FINANCING TRANSACTIONS
Presented by:
SUMATHI MURUGIAH
PRELIMINARIES
There are basically 2 types of financing
available:
1.
Conventional Financing
2.
Islamic Financing
Conventional loans
•
Conventional Financing - financing
granted by the Financial Institutions.
Eg. housing loans, terms loans, overdraft,
trade financing, etc
Documents - Facilities Agreement, Charge,
Deed of Assignment, Debentures, etc.
Islamic Financing
•
Islamic
financing
–
financing
in
accordance to Shariah principles. It is
based on the concept of trade which is
permitted under Shariah rules (Not interest
base ie. No Riba)
•
Documents – depends on type of
financing (BBA facility, Musyarakah, Ijarah,
etc.)
LEGAL DOCUMENTATIONS
TYPES OF FINANCING:
house financing, overdrafts, business loans,
corporate loans, trade financing, personal
financing, etc.
Example: House financing
For house financing, there would be 2 types
of documents executed :
1.
2.
A contract document between the bank
and the customer; and
Security document where the customer
would normally charge/assign the
property to the bank
For Conventional Financing:
 Facility
Agreement - 1st Party/3rd Party
Loans
 Security Documents - Legal Charge/DOA
For Islamic financing:
•
•
•
Property Purchase Agreement
Property Sale Agreement
Security Documents – Legal Charge/DOA
Note: There cannot be a 3rd Party Financing
in Islamic financing - Hibah (gift) to be
executed
Other Documents
Debentures, Memorandum of Deposit,
Letter of Set-Off, Shipping Guarantee,
Letters of Credit, etc
IMPORTANT CONSIDERATIONS FOR
FINANCING TRANSACTIONS
1. CONVENTIONAL OR ISLAMIC
The first consideration would be
whether the proposed financing
falls under the Conventional
Financing or Islamic Financing.
2. WHAT ARE THE SECURITIES ?
 If
a legal charge is to be created as a security, it
must be determined whether the land on which the
property is situated has its own individual/strata title
or if the property is still under master title.
 Other
securities - Fixed Deposits, Guarantees etc
3. WHO IS THE CUSTOMER ?
 Individual
; or
 If the customer of the bank is a company,
then the solicitor would need to obtain,
inter alia, the following documents from
the company:
Forms 24, 49, 13, 44, etc
- Memorandum & Articles of Association
- Board of Director’s resolution authorizing
the company to obtain the financing and
stating the purpose of the financing
4. PURPOSE OF THE FINANCING
 Financing
for the purchase of a property
 Personal use by refinancing a property
 Working
capital/operational
cost
company)
(if
PRACTICAL APPROACH –
HANDLING A FINANCING
TRANSACTION FOR HOME
FINANCING
Documentation
1) Letter of Instruction received from bank
2) To purchase bank’s preprinted
documents
3) To conduct the necessary searches :
 Land Search
 Bankruptcy/winding up searches
 Company searches
4) To send out letter requesting borrower(s)/
chargor(s) to execute documents and to
furnish documents (ex: nric, sale and
purchase agreement, resolutions, etc)
5) to prepare documents for execution by
the borrowers
- in the event that the title has restrictions-ininterest, to prepare application for consent
to charge form or ensure that the SPA
Solicitors have applied for both consent to
transfer & Charge
6)
Once
executed
by
the
borrower(s)/chargor(s),
to
forward
documents to the bank for execution.
7) If the property has a restriction in
interest- to submit application to land
office to obtain the consent to charge if
not done by the SPA Solicitors.
8. After the borrower signs the
documents, the solicitor has to liaise
with all the relevant parties –
Vendor’s Solicitors, Purchaser’s
Solicitors, etc for undertakings, etc
9. Once the Financial Institution signs
the documents, the documents will be
sent for stamping and where
applicable, registration at the relevant
Land Office/High Court.
Note:
 cases where redemption is involvedadditional steps :
Redemption statement cum undertaking
entry of caveat
date of assignment to correspond with date of
reassignment
- If the property is encumbered and
the bank has to redeem the property
from the current Financier, to request
for the redemption statement cum
undertaking from the current Financier
and to enter a private caveat on the
property (unless the individual title is not
issued and the developer expressly
prohibits the entry of private caveat).
-
the
redemption
statement
cum
undertaking would state the amount still
owing by the seller to the financier and an
undertaking from the financier to forward
the Discharge of Charge, Duplicate
Charge and Title OR Receipt and
Reassignment with the original documents
evidencing title to the property, upon
receipt of redemption sum and to refund
the redemption sum in the event that the
discharge of charge/deed of release &
reassignment cannot be perfected.
10) Solicitor to request for the necessary
undertakings from the relevant parties :
-
If the seller is a developer – to obtain the
developer’s undertaking, inter alia, :
to deliver a valid and registrable transfer and
title upon issuance of title,
not to encumber the Master title without
bank’s prior consent,
to procure the relevant consent to
transfer/charge (if applicable)
-
and to refund the loan sum in the event of :
non registration of Transfer,
suspension /abandonment of project,
non issuance of Certificate of Completion and
Compliance,
the individual/strata title is not issued (if
applicable); and
the consent to transfer and charge is not
obtained (if applicable).
 If
the property has no individual title as yet – to
obtain the SPA Solicitors undertaking to, inter
alia, forward the valid & registrable and
stamped Memorandum of Transfer to the bank
upon issuance of title.
 If there is no individual title and the master title
is charged to a bridging financier, then to
obtain a letter of disclaimer from the bridging
financier to exclude the property in the event
of foreclosure, to forward the Discharge of
Charge and title upon issuance thereof and to
refund the redemption sum in the event of non
registration of the Discharge of Charge
-
if the seller is not a developer but an
individual/company – to procure the
Vendor’s undertaking to refund addressed
to the bank stating that the Vendor
undertakes to refund all monies released to
him/his financier in the event that the
Transfer/Assignment cannot be perfected.
-
To obtain confirmation from developer or
Vendor’s Solicitors, whichever applicable,
that the differential sum between the
Balance purchase price and
Banking
Facility has been settled.
The bank’s solicitors are to ensure all
the undertakings and disclaimers are
worded correctly to protect the bank’s
interest.
The solicitors can now advise the bank
to release the redemption sum.
Once the redemption sum is paid, the
seller’s bank will forward all documents
held by them as security to the new
Financier’s Solicitors.
Security documents are to be stamped. The
principal instrument is to be stamped ad valorem
and the subsidiary documents can be stamped at
a nominal rate.
 For properties with title, the charge is then to be
presented at the land office. The order of
presentation must be noted :
- discharge of charge (if applicable)
- Withdrawal of caveat (if caveat had been lodged
prior to drawdown of redemption sum)
- Consent to transfer (if applicable)
- Transfer
- Consent to Charge (if applicable)
- Charge


Note: it is always advisable to conduct a land search
prior to the presentation of the transfer and charge.

For properties without title, the Deed of Assignment
can only be dated after the Deed of Receipt &
Reassignment. The Power of Attorney is to be
lodged at the High Court.

Companies must lodge the Form 34 within 30 days
of the date of the charge/assignment at the
Companies Commission of Malaysia or
Suruhanjaya Syarikat Malaysia.

Once the above is done, the solicitors can advise
the financial institution to release the balance of
the banking facility . In the event there is no
redemption involved, all steps except the
redemption process is the same.
Financing procedures for
properties purchased via an
auction

When preparing financing documentations for
properties purchased via an auction by a judicial
auction (High Court or PTD) or non-judicial
auction, the procedures are basically similar with
the exception to the following documents:i) A Proclamation of Sale instead of a Sale and
Purchase
Agreement;
ii) If the property purchased has been issued with
an individual title/strata title and the auction is a
judicial auction at High Court, then the
appropriate transfer is by way of Form 16F
(obtained from the court by the Solicitors
representing the chargee ) and NOT the normal
Form 14A (transfer form);
iii) If the auction was by way a judicial auction by the
Land Office (PTD), then the transfer of the property will
be by way of Form 16I (obtained from the relevant land
office) instead of Form 14A;
iv) The full Banking Facility sum would normally be paid
to the chargee as part of the balance purchase price;
v) The only security for the Financier in releasing the full
Banking Facility sum will be by lodgement of a Private
Caveat on the title pending the perfection of transfer
and charge;
vi) In the event there are restrictions-in-interest on the
title, in such circumstances, there is no requirement to
obtain consent to transfer but a consent to charge is
required to be obtained.
vii) For properties involving Master Titles, the
transfer Deed of Assignment must be
executed by the assignee bank and the
successful bidder (purchaser);
viii) A Deed of Receipt and Reassignment
need not be prepared in an transactions
involving auction properties.
Thank you