MALAYSIA Law and Practice Contributed by: Will Fung, Penelope Gan and Kee Shao Yee, Richard Wee Chambers
Charge over Land or Property A charge over land is usually released by executing and registering a Discharge of Charge (Borang 16N) at the relevant land office pursuant to the NLC. Upon registration, the financier’s interest over the property is removed from the title, and the land becomes free from the encumbrance. Company Charges For charges created by a company and registered with the Companies Commission of Malaysia (SSM), the security is released by the lodging of (i) a memo - randum of satisfaction of charge or a memorandum where property or an undertaking is released from a registered charge or has ceased to form part of the Company’s property or undertaking; (ii) evidence of satisfaction of charge/release of property or part of the property from charge; and (iii) a statutory declara - tion verifying the memorandum under Section 360 of the CA 2016. This formally records that the secured An assignment by way of security is typically released by executing a deed of receipt and reassignment, whereby the secured party reassigns the rights from the financier back to the assignor. Notice of the release is usually given to relevant counterparties or stakeholders. 5.7 Rules Governing the Priority of Competing Security Interests and/or Claims obligations have been discharged. Assignment by Way of Security In Malaysia, multiple liens and competing security interests are recognised, with priority generally deter - mined by the order of registration and the type of charge (fixed charges rank ahead of floating charg - es). Lenders may contractually vary priority among themselves or across different lender groups through intercreditor agreements, and such contractual subor - dination is generally respected in insolvency, although statutory preferential claims (eg, certain employee
enhanced priority terms. This regime is designed to encourage financiers to support companies in finan - cial difficulty by granting court-approved priority over other creditors. The court may confer three levels of protection: (i) ordering that rescue financing debts be paid immediately after winding-up costs and ahead of preferential creditors under Section 527 (1)(a) of the CA 2016; (ii) granting security over previously unse - cured assets; or (iii) granting security of equal or even higher priority than existing security, provided existing secured creditors are adequately protected. 5.9 Cash Pooling and Hedging/Cash Management Obligations Only local currency cash concentration and notional pooling are permitted in Malaysia. However, compa - nies wishing to participate in cross-border foreign cur - rency pooling can first apply for permission from the central bank. 5.10 Appointment of Collateral Agent In Malaysia, a security or collateral agent (or trustee) may validly hold security on trust for a syndicate of lenders, so liens do not need to be granted separately to each lender. This structure allows changes in the lender group without re-perfecting security. Where a loan is assigned, security generally continues for the benefit of the assignee if the agent/trust struc - ture is used, although certain asset classes (eg, land, contracts or bank accounts) may still require notice, endorsement or registration updates. Private credit lenders may address any limitations by using a secu - rity trustee/agent structure, contractual parallel debt provisions, and sometimes a fronting bank to hold regulated assets or accounts on behalf of the lender group, thereby avoiding the need to re-take security on each transfer. 6. Enforcement 6.1 Enforcement of Collateral by Non-Bank Secured Lenders In Malaysia, non-bank secured lenders, including private credit providers, may enforce collateral upon the occurrence of an event of default or other trigger under the finance documents. Enforcement rights are contractual and operate subject to the CA 2016, the
wages and taxes) cannot be overridden. 5.8 Priming Liens and/or Claims
The new Sections 368B and 415A of the CA 2016 introduce super-priority rescue financing in the context of schemes of arrangement and judicial management, allowing distressed companies to obtain funding on
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