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Loan Participation Agreement for Malaysia

Loan Participation Agreement Template for Malaysia

This agreement, governed by Malaysian law, establishes the terms and conditions under which a financial institution (the Lead Lender) sells and a participant acquires an interest in a loan or credit facility. The document details the rights, obligations, and responsibilities of both the lead lender and participant(s), including payment distributions, voting rights, and administration of the underlying loan. It incorporates relevant provisions of the Malaysian Financial Services Act 2013 and other applicable banking regulations, while addressing risk-sharing, confidentiality, and regulatory compliance requirements specific to the Malaysian financial sector.

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What is a Loan Participation Agreement?

The Loan Participation Agreement is a crucial document in Malaysian banking practice, used when a financial institution wishes to share its exposure to a particular loan or credit facility without formally assigning or transferring its rights under the loan agreement. This document is particularly relevant in scenarios where banks need to manage their credit exposure, comply with regulatory lending limits, or share risk while maintaining the original lending relationship. The agreement must comply with Malaysian banking regulations, including the Financial Services Act 2013 and Bank Negara Malaysia's guidelines. It typically includes detailed provisions on payment mechanics, risk sharing, reporting requirements, and the administration of the underlying loan. The document is essential for syndicated lending arrangements and portfolio management in the Malaysian financial sector.

What sections should be included in a Loan Participation Agreement?

1. Parties: Identifies the lead lender and participant(s) entering into the agreement

2. Background: Describes the underlying loan agreement and the intent to sell and purchase a participation interest

3. Definitions: Defines key terms used throughout the agreement

4. Sale and Purchase of Participation: Details the participation interest being sold, purchase price, and closing conditions

5. Payments and Distributions: Governs the allocation and distribution of payments received from the borrower

6. Rights and Obligations of the Parties: Sets out the respective rights and duties of the lead lender and participant

7. Representations and Warranties: Contains representations and warranties from both lead lender and participant

8. Administration of the Underlying Loan: Describes how the underlying loan will be administered and decisions made

9. Standard of Care and Indemnification: Establishes the lead lender's standard of care and indemnification obligations

10. Termination: Addresses circumstances and procedures for terminating the participation

11. Confidentiality: Governs the treatment of confidential information

12. Governing Law and Jurisdiction: Specifies Malaysian law as governing law and jurisdiction for disputes

13. Miscellaneous: Contains standard boilerplate provisions including notices, amendments, and assignment

What sections are optional to include in a Loan Participation Agreement?

1. Regulatory Compliance: Required when specific regulatory requirements apply to the participation or parties

2. Sub-Participation: Included when sub-participation rights are to be permitted

3. Voting Rights: Required for participations where participants have voting rights on certain matters

4. Multiple Participant Provisions: Needed when there are multiple participants to govern their relationship

5. Tax Provisions: Detailed tax provisions required when there are specific tax implications or cross-border elements

6. Transfer Provisions: Detailed provisions for transferring participation interests when transfers are permitted

7. Security Interest Provisions: Required when the participation interest can be used as security

What schedules should be included in a Loan Participation Agreement?

1. Details of Underlying Loan: Summary of key terms of the underlying loan agreement

2. Participation Details: Specific details of the participation interest, including percentage and purchase price

3. Form of Transfer Certificate: Standard form for documenting transfers of participation interests

4. Administrative Details: Contact information and payment instructions for all parties

5. Form of Participation Certificate: Standard form evidencing the participation interest

6. Required Notices and Forms: Ƶ for various notices required under the agreement

7. Fee Schedule: Details of any fees payable under the participation arrangement

Authors

Alex Denne

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

Jurisdiction

Malaysia

Publisher

Ƶ

Document Type

Financing Agreement

Cost

Free to use
Relevant legal definitions










































Clauses





























Relevant Industries

Banking

Financial Services

Investment Management

Corporate Lending

Project Finance

Infrastructure Finance

Real Estate Finance

Trade Finance

Asset Management

Insurance

Relevant Teams

Legal

Risk Management

Credit

Treasury

Compliance

Finance

Operations

Documentation

Portfolio Management

Syndications

Banking Operations

Relevant Roles

Chief Financial Officer

Head of Legal

Credit Risk Manager

Syndication Manager

Portfolio Manager

Compliance Officer

Treasury Manager

Legal Counsel

Relationship Manager

Credit Administrator

Risk Officer

Documentation Specialist

Finance Director

Banking Operations Manager

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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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