FINANCING TRANSACTIONS

Presented by:

SUMATHI MURUGIAH

PRELIMINARIES
There are basically 2 types of financing
available:
1.Conventional
2.Islamic

Financing

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.A

contract document between the bank

and the customer; and
2.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 Directors 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
(if
company)

PRACTICAL APPROACH
HANDLING A FINANCING
TRANSACTION FOR HOME
FINANCING

Documentation
1) Letter of Instruction received from
bank
2) To purchase banks 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 restrictionsin-interest, 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
Vendors Solicitors, Purchasers

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

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

developers undertaking, inter alia, :
to deliver a valid and registrable transfer and
title upon issuance of title,
not to encumber the Master title without
banks 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
Vendors
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

Vendors Solicitors, whichever applicable,
that the differential sum between the
Balance purchase price and
Banking
Facility has been settled.

The banks solicitors are to ensure all

the undertakings and disclaimers are
worded correctly to protect the banks

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

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