MALAYSIA Law and Practice Contributed by: Samantha Chiang Xin Li, Yee Yik Shien and Tay Zi Li, Zi Li & Partners
• the aggregate amount of the financial assistance (together with any other financial assistance still outstanding) must not exceed 10% of the aggre- gate amount received by the company in respect of the issue of shares and reserves of the compa- ny, as disclosed in its most recent audited financial statements; • the company must receive fair value in exchange for giving the financial assistance; and • the financial assistance is given not more than 12 months after the day the solvency statement was made by the directors. 5.5 Other Restrictions Prior consent from the relevant state authority may be required if the land title contains express conditions or restrictions-in-interest regulating the use or dealings with the land, and if it typically includes prohibitions on the charging of the land without state authority approval. Applications for state authority approval are gener- ally subject to administrative fees prescribed by the relevant state government. 5.6 Release of Typical Forms of Security Typically, security is released by way of a deed of release or discharge, or where applicable, deed of reassignment of a security asset or interests to the security provider. Depending on the type of security, further steps will be taken to release the security, including the following: • For a charge registered with the CCM, the com- pany must lodge the relevant satisfaction and release-of-charge forms, as prescribed under the Companies Act with the CCM, within 14 days from the satisfaction of the debt. Similarly, for a charge registered with the LFSA, the company is required to lodge the relevant statutory-prescribed form with the LFSA within one month of the debt being satisfied. • For a land charge, a discharge-of-charge form prescribed under the NLC must be filed with the relevant land office/registry. • Where a power of attorney has been registered at the High Court of Malaya, the relevant deed of
release stating the revocation of such power of attorney must be filed with the High Court. 5.7 Rules Governing the Priority of Competing Security Interests In Malaysia, the priority of competing security inter- ests is generally governed by statute and common law rules. Generally, priority will be determined by the time a security interest is created and the type of security interest. For example, fixed charges rank in priority according to the order of creation, while float- ing charges typically rank behind fixed charges. Contractual subordination between lenders is com- monly achieved through intercreditor agreements or subordination deeds, under which, priority can be contractually varied between lender groups or sepa- rate creditor classes. Such contractual subordination provisions are generally enforceable under Malaysian law, including in insolvency, provided they do not con- travene mandatory statutory priorities. 5.8 Priming Liens In Malaysia, one of the most material security inter- ests that may arise by operation of law and potentially prime a lender’s security interest, include the super- priority rescue financing provisions introduced under the Companies (Amendment) Act 2024 which are available to companies in a scheme of arrangement or under judicial management. Such rescue financing may rank in priority over pref- erential debts and unsecured debts in a subsequent winding-up, permit the granting of new security inter- ests over previously unsecured assets, and in certain circumstances, allow such new security to rank pari passu with or above existing secured creditors, sub- ject to safeguards. These provisions were enacted to encourage “new money” lending to distressed companies, address- ing the reluctance of lenders to finance rescue efforts where their claims would otherwise be subordinated. Lenders may manage the risk of court-approved prim- ing liens through contractual and structural protec- tions such as establishing contractual arrangements with other creditors that regulate the granting of fur-
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