
\clpadb60 \clpadfb3 \clpadl400 \clpadfl3 \clbrdrt \clbrdrb \brdrw20 \brdrcf17
\brdrs \clbrdrr \trql \clwWidth700 \cellx10080
\intbl
{\li0 \f0 \b0 \ql \ri0 \fs18 \cf1 \i0
{\f0 \strike0 \ul0 \b0 \fs18 \cf1 \i0
}
{\f0 \b1 \fs18 \cf18 \i0
{\f0 \strike0 \ul0 \b1 \sa0 \sb0 \fs18 \cf18 \i0
Lending and taking security in Malaysia: overview, Practical Law Country Q&A...
}
}
}
}\f0 \li0 \strike0 \ul0 \b0 \sa0 \ql \sb0 \fs18 \ri0 \cf1 \i0 \intbl \cell \intbl
{\li0 \f0 \b0 \ri0 \fs18 \cf1 \qr \i0
}\f0 \li0 \b0 \fs18 \ri0 \cf1 \i0 \qr \intbl \cell \row }
{\trowd \lastrow \trleft0
\clbrdrb \clbrdrl \trql \clwWidth10080 \cellx10080
\intbl
{\li0 \f0 \b0 \ql \ri0 \fs18 \cf1 \i0
}\f0 \li0 \b0 \ql \fs18 \ri0 \cf1 \i0 \intbl \cell \row }}\par }{\footer {
\clpadl60 \clpadfl3 \clbrdrt \brdrw20 \brdrcf17 \brdrs \clbrdrb \clbrdrl \trql
\clvertalb \clwWidth9300 \cellx9300
\clpadl60 \clpadfl3 \clbrdrt \brdrw20 \brdrcf17 \brdrs \clbrdrb \clbrdrr \trql
\clwWidth700 \cellx10000
\intbl
{\li0 \f0 \b0 \ql \ri0 \fs20 \cf17 \i0
\u169\'3f 2017 Thomson Reuters. All rights reserved.
}
}\f0 \li0 \strike0 \ul0 \b0 \sa0 \ql \sb0 \fs20 \ri0 \cf17 \i0 \intbl \cell \intbl
{\li0 \f0 \b0 \ri0 \fs20 \cf17 \qr \i0
{\b0 \i0 \ul0 \fs20 \f0 \chpgn }
}\f0 \li0 \strike0 \ul0 \b0 \fs20 \ri0 \cf17 \i0 \qr \intbl \cell \row }}\par }
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \par}\sect\sbknone\pgncont\cols1{\ids0 \i0
{\f5 \b0 \fs20 \cf1 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\li0 \f5 \b1 \ql \ri0 \fs36 \cf19 \i0
Lending and taking security in Malaysia: overview
\par
}
}
{\li0 \f5 \b1 \ql \ri0 \fs17 \cf29 \i0
by\u160\'3f
}
{\f5 \b1 \fs17 \cf29 \i1
{\field {\*\fldinst HYPERLINK "http://uk.practicallaw.thomsonreuters.com/1-607-
3886?
originationContext=document&vr=3.0&rs=PLUK1.0&transitionType=DocumentItem&contextDa
ta=(sc.Default)#co_anchor_a297590" }{\fldrslt
Evelyn Ch\rquote ng
}}}
}
,
}
{\f5 \b1 \fs17 \cf29 \i1
3886?
Chor Jack
}}}
}
and
}
{\f5 \b1 \fs17 \cf29 \i1
3886?
Fiona Sequerah
}}}
}
, Messrs Christopher & Lee Ong
\par
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Country Q&A |
}
{\f5 \b0 \fs20 \cf52 \i0
Law stated as at 01-Feb-2016
}
}
| Malaysia
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf22 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf22 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf22 \i0
A Q&A guide to Finance in Malaysia. The Q&A gives a high level overview of the
lending market, forms of security over assets, special purpose vehicles in secured
lending, quasi-security, negative pledge clauses, guarantees, and loan agreements.
It covers creation and registration requirements for security interests; problem
assets over which security is difficult to grant; risk areas for lenders;
structuring the priority of debt; debt trading and transfer mechanisms; agent and
trust concepts; enforcement of security interests and borrower insolvency; cross-
border issues on loans; taxes; and proposals for reform.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf22 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf22 \i0
To compare answers across multiple jurisdictions, visit the Finance
}
{\field {\*\fldinst HYPERLINK
"http://uk.practicallaw.thomsonreuters.com/QACompare/Builder/Country?
originationContext=document&vr=3.0&rs=PLUK1.0&transitionType=PLDocumentLink&context
Data=(sc.Default)" }{\fldrslt
{\f5 \b0 \fs20 \cf5 \i1
Country Q&A tool.
}
}}}
This article is part of the Global guide to finance. For a full list of contents
visit
}
{\f5 \b0 \fs20 \cf22 \i1
www.practicallaw.com/finance-guide
}
}
.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Overview of the lending market
\par
}
}
{\f5 \brdrl \brdrw20 \brdrcf1 \brdrs \b0 \qj \cfpat53 \ri620 \shading10000
\brdrb \brdrw20 \brdrcf1 \brdrs \i0 \li620 \fs20 \cf1 \brdrt \brdrw20 \brdrcf1
\brdrs \brdrr \brdrw20 \brdrcf1 \brdrs
{\f5 \b0 \fs20 \cf5 \i0
{\*\bkmkstart co_anchor_W_q1_1}{\*\bkmkend co_anchor_W_q1_1}
}
{\f5 \b0 \fs20 \cf5 \i0
{\*\bkmkstart co_anchor_a466861_1}{\*\bkmkend co_anchor_a466861_1}
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
1.
}
}
What have been the main trends and important developments in the lending market in
your jurisdiction in the last 12 months?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Liquidity in Malaysia generally comes from three sources:
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0 {\fi-360 \li {\*\pn \pnlvlblt \ilvl0 \ls1
\pnindent0 \pnf1 {\f2 \pntxtb \u8226\'3f}}{\listtext \li480 \f5 \qj \b0 \ri0
\fs20 \cf1 \i0 \u8226\'3f\tab }\ls1 {\pntext }
{\pard }\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Bank borrowings.
\par {\pntext }
}
}
}
}{\fi-360 \li {\*\pn \pnlvlblt \ilvl0 \ls2 \pnindent0 \pnf1 {\f2 \pntxtb
\u8226\'3f}}{\listtext \li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0 \u8226\'3f\tab }\ls2
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Issuance of debt instruments.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Equity.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
During the last 12 months, Malaysia has experienced decreasing economic growth,
with a significant depreciation in the Ringgit and a dramatic drop in oil prices;
the oil, gas and energy sector contributes approximately 20% to Malaysia\rquote s
Gross Domestic Product (GDP) (information extracted from an article on the official
website of the Malaysian Industrial Development Authority website, \ldblquote Oil
and Gas\rdblquote , dated 3 February 2016). In addition, a goods and services tax
(a consumption tax) of 6% was implemented with effect from 1 April 2015. Against
this background of rising costs and reduced liquidity, the cost of funding
increased, and lending activity slowed. Malaysian banks adopted a more cautious
approach towards lending, as there was a gradual rise in the number of non-
performing loans. However, applications by Malaysian corporates, for trade
financing and working capital facilities continued unaffected during this time and
appear to have been the most frequently approved and granted type of facilities
from Malaysian banks in the past 12 months.
\par
}
}
}
\u160\'3f
\par
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Forms of security over assets
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Real estate
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
2.
}
}
What is considered real estate in your jurisdiction? What are the most common forms
of security granted over it? How are they created and perfected (that is, made
valid and enforceable)?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Real estate
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Real estate is land, which is statutorily defined (land) to include:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The surface of the earth and all substances forming that surface.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The earth below the surface and substances therein.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Buildings on land and anything attached to land or permanently fastened to anything
attached to land (whether on or below the surface).
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Standing timber, trees, crops and other vegetation growing on land.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Land covered by water.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The laws governing real estate in Malaysia (Real Estate Legislation) are the:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
National Land Code 1965, which covers Peninsular Malaysia.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Sarawak Land Code in the State of Sarawak.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Sabah Land Ordinance in the State of Sabah.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The types of land in Malaysia are:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Freehold, which means the land is granted by the state authority in perpetuity.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Leasehold, which means the land is granted by the state authority for a term of
years (not exceeding 99 years) and when that period expires the state authority can
take back the land, or grant a renewal of lease.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Malay reserved land and customary land, which are reserved only for the Malay race
and can be transacted only between members of the Malay race.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Native land, which applies to land in Sabah and Sarawak and can only be transacted
between natives.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
There are two types of land titles: final title and qualified title. Both titles
can be registered at the Land Registry of the State (Registry) or the Land Office.
A Registry title is evidenced by a grant or state lease, or by any document of
title registered in a Registry. A Land Office title is evidenced by a \ldblquote
mukim\rdblquote grant or \ldblquote mukim\rdblquote lease, or by any document of
title registered in a Land Office.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A transfer of land must be registered at the Land Office or the Registry in order
to confer indefeasible title to the new proprietor.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Common forms of security
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The most common forms of security over real estate are:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Charges.
}
}
Charges can be created over real estate to secure a debt, annuity or any other
amount other than a debt. Where a charge is created over land, the chargee acquires
a legal interest in the land. However, the chargor retains ownership of the land. A
chargee can enforce his security by way of a sale of the land if the chargor
defaults. Charges are the predominant form of security taken by banks and financial
institutions when financing the purchase and development of real estate.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Statutory liens.
}
}
Liens are usually used when the loan is for a small amount and is required for a
short duration.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Assignments.
}
}
Absolute assignments of the borrower\rquote s rights, title and interests in a
sale and purchase agreement are usually effected in favour of banks and financial
institutions financing the purchase of real estate, where the title documents to
the real estate were not yet issued.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Formalities
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The formalities are as follows:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Charges.
}
}
Every charge created must be effected by an instrument in accordance with the form
prescribed by the relevant Real Estate Legislation. It must also be presented at
the Registry or the Land Office for registration. Additionally, the charge must be
lodged with the Companies Commission for registration within 30 days after the
creation of the charge. If this is not done the charge will be void against the
liquidator and any creditor of the company (see
}
{\field {\*\fldinst HYPERLINK "#co_anchor_a368138_1" }{\fldrslt
{\f5 \b0 \fs20 \cf5 \i1
Question 4
}
}}}
\sa120
).
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Statutory liens.
}
}
A lien is created when the registered owner or lessee of land has an intention to
create the lien, and as security for a loan, deposits the issue document of title
or duplicate lease with the lender. The lender then applies for entry of a lien-
holder\rquote s caveat.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Assignments.
}
}
The assignment must be perfected by serving a notice on the counterparty to the
sale and purchase agreement, usually a developer if the property is part of a new
development, or the vendor of the property, if it is a sub-sale. A deed of power of
attorney, giving the power to the assignee to sell, assign, lease, deal with and
take possession of the property must then be registered at the High Court (see
}
{\f5 \b0 \fs20 \cf5 \i1
Question 4
}
}}}
\sa120
).
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Tangible movable property
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
3.
}
}
What is considered tangible movable property in your jurisdiction? What are the
most common forms of security granted over it? How are they created and perfected?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Tangible movable property
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Examples of tangible movable property include:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Aircraft and ships.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Motor vehicles.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Plant and machinery.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Stock-in-trade.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Equipment.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The most common forms of security over tangible movable property are:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Mortgages.
}
}
Security is created over aircraft and ships by a statutory mortgage in accordance
with the Civil Aviation Regulations 1996 and the Merchant Shipping Ordinance 1952.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Debentures.
}
}
A debenture is a security document that is usually entered into when creating a
fixed and floating charge over the assets and undertaking of a borrower. It is
common for tangible movable property such as plant and machinery, motor vehicles
(which are not the subject of a hire-purchase agreement) and equipment to be
charged by way of a fixed charge in a debenture. However, stock-in-trade is charged
by way of a floating charge to enable the borrower to continue to deal with it.
Where specific property is the subject of a charge, it is common for a list
containing details of such property to be attached to the debenture.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The following types of charges can apply:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Fixed charges.
}
}
The creation of a fixed charge has the immediate effect of appropriating a
specific asset to the satisfaction of a debt in the event of a default by the
borrower/chargor. It deprives the chargor of the right to deal with the
appropriated asset without the consent of the chargee.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Floating charges.
}
}
A floating charge is a charge on the assets that allows the assets to be dealt
with in the ordinary course of business until some event occurs that causes the
floating charge to crystalise into a fixed charge. When a floating charge
crystalises into a fixed charge, the chargor then can no longer deal with those
assets. A crystallised floating charge fastens on all assets presently owned as
well as all future assets from the moment the company acquires an interest in the
assets.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Formalities
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The formalities are as follows:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Mortgages.
}
}
An application to enter an aircraft mortgage in the Aircraft Register must be made
in the prescribed form and accompanied by a certified true copy of the mortgage. A
security interest in an aircraft and aircraft engine falling within the scope of
the Convention on International Interests in Mobile Equipment and the Protocol to
the Convention on International Interests in Mobile Equipment on Matters Specific
to Aircraft Equipment, may be registered on the International Registry. A ship
mortgage must be made in the prescribed form and presented for registration at the
ship\rquote s port of registry whereby the mortgage is recorded in the register
book (see
}
{\f5 \b0 \fs20 \cf5 \i1
Question 4
}
}}}
\sa120
).
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Debentures.
}
}
When a fixed and/or floating charge is created by a company under a debenture, the
particulars of the charges must be lodged with the Companies Commission for
registration within 30 days after the execution of the debenture (see
}
{\f5 \b0 \fs20 \cf5 \i1
Question 4
}
}}}
\sa120
).
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Financial instruments
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
4.
}
}
What are the most common types of financial instrument over which security is
granted in your jurisdiction? What are the most common forms of security granted
over those instruments? How are they created and perfected?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Financial instruments
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The financial instruments over which security is most commonly granted are shares
and debt securities (for example, bonds). Security can be granted over the security
provider\rquote s rights in shares, both certificated (for example, unlisted shares
in private companies) and non-certificated (for example, shares in listed
companies), owned by the security provider, and bonds and other
tradable/untradeable debt securities.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A fixed charge cum assignment is the most common form of security created over
certificated and non-certificated (listed) shares and debt securities.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Formalities
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The formalities for creating security over financial instruments are as follows:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Certificated and non-certificated shares, and debt securities.
}
}
A fixed charge over the shares or debt securities and assignment of the rights and
interests in and to such shares and debt securities (for example, dividends,
interest or coupon) is the most common way of creating security. It is in writing
and created by both security provider and security holder entering into a document
evidencing the charge cum assignment (see above,
}
{\f5 \b0 \fs20 \cf5 \i1
}
}}}
\sa120
).
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Certificated shares.
}
}
The security holder usually requires custody of the original share certificates
and an executed but undated share transfer form (in prescribed form) from the
security provider with the transferee details left blank. When the security is
enforced, the security holder can transfer the title of the shares to itself or a
nominee by exercising powers of attorney granted by virtue of the charge
instrument.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Non-certificated (listed) shares.
}
}
The shares are transferred from the securities account of the security provider to
the securities account of the security holder. This account is established to
receive the charged shares and is designated a \ldblquote pledged securities
account\rdblquote in accordance with the Securities Industry (Central
Depositories) Act 1991.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Debt securities.
}
}
For listed/non-certificated debt securities, security is created in the same way
as non-certificated shares.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Private debt securities (PDSs) and Malaysian Government Securities (MGSs) are
recorded and maintained with the Malaysian Electronic Clearing Corporation Sdn Bhd
(MyClear). MyClear is a subsidiary of the central bank (Bank Negara Malaysia),
which provides among others securities depository services for PDSs and MGSs. The
security over PDSs or MGSs is usually created via a charge cum assignment. Only
certain users, such as issuers of PDSs or the facility agent for an issue or SSDS
Participants (entities, usually financial institutions, which are permitted to hold
PDS and MGS for their own account and on behalf of their customers) can use the
MyClear systems (for example, RENTAS and FAST). Therefore, the security holder
should be an SSDS Participant in order to hold the security. If it is not, then an
SSDS Participant must be appointed as security agent. However, as PDS and MGS are
usually subscribed by financial institutions, it is not common for security to be
created over these debt securities. Where the debt securities are listed, security
may be created by the holder in the same way as for non-certificated (listed)
shares.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
All security above almost invariably includes a grant by the security provider to
the security holder of a power of attorney. The terms of the power are set out in
the security document. The power must be stamped for a nominal amount and
registered with the Registrar at the High Court.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The charge cum assignment must also be stamped. The amount of stamp duty chargeable
depends on which document is designated the principal instrument and which is
designated a subsidiary or an ancillary instrument (see
}
{\f5 \b0 \fs20 \cf5 \i1
Questions 27
}
}}}
and
}
{\f5 \b0 \fs20 \cf5 \i1
28
}
}}}
).
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Certain charges, if created by a company, must be lodged for registration with the
Companies Commission within 30 days of creation of the security (
}
{\f5 \b0 \fs20 \cf1 \i1
section 108, Companies Act 1965
}
}
).
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Failure to register causes the charges to be void against the liquidator and any
creditor of a company. It is common practice to lodge for registration with the
Companies Commission, particulars of charges created over shares and debt
securities.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Claims and receivables
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
5.
}
}
What are the most common types of claims and receivables over which security is
over claims and receivables? How are they created and perfected?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Claims and receivables
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Common types of claims and receivables include:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Debts and other rights to the payment of money.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Rights to require (in project financing, for example) performance of a non-
financial obligation.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Rights to claim under insurances.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Cash deposited with banks.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Security is created over claims and receivables by an assignment by way of
security.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Formalities
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Assignments of rights and benefits in and to claims and receivables are effected in
writing and created when the security provider enters into the assignment. The
assignment must be stamped. A power of attorney in favour of the security holder is
usually included in the security document. The power must also be stamped and
particulars of the security must be registered with the Companies Commission (see
}
{\f5 \b0 \fs20 \cf5 \i1
Question 4
}
}}}
).
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The following conditions must be fulfilled for the perfection of a legal
assignment:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The assignment must be for a debt or other legal chose in action.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The assignment must be in writing and signed/executed by the security provider.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Express notice in writing of the assignment must be given to the debtor, trustee or
other person from whom the security provider would have been entitled to claim the
debt or chose in action.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The assignment must be absolute and not purporting to be by way of charge only.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
By law, a legal assignment by way of security must be perfected by the security
provider serving a notice of assignment on the debtor, trustee or other relevant
counterparty.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Cash deposits
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
6.
}
}
What are the most common forms of security over cash deposits? How are they created
and perfected?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
It is common to grant security over cash deposits by charging and assigning the
bank accounts that contain the deposit in favour of the lender/security holder.
Where the lender is the account bank, it is common to reinforce that charge by
granting set-off rights to the lender with respect to the deposit.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
In order to perfect the security created over the cash deposits and bank account,
the account bank must be notified of the assignment and charge over the bank
account. Additionally, the charge cum assignment must be stamped and particulars of
the security lodged for registration with the Companies Commission (see
}
{\f5 \b0 \fs20 \cf5 \i1
Question 4
}
}}}
).
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Formalities
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The security is created by the security provider executing a charge and assignment
in favour of the lender. See
}
{\f5 \b0 \fs20 \cf5 \i1
Question 4
}
}}}
.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Where the deposit is in the form of a fixed deposit, the security holder usually
takes possession of the fixed deposit certificate.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Intellectual property
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
7.
}
}
What are the most common types of intellectual property over which security is
over intellectual property? How are they created and perfected?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Intellectual property
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The following are the common types of intellectual property in Malaysia:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Industrial designs.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Patents.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Trade marks.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Copyright.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Security over intellectual property can be taken by either:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Assignment.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Fixed charge.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Formalities
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A registered industrial design can be the subject of a security interest in the
same way as other personal or movable property (
}
{\f5 \b0 \fs20 \cf1 \i1
section 29(5), Industrial Designs Act 1996
}
}
). An assignment of a registered industrial design is not effective unless it is in
writing and signed by or on behalf of the assignor and the assignee. The assignee
must then apply to the Registrar of Industrial Designs to record his interest in
the register.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
There is no equivalent legislation for patents, trade marks and copyright. It
appears that similar legislation to the Industrial Design Act has been proposed and
is in the drafting stage; however, it is many years away from becoming law.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
If a charge is created on the goodwill, patent or licence under a patent, on a
trade mark, or on a copyright or a licence under a copyright, the charge must be
lodged with the Companies Commission for registration within 30 days after the
creation of the charge (
}
{\f5 \b0 \fs20 \cf1 \i1
Companies Act
}
}
). (It is presumed this is in anticipation of legislation being passed eventually
to enable security to be created over intellectual property.)
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Intellectual property as a separate security class has not to date been generally
taken as security in Malaysia. It is most commonly captured by debentures creating
fixed and floating charges over the assets of the party providing the debenture.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Problem assets
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
8.
}
}
Are there types of assets over which security cannot be granted or can only be
granted with difficulty? Which assets are difficult or problematic when security is
granted over them?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Security over personal chattels granted by individuals is governed by the Bills of
Sale Act, an archaic piece of legislation that emphasises form over substance. Due
to the technicalities associated with compliance with the Act, this kind of
security is rarely taken.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Generally, security can be granted over all types of assets except for intellectual
property (see
}
{\f5 \b0 \fs20 \cf5 \i1
Question 7
}
}}}
).
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Future assets
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Security can be granted over future tangible assets that are not yet owned. This is
done by creating a charge attaching to the future assets as they come into the
security provider\rquote s ownership. These charges are normally created by a
debenture. However, future assets (for example, rights to rental proceeds) cannot
be assigned unless a tenancy or contract is entered into. As a result, security
cannot be created until the assets come into existence.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Fungible assets
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Security can be granted over fungible assets (for example, listed shares) by
execution of a charge and assignment over shares. The charge instrument must
contractually allow the chargee to return similar equivalent assets that are not
the original assets delivered.
\par
}
}
}
\u160\'3f
\par
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Release of security over assets
\par
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
9.
}
}
How are common forms of security released? Are any formalities required?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
To release a charge registered over real property, the lender must execute a
discharge of charge form prescribed by the relevant Real Estate Legislation and
file the form at the relevant Registry or Land Office. Notification must also be
lodged with the Companies Commission for the release of the charge through the
filing of forms prescribed by the Companies Act.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The lender can release a lien over real estate by giving a notice in writing to the
Registrar to withdraw the lien holder\rquote s caveat on the real estate.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
When outstanding sums are settled in full, the assignee usually executes a deed of
receipt and re-assignment in favour of the assignor whereby the property in
question is reassigned to the assignor. The assignee also revokes the power of
attorney registered at the High Court.
\par
}
}
}
\u160\'3f
\par
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Special purpose vehicles (SPVs) in secured lending
\par
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
10.
}
}
Is it common in your jurisdiction to take security over the shares of an SPV set up
to hold certain of the borrower\rquote s assets, rather than to take direct
security over those assets?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
It is common to take security over the shares of an SPV set up to hold certain of
the borrower\rquote s assets in certain types of financing. In project financing,
for example, where lenders may take security over the shares of the borrower that
is an SPV established as a project company. More often than not, security over
shares of an SPV borrower is taken in addition to and not instead of, security over
the SPV\rquote s assets. The share charge is likely to be taken to provide an
alternative enforcement option.
\par
}
}
}
\u160\'3f
\par
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Quasi-security
\par
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
11.
}
}
What types of quasi-security structures are common in your jurisdiction? Is there a
risk of such structures being recharacterised as a security interest?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Sale and leaseback
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
In a standard sale and leaseback, the owner of equipment/real estate sells that
asset to another party (such as a holding company or a financier) who leases the
equipment back to the seller. One of the risks of a sale and leaseback transaction
is that, under the Sale of Goods Act 1957, someone who sells but retains possession
of goods (or documents of title to those goods) after the sale, may give title to
those goods to anyone who receives them in good faith and without notice of the
previous sale. Generally, a Malaysian court may re-characterise such a transaction
as containing a security interest, if there is evidence that the transaction is not
a genuine sale and leaseback but was structured to evade revenue or tax laws or
other laws of Malaysia.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Factoring
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Factoring in Malaysia involves the business of acquiring debts due to any person
from time to time. In factoring the financier/buyer can collect payment/receivables
directly from the seller\rquote s debtors (if notice was given to the debtor of the
factoring) or the financier/buyer may require the seller to act as its servicer in
the collection of those receivables. The factoring can be structured such that the
buyer/financier can have recourse to the seller when certain events occur.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Factoring is carried out in the form of a sale and assignment by the seller of all
its rights, titles and interests in and to the receivables. Therefore, the
requirements for the perfection of a legal assignment should be satisfied (see
}
{\f5 \b0 \fs20 \cf5 \i1
Question 4
}
}}}
).
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Where the seller acts as the servicer of the buyer/financier by collecting the
receivables on behalf of the buyer/financier, the buyer/financier may require all
receivables collected to be deposited into a bank account. The bank account is
charged in favour of the buyer/financier and controlled by the buyer/financier.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
There is minimal risk of a standard factoring arrangement being re-characterised as
a secured loan.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Hire purchase
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Under a hire purchase agreement, the owner of goods leases or lets them to a
lessee/hirer with an option to purchase the goods by instalments. In Malaysia, hire
purchase is governed by the Hire-Purchase Act 1967 (HP Act), which prescribes the
form and contents of hire purchase agreements and the rights and duties of parties
to such agreements. The HP Act regulates agreements for the hire purchase of
consumer goods, motorcycles, cars, certain goods vehicles and buses, among other
things. Agreements not in compliance with the provisions of the HP Act will be
void.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Provided that a hire purchase arrangement complies with the requirements of the HP
Act, there is almost no risk of a hire-purchase arrangement being re-characterised
as a security interest.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Retention of title
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Under a standard title retention structure, the seller retains title to the goods
it sells until it receives their purchase price. Generally, the arrangement is
contractual in nature and the Malaysian courts will enforce this arrangement.
However, this arrangement is not treated as a registrable secured transaction, in
that retention of title clauses do not have the effect of creating security over
the goods, and therefore, do not have priority over secured creditor claims.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Other structures
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Contractual set-off arrangements are enforceable unless inconsistent with the
Bankruptcy Act 1967 and the Companies Act 1965. Both these acts restrict any set-
off in an insolvency if such set-off is construed as giving undue preference to the
creditor. Flawed asset arrangements between a bank and its customer, under which
moneys deposited by the customer is not repayable by the bank until a trigger event
has occurred, are considered contractual arrangements and are enforceable. The
concept of a Quistclose trust (where a loan is given for a specific purpose) has
also been held to be enforceable.
\par
}
}
}
\u160\'3f
\par
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Guarantees
\par
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
12.
}
}
Are guarantees commonly used in your jurisdiction? How are they created?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Guarantees are commonly used in Malaysia and can be granted by individuals or
corporate entities. A guarantee\rquote s main terms must be in writing and signed
by or on behalf of the guarantor to be enforceable. The beneficiary of the
guarantee must also provide consideration for the guarantor\rquote s promise.
Additionally, where the guarantees are issued in favour of non-resident lenders,
the prior written approval of the Central Bank of Malaysia (Bank Negara Malaysia)
may be required under the relevant Notices (see
}
{\f5 \b0 \fs20 \cf5 \i1
Question 25
}
}}}
).
\par
}
}
}
\u160\'3f
\par
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Risk areas for lenders
\par
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
13.
}
}
Do any laws affect the validity of a loan, security or guarantee (or the terms on
which they are made or agreed)?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Financial assistance
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A company is not permitted, either directly or indirectly, to give any financial
assistance through loans, guarantees or the provision of securities or otherwise,
for any of the following (
}
{\f5 \b0 \fs20 \cf1 \i1
section 67, Companies Act
}
}
):
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
To purchase or in connection with a purchase or subscription made or to be made by
any person of, or for:
\par {\pntext }
}
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0 {\fi-360 \li {\*\pn \pnlvlblt \ilvl0
\ls52 \pnindent480 \pnf1 {\f2 \pntxtb \u8226\'3f}}{\listtext \li960 \f5 \qj \b0
\ri0 \fs20 \cf1 \i0 \u8226\'3f\tab }\ls52 {\pntext }
{\li960 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li960 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
any shares in the company; or
\par {\pntext }
}
}
}
{\pntext }
{\li960 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li960 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
where the company is a subsidiary, in its holding company.
\par {\pntext }
}
}
}
}{\pntext }
}
{\li580 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
To purchase, deal in, or lend money on its own shares.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A common scenario is where a company (Company A) obtains financing to acquire
shares in another company (Company B). Company B is not permitted to create
security over its assets for such financing (
}
{\f5 \b0 \fs20 \cf1 \i1
}
}
). However, as a result of the wide drafting of section 67, the prohibited
financial assistance also extends to facilities obtained by Company A to refinance
the original acquisition financing facility, and Company B would still be
prohibited from creating security over its assets in favour of the new financiers
providing the refinancing.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Corporate benefit
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The fundamental principle underlying the issue of corporate benefit is that
directors must exercise their powers in the best interest of the company. The
duties and liabilities of officers of a company are now codified in the Companies
Act (
}
{\f5 \b0 \fs20 \cf1 \i1
section 132
}
}
). When acting in the interest of the company, a director must exercise his powers
for a proper purpose and in good faith (
}
{\f5 \b0 \fs20 \cf1 \i1
section 132(1), Companies Act
}
}
). Therefore, if a director acts in good faith in the best interest of the company
but for a collateral purpose, he would be in contravention of section 132(1) and
liable to be imprisoned for five years or subject to a fine of MYR30,000.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Ultimately, it is a question of fact as to whether a transaction has commercial
benefit for a company. In practice, resolutions of the directors should set out in
detail the commercial benefit that the company will derive from entering into a
particular transaction. It is also a good practice to obtain shareholders\rquote
approval for such transaction. A common example of a transaction that may require
detailed directors\rquote as well as shareholders\rquote resolutions to be
obtained is where a subsidiary executes a guarantee for the payment obligations of
its parent.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Loans to directors
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A company (other than an exempt private company, that is a company where
shareholders are all individuals) cannot make a loan to its director or to a
director of a related company. Additionally, the company cannot enter into a
guarantee or provide any security in connection with a loan made by a third party,
to such a director. However, there are exceptions to this prohibition that permit
the loan, guarantee or security to be made or given in such circumstances. However,
this is provided also that a general meeting was convened at which full details of
the loan, guarantee or security were disclosed and approved by the shareholders.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Loans to persons connected to directors
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Loans to persons connected to directors is one of the more difficult sections of
the Companies Act for a lender, due to the often unclear and intertwined
shareholdings of persons connected to directors. These persons may be family
members of the director or bodies corporate associated with directors, among
others.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A company (other than an exempt private company) is not permitted to either:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Make a loan to any person connected to its director or a director of its holding
company.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Enter into a guarantee or provide any security in connection with a loan made to
its director or a director of its holding company.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A body corporate is associated with a director if any of the following apply:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
If the body corporate is accustomed or under an obligation, or its directors are
accustomed, to act in accordance with the directions, instructions or wishes of
that director.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
If that director has a controlling interest in the body corporate.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
If that director or persons connected with him are entitled to exercise, or control
the exercise of, not less than 15% of the votes attached to voting shares in the
body corporate.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Determining if a body corporate is associated with a director is therefore, a
question of fact. However, lenders are often unable to independently verify the
facts under the points above and must rely solely on written confirmations provided
by directors.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
If there is a contravention of section 67 of the Companies Act, the company can
recover the loan or any amount it becomes liable for under the guarantee or
security provided. This seems by implication to statutorily preserve the validity
and enforceability of such loans, guarantee and security regardless of the
contravention. Any director that authorised such a transaction is however liable to
a penalty of MYR10,000.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Moneylenders\rquote Act 1951
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The Moneylenders\rquote Act 1951 (MLA) regulates the business of moneylending
carried out by non-licensed entities and addresses the issue of exorbitant or
extortionate interest rates being charged. The MLA requires these entities to be
licensed as a moneylender. It was often argued that a single loan extended by a
non-licensed entity does not amount to it carrying on the \ldblquote
business\rdblquote of moneylending. However, this argument is no longer
sustainable as the MLA was subsequently amended to include a provision that a
person is presumed to be carrying on the business of moneylending if there is proof
that a single loan at interest was made by that person, unless the contrary is
proved.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The MLA excludes specific entities from its operation, including licensed financial
institutions, related corporations and Government authorities. The maximum interest
chargeable under the MLA for a secured loan is 12% and for an unsecured loan, 18%.
Where the interest charged in a moneylending agreement exceeds such limits, the
agreement will be void, have no effect and will be unenforceable.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The MLA is relevant to non-resident lenders who may wish to extend loans to
Malaysian residents with interest. As such lenders are unlikely to fall within any
of the exempted categories under the MLA, care must be taken by such lenders to
structure their lending transaction to avoid falling foul of any of the provisions
of the MLA.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
14.
}
}
Can a lender be liable under environmental laws for the actions of a borrower,
security provider or guarantor?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
There is no Malaysian authority to date that makes a lender liable for the actions
of a borrower for only making a loan to that borrower or by holding security over
contaminated land belonging to the borrower, without more. However, the
environmental laws in Malaysia govern various offences against the environment and
therefore the range of responsible persons varies depending on the offence. For
example, under the Environmental Quality Act 1974, an owner or occupier of premises
who has control over such premises will be liable for open burning.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
For contaminated land, the \ldblquote Polluter Pay Principle\rdblquote applies.
Therefore, the persons liable can possibly be the land owner, the occupants or
users of the land, chemicals or products, or waste owners. If a lender enforces
security over the land and enters into occupation of the land and causes the land
to become contaminated during its occupation, then that lender is liable under the
environmental laws for the contamination by virtue of its occupation and as the
\ldblquote polluter\rdblquote of the land.
\par
}
}
}
\u160\'3f
\par
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Structuring the priority of debts
\par
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
15.
}
}
What methods of subordination are there?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Contractual subordination
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
It is common to find covenants from the borrower in loan agreements, undertaking to
enter into subordination agreements for debts owed by related parties. It is also
common practice for the borrower and its existing creditors to enter into
subordination agreements as a precondition to first drawing.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Subordination agreements that are entered into between the senior creditor, the
junior creditor and the borrower, often contain, among other things:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Standard undertakings from the junior creditor not to make any claim for the monies
owed to it unless the senior creditor has been paid in full.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Undertakings from the borrower not to pay the junior creditor until and unless the
senior creditor has been paid in full.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Covenants from the junior creditor agreeing to hold monies paid to it, on trust for
the senior creditor.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Covenants not to prove for its debt in an insolvency of the borrower.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Structural subordination
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Mezzanine financing is not common in Malaysia, and consequently, structuring a
financing transaction that includes structural subordination is not common.
However, structural subordination in Malaysia commonly occurs in certain industries
inadvertently. Project financing and property development are two areas where a
holding company may initially obtain funding for construction of a project or to
develop a piece of land. The holding company subsequently may incorporate a wholly
owned subsidiary, that is, a special purpose vehicle (SPV), which becomes the
project company or the developer. The SPV will then also obtain financing, and it
is common to find that the financiers of the SPV will restrict cashflow upwards to
the holding company, therefore, indirectly subordinating the lenders to the holding
company. Structural subordination that occurs in this manner is seldom documented
in an agreement between the holding company\rquote s lenders and the financiers to
the SPV.
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Inter-creditor arrangements
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Inter-creditor arrangements are common in Malaysia. For example, inter-creditor
agreements are frequently entered into where a project is being developed in three
phases, and each phase is funded by different financiers but security is taken over
identical project assets.
\par
}
}
}
\u160\'3f
\par
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Debt trading and transfer mechanisms
\par
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
16.
}
}
Is debt traded in your jurisdiction and what transfer mechanisms are used? How do
buyers ensure that they obtain the benefit of the security and guarantees
associated with the transferred debt?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Trading of debt is common, particularly for loans structured as syndicated loans.
It is typical for most loan agreements to allow for an effective transfer by a
lender without having to obtain the borrower\rquote s consent to it. This can be by
way of novation or assignment or by transferable loan certificates. The most common
ways of trading debt are by novation and assignment.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A novation involves the transfer of all rights and obligations by the original
lender to a buyer/new lender. It is the most common/traditional way of transferring
syndicated loan commitments. The procedures for transfer are usually set out
extensively in the loan agreement. Essentially, the new lender steps into the shoes
of the original lender and assumes the benefits and obligations under the
agreement. Where security for a syndicated loan is held on trust by a security
trustee/agent for the benefit of the lenders, the buyer/new lender should
automatically benefit from the security following the transfer. These should be
contractually provided for.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Assignments only allow for the transfer of rights and not obligations. They are
commonly used to transfer rights to fully drawn loans. Generally accepted forms of
syndicated loan agreements now do expressly provide for transfers by assignment
agreement, as well as by novation. However, both have the same effect of
transferring all rights and obligations from the original lender to the buyer/new
lender.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Another form of debt trading/transfer is sub-participations. Essentially, the
original lender remains the lender although it may have sold and transferred the
economic interest in the loan to a buyer. Any security granted is still in favour
of the original lender.
\par
}
}
}
\u160\'3f
\par
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Agent and trust concepts
\par
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
17.
}
}
Is the agent concept (such as a facility agent under a syndicated loan) recognised
in your jurisdiction?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The concept of agency is recognised in Malaysia.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
18.
}
}
Is the trust concept recognised in your jurisdiction?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The concept of the trust is recognised in Malaysia.
\par
}
}
}
\u160\'3f
\par
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Enforcement of security interests and borrower insolvency
\par
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
19.
}
}
What are the circumstances in which a lender can enforce its loan, guarantee or
security interest? What requirements must the lender comply with?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The circumstances in which a lender can enforce its loan are determined by the
terms of the loan agreement. The facility document usually provides that when an
event of default occurs or is declared the lender can terminate the facility and
accelerate the loan. The security then also becomes immediately enforceable. A
guarantor\rquote s obligation to pay under a guarantee usually arises once the
lender makes a demand in accordance with the terms of the guarantee.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Methods of enforcement
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
20.
}
}
How are the main types of security interest usually enforced? What requirements
must a lender comply with?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A security over real estate can be enforced by obtaining an order of sale either
from the High Court (if it is a Registry title) or the Land Administrator (if it is
a Land Office title). Where there is a shortfall in the realisation on sale of the
real estate, the lender can sue the borrower under a personal covenant in the
charge annexure for any difference between the debt owing and the amount recovered
from the sale of the real estate.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Security created under a debenture (for assets other than real estate) can usually
be enforced by the appointment of a receiver or manager. The receiver, in the
enforcement of the security is liable for debts incurred by him in the course of
the receivership.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Enforcement proceedings for ship mortgages are commenced as an admiralty action in
the High Court. A mortgage over an aircraft can be enforced through a sale under
the provisions of the Civil Aviation Regulations 1996.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf20 \i0
Rescue, reorganisation and insolvency
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
21.
}
}
Are company rescue or reorganisation procedures (outside of insolvency proceedings)
available in your jurisdiction? How do they affect a lender\rquote s rights to
enforce its loan, guarantee or security?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A compromise or arrangement can be proposed between a company and its creditors or
any class of creditors to reorganise the company\rquote s debts under the Companies
Act 1965 (
}
{\f5 \b0 \fs20 \cf1 \i1
}
}
). This can be initiated by the company or its creditors. It is binding on both
creditors and parties when it is approved by a majority in number representing
three-fourths in value of the creditors or class of creditors or members or class
of members present and voting either in person or by proxy at the meeting or the
adjourned meeting; and confirmed by the court.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
For the court order to take effect, an office copy of the order must be lodged with
the Companies Commission. The order takes effect on the date of the lodgement or on
an earlier date as determined by the court.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
In addition to the courts\rquote approval of the scheme of arrangement, the court
can restrain further proceedings against the company and subject to such terms as
the court imposes. Any further disposition of the company\rquote s property apart
from those in its ordinary course of business made after the grant of the
restraining order will be invalid.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
If the scheme of arrangement provides for the distribution of the company\rquote s
assets, the manner in which the distribution is to be carried out should be set out
in the scheme and adhered to. However, it may be that the creditors agree to a
scheme that suspends their strict legal rights for a time while the company tries
to revive its business.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Another manner in which a company can restructure its debts is by entering into a
negotiable standstill agreement with its creditors. However, this does not have the
benefit of being binding on minority dissenting creditors. Any restructuring done
in this manner must be by unanimous consent and all creditors must sign the
agreement.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
22.
}
}
How does the start of insolvency procedures affect a lender\rquote s rights to
enforce its loan, guarantee or security?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A secured creditor is not affected by the start of insolvency procedures and can
enforce its security. However, when a winding up order is made or a provisional
liquidator is appointed, no action or proceeding is proceeded with or commenced
against the company except by leave of the court and in accordance with such terms
as the court imposes.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
23.
}
}
What transactions involving loans, guarantees, or security interests can be made
void if the borrower, guarantor or security provider becomes insolvent?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Any disposition of the company\rquote s property made after the commencement of the
winding-up by the court is void unless the court orders otherwise.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Any transfer, mortgage, delivery of goods, payment, execution or other act relating
to property made or done against a company within six months before the
presentation of the winding-up petition may be deemed fraudulent and void if the
transfer (and so on) is intended to give a preferential status to any creditor.
Property disposed of may be \ldblquote clawed back\rdblquote by the liquidator of
the insolvent company.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A floating charge on the undertaking or property of the company created within six
months of the commencement of the winding-up is invalid unless it is proved that
the company was solvent immediately after the creation of the charge.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A liquidator can challenge a transaction that was made at an undervalue in the
purchase or sale of any property, business or undertaking for a cash consideration
entered into by a company where both:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The transaction was with any person who was a director of the company, or with whom
a director was so connected, within a period of the two years immediately preceding
the date of commencement of winding-up of the company.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The value of the consideration received by the company is less than the value of
the consideration provided by it.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
24.
}
}
In what order are creditors paid on the borrower\rquote s insolvency?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Secured creditors can realise their security without the need to prove their debts.
If the security is less than the debt owed, they can claim the outstanding debt as
an unsecured creditor.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Certain claims are given priority over all unsecured debts in a specific order as
statutorily prescribed. These include:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
All wages and salary.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Amounts due in respect of workers\rquote compensation.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Contributions to the employees\rquote provident fund during the 12 months before
the commencement of the winding-up.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Federal tax.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Creditors within the same class rank equally between themselves. If the
company\rquote s assets are insufficient to satisfy their claims in full, then all
claims are reduced in equal proportions between themselves.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
If the assets of the company available for payment of general creditors are
insufficient to meet the preferential debts, these debts have priority over the
claims of the holders of debentures under any floating charge.
\par
}
}
}
\u160\'3f
\par
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Cross-border issues on loans
\par
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
25.
}
}
Are there restrictions on the making of loans by foreign lenders or granting
security (over all forms of property) or guarantees to foreign lenders?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The Central Bank of Malaysia (Bank Negara Malaysia) imposes certain exchange
control restrictions on the borrowing from and granting of security in favour of a
foreign lender. These restrictions are provided for in Notices issued by the
Central Bank.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Generally, the approval of the Central Bank is required for any lending or granting
of security that is not expressly allowed in the Notices. As Ringgit Malaysia (MYR)
is not legal tender outside Malaysia, it is not common for a foreign lender to lend
MYR to a Malaysian entity, except for such lending at the inter-group level.
Additionally, the restrictions on the lending of MYR by a foreign lender are more
onerous.
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Making of loans in foreign currency by foreign lenders or granting of security for
that purposes generally are subject to certain qualifications and restrictions set
out in the relevant Notices:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A resident entity can borrow any amount of foreign currency from a foreign lender
that is within its group of entities or its direct shareholder. The amount can be
up to an aggregate of MYR100 million in foreign currency equivalent from other
foreign lenders.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A resident entity can give a financial guarantee (defined as an undertaking to
secure the repayment of a debt or liability) in any amount in foreign currency or
in MYR in favour of a foreign lender. This financial guarantee must not entail any
payment being made in MYR to or by a non-resident/foreign entity for an underlying
foreign currency borrowing. Additionally, the secured amount must not exceed in
aggregate MYR50 million or its foreign currency equivalent to secure borrowing
obtained by a non-resident/foreign entity that:
\par {\pntext }
}
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0 {\fi-360 \li {\*\pn \pnlvlblt \ilvl0
\ls72 \pnindent480 \pnf1 {\f2 \pntxtb \u8226\'3f}}{\listtext \li960 \f5 \qj \b0
\ri0 \fs20 \cf1 \i0 \u8226\'3f\tab }\ls72 {\pntext }
{\li960 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li960 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
is not part of the resident\rquote s group; or
\par {\pntext }
}
}
}
{\pntext }
{\li960 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li960 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
obtains financing from a foreign financial institution or any person that is not
part of the resident entity\rquote s group or is not its direct shareholder.
\par {\pntext }
}
}
}
}{\pntext }
}
{\li580 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The above is not an exhaustive list of exchange control restrictions and
requirements.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
26.
}
}
Are there exchange controls that restrict payments to a foreign lender under a
security document, guarantee or loan agreement?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
See
}
{\f5 \b0 \fs20 \cf5 \i1
Question 25
}
}}}
.
\par
}
}
}
\u160\'3f
\par
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Taxes and fees on loans, guarantees and security interests
\par
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
27.
}
}
Are taxes or fees paid on the granting and enforcement of a loan, guarantee or
security interest?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The following taxes and fees are payable for loans and security granted:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
A fee of MYR300 is payable to register security granted by a company (except for a
guarantee, which is not required to be registered) at the Companies Commission.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The fee for registering a charge over land and charge over lease at the relevant
land offices vary from office to office, but is nominal.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
For security documents that contain the grant of a power of attorney by the
security provider, that power must be registered with the High Court. A
registration fee applies, calculated based on folios.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Generally, ad valorem stamp duty of 0.5% of the facility amount is payable on any
document designated as the principal instrument (usually the facility agreement)
for a MYR denominated loan. A maximum stamp duty of MYR500 is payable on the
principal instrument of a foreign currency loan (any currency except MYR).
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Stamp duty of MYR10 is payable on each subsidiary instrument and on each copy of
the principal and subsidiary instruments provided that the original principal
instrument was stamped ad valorem.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Where security is enforced following a charge over shares, ad valorem stamp duty is
generally payable on the share transfer instrument by the purchaser/lender/security
holder. This stamp duty is payable before the shares can be registered in the name
of the security holder.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
28.
}
}
Are there strategies to minimise the costs of taxes and fees on the granting and
enforcement of a loan, guarantee or security interest?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Certain stamp duty remissions and exemptions have been granted for certain types of
financing or financing products (
}
{\f5 \b0 \fs20 \cf1 \i1
see below
}
}
). It is common for borrowers to try and minimise their exposure to stamp duties,
for example, by applying for certain types of financing or by structuring their
financing to take advantage of the remissions and exemptions available, such as:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Remission of 20% of the stamp duty payable and chargeable on the principal
instrument if the financing is made in accordance with Islamic/shariah principles
and it is for the purpose of financing the purchase of residential property. This
remission is only available until 31 December 2017.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Remission of duty on any instrument for the refinancing of a conventional loan to a
shariah financing (in accordance with approved Islamic/shariah principles). The
remission is to the extent of the duty that would be payable on the principal
amount of the existing loan, provided that the instrument for the existing loan was
duly stamped.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
Stamp duty is exempted for instruments executed by a Labuan entity in connection
with a Labuan business activity (as defined in the Labuan Business Activity Tax Act
1990). Additionally, withholding tax is not applicable to dealings between a
resident entity and a Labuan entity, and between a Labuan entity and a non-resident
entity. Therefore, many borrowers try to minimise stamp duty and withholding taxes
by structuring their borrowing through a Labuan entity.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf20 \i0
Reform
\par
}
}
{\f5 \b0 \fs20 \cf5 \i0
}
{\f5 \b0 \fs20 \cf5 \i0
\par
}
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\li620 \f5 \qj \b0 \ri620 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf1 \i0
29.
}
}
Are there any proposals for reform?
\par
}
}
}
\u160\'3f
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
The exposure draft of the Companies Bill 2013 was published in July 2013 by the
Companies Commission. Having taken into account feedback from various quarters, the
revised Companies Bill 2015 was tabled in the Malaysian Parliament for First
Reading in October 2015 with the Second Reading of the Bill being expected to take
place in the coming sitting. When it comes into force, the Bill, which is intended
to modernise Malaysian corporate law in line with international standards, will
have a major effect on the corporate scene in Malaysia. Some of the aspects of the
Bill that may have an effect in relation to lending and taking security include the
following:
\par
}
}
}
\u160\'3f
\par
}
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Incorporation of the company.
}
}
The Bill proposes to grant unlimited capacity to companies, which removes the
burden to ensure that the company has capacity to borrow or grant security. The
Bill also proposes to permit single shareholders and directors for private
companies.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Solvency statement.
}
}
The Bill introduces a solvency test similar to that applicable to companies in
certain jurisdictions such as the UK. A company must satisfy the test for purposes
of provisions relating to redemption of preference shares, reduction of share
capital and financial assistance.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Financial assistance.
}
}
The current regime almost entirely prohibits a company from giving financial
assistance for the purchase of its shares or shares of its holding company. This
limits the security that may be granted in certain transactions, such as in an
acquisition of shares. The Bill proposes a whitewash procedure under which a
company can provide financial assistance for the acquisition of that company\rquote
s or its holding company\rquote s shares or to reduce or discharge liability
arising from that acquisition, subject to certain thresholds (approval and
monetary) being met and a solvency statement being made.
\par {\pntext }
}
}
}
{\pntext }
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\li480 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
{\f5 \b1 \fs20 \cf1 \i0
Corporate rehabilitation.
}
}
Currently, the Companies Act only provides for an insolvent company to wind up,
enter into receivership, or undertake a scheme of arrangement with its creditors.
The Bill introduces the additional mechanisms of judicial management and corporate
voluntary arrangement to rehabilitate insolvent companies/those in financial
trouble. For judicial management, an insolvent company or its creditors can apply
to the court for the company to be managed by a qualified judicial manager. This
may be granted if there is a possibility that the company may still be rescued.
During the period of the order (180 days), the company cannot be wound up.
Additionally, without the leave/consent of the court, no proceedings can be
commenced against the company or its property and no steps can be taken to enforce
any security over the company\rquote s property. For corporate voluntary
arrangement, the directors of a troubled private company can submit terms of a
proposed arrangement to an approved liquidator. The company can file certain
documents with the court to obtain a moratorium. The effect of a moratorium is
largely similar to that under judicial management; however, a secured creditor can
appoint a receiver to deal with the company\rquote s charged property.
\par {\pntext }
}
}
}
}
}
{\li100 \f5 \qj \b0 \ri100 \fs20 \cf1 \i0
}
}
}
}{
\clcbpat53 \clpadt600 \clpadft3 \clpadb600 \clpadfb3 \clpadl600 \clpadfl3
\clpadr600 \clpadfr3 \clbrdrt \brdrw20 \brdrcf1 \brdrs \clbrdrb \brdrw20
\brdrcf1 \brdrs \clbrdrl \brdrw20 \brdrcf1 \brdrs \clbrdrr \brdrw20 \brdrcf1 \brdrs
\trql \clwWidth10091 \cellx10091
\intbl
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs28 \cf29 \i0
Contributor profiles
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf29 \i0
Evelyn Ch\rquote ng, Associate
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf29 \i0
Christopher & Lee Ong
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\li0 \f6 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f6 \b1 \fs20 \cf29 \i0
T
}
}
+603 2273 1919
\par
}
{\li0 \f6 \qj \b0 \ri0 \fs20 \cf29 \i0
}
{\f6 \b1 \fs20 \cf29 \i0
F
}
}
+603 2273 8310
\par
}
{\li0 \f6 \qj \b0 \ri0 \fs20 \cf29 \i0
}
{\f6 \b1 \fs20 \cf29 \i0
E
}
}
{\f6 \b0 \fs20 \cf29 \i1
{\field {\*\fldinst HYPERLINK "mailto:evelyn.chng@christopherleeong.com" }{\fldrslt
evelyn.chng@christopherleeong.com
}\f6 \strike0 \ul0 \b0 \sa0 \sb0 \fs20 \cf5 \i1 }}
\par
}
}
{\li0 \f6 \qj \b0 \ri0 \fs20 \cf29 \i0
}
{\f6 \b1 \fs20 \cf29 \i0
W
}
}
{\f6 \b0 \fs20 \cf29 \i1
{\field {\*\fldinst HYPERLINK "http://www.christopherleeong.com" }{\fldrslt
www.christopherleeong.com
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f5 \b1 \fs20 \cf29 \i0
Professional qualifications.
}
}
Advocate and Solicitor, Malaysia
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f5 \b1 \fs20 \cf29 \i0
Areas of practice.
}
}
Corporate real estate; general banking and finance.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf29 \i0
Chor Jack, Senior Associate
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf29 \i0
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\li0 \f6 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f6 \b1 \fs20 \cf29 \i0
T
}
}
+603 2273 1919
\par
}
{\li0 \f6 \qj \b0 \ri0 \fs20 \cf29 \i0
}
{\f6 \b1 \fs20 \cf29 \i0
F
}
}
+603 2273 8310
\par
}
{\li0 \f6 \qj \b0 \ri0 \fs20 \cf29 \i0
}
{\f6 \b1 \fs20 \cf29 \i0
E
}
}
{\f6 \b0 \fs20 \cf29 \i1
{\field {\*\fldinst HYPERLINK "mailto:jack.chor@christopherleeong.com" }{\fldrslt
jack.chor@christopherleeong.com
\par
}
}
{\li0 \f6 \qj \b0 \ri0 \fs20 \cf29 \i0
}
{\f6 \b1 \fs20 \cf29 \i0
W
}
}
{\f6 \b0 \fs20 \cf29 \i1
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f5 \b1 \fs20 \cf29 \i0
}
}
Advocate and Solicitor, Malaysia; Barrister-at-law (non-practising), England
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f5 \b1 \fs20 \cf29 \i0
Areas of practice.
}
}
Banking and finance.
\par
}
}
}
\u160\'3f
\par
}
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf29 \i0
Fiona Sequerah, Partner
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f5 \b0 \fs20 \cf5 \i0
}
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf29 \i0
\par
}
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\li0 \f6 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f6 \b1 \fs20 \cf29 \i0
T
}
}
+603 2273 1919
\par
}
{\li0 \f6 \qj \b0 \ri0 \fs20 \cf29 \i0
}
{\f6 \b1 \fs20 \cf29 \i0
F
}
}
+603 2273 8310
\par
}
{\li0 \f6 \qj \b0 \ri0 \fs20 \cf29 \i0
}
{\f6 \b1 \fs20 \cf29 \i0
E
}
}
{\f6 \b0 \fs20 \cf29 \i1
{\field {\*\fldinst HYPERLINK "mailto:fiona.sequerah@christopherleeong.com" }
{\fldrslt
fiona.sequerah@christopherleeong.com
\par
}
}
{\li0 \f6 \qj \b0 \ri0 \fs20 \cf29 \i0
}
{\f6 \b1 \fs20 \cf29 \i0
W
}
}
{\f6 \b0 \fs20 \cf29 \i1
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f5 \b1 \fs20 \cf29 \i0
}
}
Advocate and Solicitor, Malaysia; Barrister-at-law (non-practising), England
\par
}
}
}
\u160\'3f
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf29 \i0
{\f5 \b1 \fs20 \cf29 \i0
Areas of practice.
}
}
Banking and finance.
\par
}
}
}
\u160\'3f
\par
}
}
}
}\f5 \li0 \strike0 \ul0 \b0 \qj \sa0 \sb0 \fs20 \ri0 \cf29 \i0 \intbl \cell
\row }}\par
{\li0 \f5 \qj \b1 \ri0 \fs20 \cf29 \i0 {
{\trowd \lastrow \trkeep \trleft0
\clbrdrt \brdrw20 \brdrcf45 \brdrs \clbrdrb \clbrdrl \trql \clwWidth3911 \cellx3911
\clbrdrt \brdrw20 \brdrcf45 \brdrs \clbrdrb \brdrw20 \brdrcf45 \brdrs \clbrdrl
\brdrw20 \brdrcf45 \brdrs \clbrdrr \brdrw20 \brdrcf45 \brdrs \trql \clwWidth2267
\cellx6178
\clbrdrt \brdrw20 \brdrcf45 \brdrs \clbrdrb \clbrdrr \trql \clwWidth3911
\cellx10089
\intbl
{\li0 \f5 \b1 \ri0 \fs20 \cf29 \qc \i0
}\f5 \li0 \b1 \fs20 \ri0 \cf29 \i0 \qc \intbl \cell \intbl
{\li0 \f5 \b1 \ri0 \fs20 \cf29 \qc \i0
END OF DOCUMENT
}
}\f5 \li0 \strike0 \ul0 \b1 \sa0 \sb0 \fs20 \ri0 \cf29 \i0 \qc \intbl \cell \intbl
{\li0 \f5 \b1 \ri0 \fs20 \cf29 \qc \i0
}\f5 \li0 \b1 \fs20 \ri0 \cf29 \i0 \qc \intbl \cell \row }}\par
}
{\f5 \b0 \fs20 \cf5 \i0
{\*\bkmkstart kh_relatedContentOffset_1}{\*\bkmkend kh_relatedContentOffset_1}
\par
}
{\li0 \f5 \qj \b0 \ri0 \fs20 \cf1 \i0
}
}
}
}\sect }

Lending and Taking Security in Malaysia Overview

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Lending and Taking Security in Malaysia Overview

Hochgeladen von

Copyright:

Verfügbare Formate

{\rtf1 \ansi

Das könnte Ihnen auch gefallen