MALAYSIA Law and Practice Contributed by: Will Fung, Penelope Gan and Kee Shao Yee, Richard Wee Chambers
without approval, with amounts above this requiring BNM’s consent. Ringgit-denominated lending by non- residents is more restricted and generally subject to approval, leading most private credit transactions to be structured in foreign currency. Borrowers must comply with applicable registration and reporting requirements, and repayments of principal and inter - est must follow permitted payment and repatriation rules. Foreign lenders may take security over Malaysian assets, including debentures, share charges, receiva - bles and guarantees, subject to proper perfection (eg, registration with CCM and, for land, under the NLC). Where land is involved, foreign interest restrictions are typically addressed by appointing a Malaysian secu - rity agent. In practice, foreign private credit is structured as off - shore lending with Malaysian-law security, with com - pliance and perfection being the key considerations rather than foreign ownership restrictions. 3.4 Use of Proceeds and Acquisition Financings Malaysia does not impose general statutory restric - tions on a borrower’s use of proceeds in private credit transactions, provided funds are used for lawful pur - poses. In practice, permitted uses are primarily gov - erned by contractual covenants and typically cover working capital, capital expenditure, refinancing, or acquisitions. Shariah-compliant transactions impose additional constraints, as proceeds must not be applied to non- Shariah-compliant activities. These restrictions are usually managed through representations and ongo - ing undertakings. For cross-border transactions, foreign currency bor - rowings are subject to foreign exchange rules that limit use of proceeds to business or real sector activities. Lenders commonly include monitoring provisions to manage compliance risk. A key challenge in acquisition financings is the finan - cial assistance restriction, which limits a target’s ability to provide guarantees or security for the acquisition
of its own shares. Although this can be addressed through statutory whitewash procedures, the process adds time, documentation, and execution risk. Cross-border acquisition financings may also face complexity where larger foreign currency facilities trig - ger regulatory approvals. This can affect timing and may require interim or alternative funding structures. 3.5 Debt Buyback Debt buybacks by a borrower or sponsor are generally permitted in Malaysia in private credit transactions. There is no statutory prohibition on a company pre - paying, redeeming, or repurchasing its own debt, and such transactions are treated as a contractual matter rather than a capital maintenance issue. Unlike share buybacks or financial assistance for share acquisitions, debt repurchase does not trigger specific restrictions under company law. As a result, permissibility and mechanics are determined primarily by the terms of the facility documentation and remain subject to directors’ duties and insolvency considera - tions. 3.6 Recent Legal and Commercial Developments Several recent developments have required updates to private credit documentation in Malaysia to manage regulatory risk and reflect evolving market practice. Foreign Exchange Administration Updates to the foreign exchange framework in late 2025 reaffirmed the commonly referenced approval- exempt threshold for foreign currency borrowings while clarifying operational requirements. Documen - tation now more frequently includes clearer approval contingency clauses, representations on compliance with borrowing thresholds, and detailed provisions on permitted use of proceeds, hedging, and repatriation mechanics in cross-border transactions. Stamp Duties Amendments to the Stamp Act have removed the pre - vious fixed cap on stamp duty for foreign currency loan documentation, leading to updated drafting to reflect ad valorem treatment and ensure compliance with evidentiary requirements.
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