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The Deed of Subordination of Directors Loan is a critical document in Malaysian corporate finance, typically used when a company has existing loans from its directors and seeks additional financing from external lenders. External financiers often require such subordination to ensure their loans take priority over director loans in terms of repayment. Under Malaysian law, particularly the Companies Act 2016, this deed provides a legally binding framework for debt prioritization, protecting senior creditors while allowing directors to maintain their loans to the company. The document is especially relevant in scenarios of corporate restructuring, additional fundraising, or when establishing clear payment hierarchies among different classes of creditors.

1. Parties: Identification of the Company, Director(s) providing the loan, and any Senior Creditors

2. Background: Recitals explaining the existing director's loan, senior debt, and purpose of subordination

3. Definitions: Key terms including Senior Debt, Subordinated Debt, Enforcement Action, Discharge Date

4. Subordination: Core provisions establishing the subordination of the director's loan to the senior debt

5. Undertakings by Director: Director's commitments regarding the subordinated debt, including restrictions on enforcement and receipt of payments

6. Permitted Payments: Circumstances under which payments on the subordinated debt may be made

7. Turnover of Receipts: Provisions for handling any payments received in breach of the subordination

8. Protection of Subordination: Mechanisms to maintain the effectiveness of the subordination arrangement

9. Power of Attorney: Appointment of the company/senior creditors as attorney to enforce the subordination

10. Duration: Term of the subordination and conditions for termination

11. Governing Law and Jurisdiction: Specification of Malaysian law as governing law and jurisdiction for disputes