No.
Yes, this is possible through the execution of an intercreditor agreement specifying the priority and ranking arrangements.
Yes, a floating charge can be created over any assets of a company. This is usually created over current assets, such as a company's stock-in-trade or book debts. The security is usually conferred under a debenture containing a fixed charge and a floating charge together covering all the available assets of the company.
No.
Yes.
Not applicable, as a trustee may be appointed.
Not applicable, as a trustee may be appointed.
Although it is possible to take security over intellectual property rights such as trademarks and patents, there is currently no official register in the intellectual property registries that records those security interests. Therefore, there is no system that enables the giving of notice of the security interests to third parties who could be potential buyers of those intellectual property rights.
Pursuant to the FE Notices, a resident ( which is not a bank) is allowed to give a financial guarantee (in any amount in Malaysian ringgit or in foreign currency) to secure a borrowing obtained by a nonresident except for a financial guarantee given to secure a borrowing:
- Obtained by a nonresident borrower that is a special purpose vehicle, or if the underlying borrowing is being utilized by the resident guarantor; or
- Where the resident has entered into a formal or informal arrangement to make the repayment of the borrowing in foreign currency other than pursuant to a call-upon of the financial guarantee in the event of default
The prior written approval of BNM is required for any of the circumstances described in paragraphs (a) or (b) above.
Yes, a company must receive a corporate benefit in return for any transaction. It does not need to be a monetary benefit. The test is whether the directors exercise their discretion to enter into a guarantee or security agreement in the best interests of the company.
Ultimately, it is a question of fact in relation to whether a transaction has commercial benefit for a company. Under the MCA, the directors are statutorily required to exercise their discretion and powers in the best interests of the company with reasonable care, skill and diligence. If the transaction is found not to have a commercial benefit for the company, this does not affect the validity of the security but there will be consequences for the directors for acting improperly.
Mortgage or charge
An individual or company may grant a mortgage or charge over its assets. If a company creates the mortgage or charge, it must be registered within 30 days of the date of its creation.
In addition, depending on the subject matter of the security interest, further registrations must be effected at certain state agencies.
For further details of the registration requirements, see the answer to question 12 of this section.
Assignment
An individual or company may grant an assignment of its rights. Under the Malaysian Civil Law Act 1956, a legal assignment must be an absolute assignment of all rights made in writing and an express written notice of the assignment must be served on the counterparty from whom the assignor would have been entitled to enforce a right or receive or claim a debt. As a matter of practice, there is no need for a separate acknowledgment by the contractual counterparty; however, in Malaysia, it is commonly procured to ensure that the contractual counterparty has full knowledge of the assignment.
Generally, under the FE Notices, the provision of financial guarantee is allowed for types of borrowing which are approved in the FE Notices or otherwise approved in writing by BNM. It is therefore important to consider whether the underlying borrowing is approved in the FE Notices or requires prior written approval of BNM.
In addition, the following registration requirements apply to security interests created under Malaysian law.
If a company incorporated under the MCA creates a security and if the security is registrable under the MCA, it must be registered with the Companies Commission of Malaysia (CCM) within 30 days of its creation. A prescribed filing fee is payable to the CCM.
A failure to register a registrable charge with the CCM within the prescribed period will result in the charge being void against the liquidator and any other creditors of that company, so that on a liquidation of that company the liquidator can deal with the charged property disregarding any interest that the charge purports to have given to the chargee. Failure to register a registrable charge may also affect the priority of the chargee's claim.
Similar requirements apply to a company incorporated under the Malaysian Labuan Companies Act 1990. Registration with the Labuan Financial Services Authority must occur within 30 days of the creation of the security.
Power of attorney
Where a security document involves the granting of a power of attorney, in order for that security document to be valid, authentication of the power of attorney must follow the prescribed procedure under the Malaysian Power of Attorney Act 1949 and a stamped copy of the power of attorney must be deposited with the High Court of Malaysia for registration purposes.
Legal land charge
Where a legal land charge is created, it must be registered with the relevant land registries. The registration fees payable to the land registries vary from one state to another.
The land charge document must be presented for registration within three months from its date. If it is not presented for registration within the three-month period, a penalty will be imposed. The penalty payable varies from one state to another.
Translation
There is no requirement for the documents to be translated into Malay (the national language).
Provided that the full amount of stamp duty due has been paid on the principal instrument (see the answer to question 8 of the section "When lending to borrowers"), a security document, guarantee, subordination agreement and intercreditor agreement would each be deemed to be a subsidiary instrument and would only be subject to a nominal stamp duty of MYR 10.