FINANCING TRANSACTIONS Presented by: SUMATHI MURUGIAH

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FINANCING TRANSACTIONSPresented bySUMATHI
MURUGIAH
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PRELIMINARIES

• There are basically 2 types of financing
  available
• Conventional Financing
• Islamic Financing

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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.

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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.)

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LEGAL DOCUMENTATIONS
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TYPES OF FINANCING

• house financing, overdrafts, business loans,
  corporate loans, trade financing, personal
  financing, etc.

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Example House financing

• For house financing, there would be 2 types of
  documents executed
• A contract document between the bank and the
  customer and
• Security document where the customer would
  normally charge/assign the property to the bank

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For Conventional Financing

• Facility Agreement - 1st Party/3rd Party Loans
• Security Documents - Legal Charge/DOA

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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
  

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Other Documents

• Debentures, Memorandum of Deposit, Letter of
  Set-Off, Shipping Guarantee, Letters of Credit,
  etc

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IMPORTANT CONSIDERATIONS FOR FINANCING
TRANSACTIONS
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1. CONVENTIONAL OR ISLAMICThe first
consideration would be whether the proposed
financing falls under the Conventional Financing
or Islamic Financing.
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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

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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

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4. PURPOSE OF THE FINANCING

• Financing for the purchase of a property
• Personal use by refinancing a property
• Working capital/operational cost (if company)

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PRACTICAL APPROACH HANDLING A
FINANCING TRANSACTION FOR HOME FINANCING
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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

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• 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-in-interest, to prepare application
  for consent to charge form or ensure that the SPA
  Solicitors have applied for both consent to
  transfer Charge

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• 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.

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8. After the borrower signs the documents, the
solicitor has to liaise with all the relevant
parties Vendors Solicitors, Purchasers
Solicitors, etc for undertakings, etc9. 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.
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• Note
• cases where redemption is involved- additional
  steps
• Redemption statement cum undertaking
• entry of caveat
• date of assignment to correspond with date of
  reassignment

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- 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).
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• - 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.

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• 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)

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• 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).

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• 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

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• 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.

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The banks solicitors are to ensure all the
undertakings and disclaimers are worded correctly
to protect the banks interest.The solicitors
can now advise the bank to release the redemption
sum.Once the redemption sum is paid, the
sellers bank will forward all documents held by
them as security to the new Financiers
Solicitors.
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• 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.

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• 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.

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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)

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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 14Aiv) The full Banking
Facility sum would normally be paid to the
chargee as part of the balance purchase
pricev) 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
chargevi) 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.
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• 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.

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• Thank you