A Parent Guarantee Agreement is commonly used in Malaysian commercial transactions where a counterparty requires additional security for dealing with a subsidiary company. This document is particularly relevant when the subsidiary lacks sufficient financial strength or track record, and the parent company's support is needed to secure the transaction. The agreement, governed by Malaysian law, typically details the scope of guaranteed obligations, enforcement mechanisms, and the conditions under which the guarantee can be called upon. It's essential in various contexts, from securing loan facilities to supporting performance obligations in commercial contracts. The document must comply with Malaysian legal requirements, including the Contracts Act 1950 and Companies Act 2016, and may need to consider specific sectoral regulations depending on the industry context.
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1. Parties: Identifies the Guarantor (parent company), the Beneficiary, and the Principal Debtor (subsidiary company)
2. Background: Sets out the context of the guarantee, including details of the underlying obligation being guaranteed
3. Definitions: Defines key terms used throughout the agreement, including Guaranteed Obligations, Event of Default, etc.
4. Guarantee and Indemnity: Core section containing the guarantee obligations and indemnity provisions
5. Scope of Guarantee: Defines the extent and limitations of the guaranteed obligations
6. Continuing Security: Establishes that the guarantee remains in force until all obligations are discharged
7. Preservation of Rights: Protects the beneficiary's rights under the guarantee in various circumstances
8. Representations and Warranties: Guarantor's confirmations regarding its capacity and authority to enter into the guarantee
9. Payments: Specifies payment obligations, timing, and currency
10. Costs and Expenses: Allocation of costs related to preparation and enforcement of the guarantee
11. Notices: Communication procedures between parties
12. Governing Law and Jurisdiction: Specifies Malaysian law as governing law and jurisdiction for disputes
1. Tax Gross-Up: Include when payments may be subject to withholding tax, ensuring the beneficiary receives the full amount
2. Currency Indemnity: Include for cross-border transactions involving multiple currencies
3. Assignment and Transfer: Include if parties want to allow transfer of rights under the guarantee
4. Financial Covenants: Include when specific financial metrics need to be maintained by the guarantor
5. Information Undertakings: Include when regular financial or other information needs to be provided by the guarantor
6. Islamic Finance Provisions: Include when the guarantee needs to be Shariah-compliant
1. Form of Demand: Standard form for making demands under the guarantee
2. Guaranteed Obligations: Detailed description of the obligations being guaranteed
3. Corporate Authorizations: Copies of board resolutions and other corporate approvals
4. Conditions Precedent: List of documents and conditions required before the guarantee becomes effective
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