MALAYSIA Law and Practice Contributed by: Dilys Tan, Adnan Sundra & Low
3.2 Principal Warranties The principal warranties to be provided by the seller/originator in the sale agreement would include the following: • representations as to its capacity and corpo - rate authority to enter into the agreement, its compliance with the relevant laws and regula - tions, and its solvency status; and • representations as to its title to the assets, and whether such assets are free and clear from encumbrances. A breach of such representations and warran - ties by the seller/originator, which, if capable of being remedied, is not remedied within the peri - od specified in the agreement, may result in the rescission of the sale agreement and the refund of the purchase consideration by the seller/origi - nator to the SPE. This would in turn result in the mandatory early redemption of the ABS to which such assets relate. The principal warranties to be provided by the SPE would be similar to that of an issuer of bonds/sukuk, and a misrepresentation thereby would be an event of default/dissolution event, which may result in the acceleration of the ABS. 3.3 Principal Perfection Provisions The perfection provisions would vary depending on the type of assets. Real estate assets would require registration of the transfer from the seller/originator to the SPE at the relevant land authority to be completed within a specified period of time following the date of completion. The perfection provisions for receivables would entail the delivery of a written notice of assign - ment to the obligor of such receivables, such
that the assignment of such receivables has been made known to the obligor – and the SPE may, via the servicer, take action against such obligor in the event of a default. 3.4 Principal Covenants The principal covenants to be provided by the seller/originator vary depending on the type of asset being securitised. Such covenants by the seller/originator would be set out in the sale agreement and given in favour of the SPE, and would typically include the following: • restriction from disposing, assigning or trans - ferring to parties other than the SPE or from essentially doing such things as may jeopard - ise the SPE’s ownership of the assets; • restriction from creating any security interest over the assets; and • restriction from claiming any ownership inter - est over the assets. The principal covenants applicable to the SPE and that would be set out in the trust deed for the ABS include the following: • restriction from amending/revising its consti - tution; • restriction from having any employees or incurring any fiduciary responsibilities to third parties other than to parties involved in the securitisation transaction; • restriction from having any subsidiaries; • restriction from incurring further indebtedness or creating any security interest, other than those contemplated under the securitisation transaction; and • an undertaking to subcontract to third parties all services that may be required by the SPE to maintain the SPE and its assets.
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