MALAYSIA Law and Practice Contributed by: Natalie Ooi and Nicholas Ooi, Ooi & Ooi
3.5 Legal Requirements Before an Entity Can Give Valid Security The Companies Act 2016 (CA2016) generally prohibits a company from providing financial assistance to acquire its own shares or shares of its holding company, with limited exceptions. The CA2016 also generally prohibits company directors from entering or putting into effect any arrangement or transaction for the acquisition or disposal of an undertaking or property of substantial value or the disposal of a substan - tial portion thereof. However, exceptions and exemptions to financial assistance do apply – eg, bona fide purpose and approval by share - holders. 3.6 Formalities When a Borrower Is in Default When a borrower defaults, the lender will typi - cally issue a formal letter of demand for the out - standing amount before any enforcement action. Further actions include: • issuing a formal default notice under the NLC; • appointing a receiver and manager (if applica - ble); or • initiating foreclosure (sale of property). Lenders should expect the following potential obstacles: • disputes over default, including the filing of stay of execution or debt restructuring arrangement under the CA2016 or the Insol - vency Act; or • competing creditors. To ensure priority over other creditors, the lender must ensure that the charge is properly registered under the NLC. The time needed to
NRFIs’ lending activities to Malaysian compa - nies are further regulated by the Moneylenders Act 1951 and the Financial Services Act 2013 (on exchange control). 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security When a legal charge (mortgage) is created over real estate, the following costs typically apply. • Stamp duty – ad valorem stamp duty applies to the principal or primary security instrument (eg, the loan agreement or charge document), at a rate of 0.5% of the loan amount secured. • Registration fees are payable to the Land Office when registering a charge over the property, and differ by state. • Legal fees are payable according to the fee scale under the Solicitors’ Remuneration Order 2023). • State consent fees – if state authority consent is required, a processing fee for the consent to charge will apply, with the amount varying from state to state. If enforcement is done via court proceedings (eg, foreclosure), court filing fees and legal costs apply. These can vary widely based on the property value and the duration of proceedings. Auctions through court may involve auctioneer fees and advertisement costs. No stamp duty or sales and service tax (SST) is payable upon such court fees. In Malaysia, notarisation is not required for the execution or registration of real estate secu - rity documents. However, if a foreign lender requires notarised or apostilled documents, this may incur notary public fees, which are typically MYR100 to MYR300 per document.
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