MALAYSIA Law and Practice Contributed by: Will Fung, Penelope Gan and Kee Shao Yee, Richard Wee Chambers
substance to access relief. Facility agreements com - monly include gross-up provisions to protect net yield. Permanent establishment risk is managed by limiting onshore activity. Foreign lenders generally avoid main - taining a fixed place of business or using dependent agents in Malaysia, and rely on independent local ser - vice providers where necessary. Stamp duty applies to Malaysian-law loan and security documents and is typically borne by the borrower, but it remains a transaction cost to be factored into struc - turing. Lenders also consider borrower-side limits on interest deductibility and transfer pricing compliance, particularly for related-party loans, and address these through arm’s length pricing and financial covenants. Private credit providers in Malaysia typically take secu - rity over a broad range of corporate assets, including: • fixed and floating charges over tangible and intan - gible assets; • share charges over subsidiaries; • assignments of receivables and material contracts; Sponsor or corporate guarantees are also common. The scope of collateral depends on asset availability and any existing senior debt. Security is commonly created through a debenture granting fixed and floating charges over present and future assets. Share security is documented by share charge or pledge, supported by executed transfer forms. Receivables and contractual rights are secured by assignment. Land security is created by registered charge, and account security may require control arrangements with the account bank. 5. Guarantees and Security 5.1 Assets and Forms of Security • bank accounts; and • land and buildings. Company charges must be registered with the cor - porate registry within the statutory period (generally 30 days). Failure to register renders the charge void against a liquidator and other creditors. Land charges
must be registered at the relevant land office to be effective against third parties and to secure priority. Assignments of receivables are valid between parties upon execution, but notice to counterparties is typi - cally required to secure priority and redirect payments. Share charges generally require delivery of share cer - tificates and transfer forms. Corporate charge registration is completed shortly after execution. Land registration may take several weeks depending on the state. Filing fees are mod - est, while land-related costs depend on property value but are predictable. Most perfection steps are com - pleted at closing, with certain registrations finalised post-closing due to administrative timelines. A standard collateral package includes: • a debenture over all present and future assets; • share charges over key subsidiaries; • assignments of receivables and material contracts; • bank account security; and • guarantees from sponsors or group entities. Where structural subordination applies, lenders often rely primarily on share security and upstream cash flow controls rather than direct operating asset secu - rity. 5.2 Floating Charges and/or Similar Security Interests Malaysian law permits a company to grant a float - ing charge or an “all-assets” security interest over its present and future assets. This is typically effected through a debenture creating fixed and floating charg - es under the CA 2016. Such structures are widely used in both bank and private credit transactions. In practice, security is commonly structured as a hybrid package. Fixed charges are taken over key non-circulating assets such as land, shares, plant and machinery, while floating charges cover circulat - ing assets including inventory and receivables. The floating charge allows the borrower to continue deal - ing with assets in the ordinary course of business until crystallisation.
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