MALAYSIA Law and Practice Contributed by: Dilys Tan, Adnan Sundra & Low
1. Specific Financial Asset Types 1.1 Common Financial Assets The financial assets most commonly securitised in Malaysia are as follows: • commercial real estate; • hire-purchase loans; • housing loans; • loan receivables; • credit and debit card receivables; • automotive loans; and • debt-settlement receivables. 1.2 Structures Relating to Financial Assets Transaction Structure The usual transaction structure would be as fol - lows. Identification of assets This involves identification of the assets to be the subject matter of the securitisation transac - tion. Such assets must fulfil the criteria set out in Chapter 2 of Part 4 Section B of the Guide - lines on Unlisted Capital Market Products under the Lodge and Launch Framework (the “LOLA Guidelines”) issued by the Securities Commis - sion Malaysia (SC), which includes the following: • the assets must generate cash flow; • the originator must have a valid and enforce - able interest in the assets and in the cash flows of the assets prior to the securitisation transaction; • there must be no impediments (whether con - tractual or otherwise) that would prevent the effective transfer of the assets or the rights in relation to such assets from the origina - tor to the special purpose entity (SPE) – to this end, all the necessary regulatory and/or contractual approvals must be obtained and
the originator must not have done or omitted to do any act which would enable the debtor of the originator to exercise a right of set-off in relation to such assets; and • the assets must be transferred at a fair value. Additionally, for an issuance of asset-backed sukuk, the assets that are the subject matter of the securitisation transaction must also be Shariah-compliant. Identification of originator This involves identification of the originator, who must be an entity incorporated in Malaysia and must be a going concern at the date of trans - fer of any assets to the SPE. Additionally, the originator is restricted from purchasing or sub - scribing up to 10% of the original amount of the asset-backed securities (ABS) issued by the SPE at market value unless with the prior approval of the SC, but there is no restriction on the holding of subordinated ABS by the originator. Incorporation of SPE This involves incorporation of the SPE, which must be a resident in Malaysia for tax pur - poses and must not have the same name as the originator or be similarly identified with the originator. The SPE must have independent and professional directors, and must be bankrupt - cy-remote. Please refer to 4.10 SPEs or Other Entities for more information on the bankruptcy remoteness test. The more common structure of the SPE would be that of a standalone special purpose vehicle (SPV) incorporated for the sole purpose of the securitisation transaction, with its shares held on trust by a share trustee in favour of charita - ble organisations to be identified by the share trustee.
255 CHAMBERS.COM
Powered by FlippingBook