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Letter Of Subordination Of Debts

Letter Of Subordination Of Debts Template for Malaysia

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Letter Of Subordination Of Debts

"I need a Letter of Subordination of Debts for our Malaysian manufacturing company where three existing shareholder loans totaling RM 5 million will be subordinated to a new bank facility of RM 15 million that we're obtaining from HSBC Malaysia in March 2025."

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Document background
The Letter of Subordination of Debts is a critical document in Malaysian corporate finance, used when a company has multiple creditors with varying levels of priority in debt repayment. This document becomes particularly important in scenarios where new financing is being introduced, during corporate restructuring, or when managing related-party loans. It explicitly sets out the hierarchy of debt repayment, ensuring that senior creditors' rights are protected while subordinated creditors agree to postpone their repayment claims. The letter must comply with Malaysian corporate law requirements, particularly the Companies Act 2016 and related financial regulations. Companies typically need this document when seeking new financing, as senior lenders often require existing creditors to subordinate their debt as a condition of providing new funds. The document includes detailed information about all relevant debts, payment restrictions, and the specific terms of subordination.
Suggested Sections

1. Parties: Identification of the Senior Creditor, Subordinated Creditor(s), and the Debtor company

2. Existing Debts: Clear identification and acknowledgment of the senior and subordinated debts

3. Subordination Declaration: Express statement of subordination and its scope

4. Payment Restrictions: Terms restricting payments on subordinated debt until senior debt is satisfied

5. Turnover Provisions: Obligation to turn over any prohibited payments to senior creditor

6. Duration: Period of effectiveness of the subordination arrangement

7. Governing Law: Confirmation of Malaysian law as governing law

Optional Sections

1. Security Arrangements: Include when the subordinated debt is secured by any assets

2. Permitted Payments: Include when certain payments to subordinated creditors are allowed under specific conditions

3. Assignment Provisions: Include when rights under the subordination arrangement may be assigned

4. Insolvency Provisions: Include specific provisions for insolvency scenarios

5. Further Assurance: Include when additional documentation or actions may be required

6. Notice Requirements: Include when specific notification procedures are needed between parties

Suggested Schedules

1. Schedule 1 - Senior Debt Details: Detailed description of all senior debt facilities, amounts, and key terms

2. Schedule 2 - Subordinated Debt Details: Detailed description of all subordinated debt facilities, amounts, and key terms

3. Schedule 3 - Form of Acknowledgment: Template for acknowledgment by future creditors if required

4. Appendix A - Payment Waterfall: Detailed order of priority for debt payments

5. Appendix B - Existing Security: List of any existing security arrangements affecting the subordinated debt

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈË°æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
Relevant legal definitions

























Clauses























Relevant Industries

Banking and Financial Services

Corporate Finance

Real Estate and Property Development

Manufacturing

Construction

Infrastructure Development

Private Equity

Venture Capital

Mining and Resources

Technology and Telecommunications

Healthcare

Retail and Consumer Goods

Relevant Teams

Legal

Finance

Treasury

Corporate Finance

Risk Management

Compliance

Credit Management

Executive Management

Company Secretarial

Strategic Planning

Relevant Roles

Chief Financial Officer

Finance Director

Corporate Treasurer

Financial Controller

Legal Counsel

Company Secretary

Risk Manager

Credit Manager

Investment Manager

Corporate Finance Manager

Debt Restructuring Officer

Compliance Officer

Managing Director

Business Development Director

Industries






Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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