MALAYSIA Law and Practice Contributed by: Natalie Ooi and Nicholas Ooi, Ooi & Ooi
3.8 Lenders’ Liability Under Environmental Laws In Malaysia, the principal legislation governing environmental pollution is the EQA. While the provisions of the EQA primarily targets polluters, lenders can be indirectly liable in cer - tain scenarios, especially if they take control of or participate in the management of a polluted site. If a lender exercises the remedy of possession of contaminated land when enforcing its rights under a charge (eg, via foreclosure or enforce - ment), they may become the legal occupier or controller of the land, and consequently may be deemed responsible for environmental compli - ance, including clean-up obligations or ongoing mitigation. 3.9 Effects of a Borrower Becoming Insolvent Regular security documents for a loan will likely contain a clause that allows the lender to recall the facility and sell the security by way of pub - lic auction if the borrower becomes insolvent. A charge that is registered on the title of a property will allow the lender to foreclose it regardless of the insolvency of the borrower. However, a floating charge created within 12 months before the commencement of winding- up is void unless the company was solvent immediately after the creation of the charge, or unless it is proven that the charge was created in good faith and for value. 3.10 Taxes on Loans Stamp duty is payable on the loan agreement at 0.5% of the loan amount in accordance with the provisions of the Stamp Act 1949; this is nor - mally borne by the borrower.
enforce and realise security will vary depending on which enforcement proceeding is taken. Most pandemic-related restrictions on foreclo - sure actions and court procedures have been lifted. Nevertheless, the residential auction seg - ment has shown an increase since the pandem - ic. There is an active market for the sale of non-per - forming loans in Malaysia, particularly for banks and financial institutions seeking to offload dis - tressed assets. 3.7 Subordinating Existing Debt to Newly Created Debt Insofar as debts secured with registered charges on land are concerned, the priority of charges is usually based on date of registration, not just creation. The first registered charge on the land generally takes priority over any subsequent charges. While multiple charges are possible, the order in which they are registered determines their prior - ity. A subsequent charge can be registered, but its effectiveness is subject to the terms of the first registered charge. In the event of the chargor’s insolvency, the priority of registered charges is generally main - tained, with the first chargee having the highest claim on the property. Malaysia does not typically recognise “subordi - nation by conduct” or implication. Subordination must be clear and intentional, either contractu - ally or via a court process.
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