Continuing Guarantee Agreement Template for Malaysia

A Continuing Guarantee Agreement is a vital security document that creates an ongoing obligation for a guarantor to answer for the debts and obligations of a borrower to a lender. Unlike a simple guarantee that covers a specific transaction, this agreement provides continuous coverage for both existing and future obligations until formally terminated.

When do you need this document?

You'll require this agreement when lending institutions need additional security beyond the borrower's own creditworthiness. It's commonly used when parent companies guarantee their subsidiaries' borrowings, when directors provide personal guarantees for corporate facilities, or when shareholders back business loans. Banks and financial institutions frequently demand continuing guarantees for overdraft facilities, term loans, and revolving credit arrangements. The document is also essential for syndicated lending where multiple guarantors support complex financing structures.

Key legal considerations

The guarantee must clearly define the scope of guaranteed obligations, including principal amounts, interest, fees, and enforcement costs. You should specify whether the guarantee is limited or unlimited in amount and duration. The agreement must address the guarantor's rights of subrogation and contribution, particularly important when multiple guarantors are involved. Consider including provisions for the guarantor's right to receive copies of facility documents and notices of default. The document should also cover scenarios such as borrower insolvency, facility variations, and the lender's right to deal with security without affecting the guarantee. Ensure proper disclosure requirements are met, especially when individual guarantors are involved.

Legal requirements in Malaysia

Under the Contracts Act 1950, guarantee agreements must comply with specific formation and enforceability requirements outlined in Sections 79-86. The agreement requires proper stamping under the Stamp Act 1949 to be admissible as evidence in Malaysian courts, with stamp duty calculated based on the guaranteed amount. For guarantees involving licensed financial institutions, compliance with the Financial Services Act 2013 is mandatory. When immovable property is involved as security, provisions of the National Land Code 1965 apply. The Limitation Act 1953 sets a six-year limitation period for enforcement actions. Ensure the guarantee includes proper Malaysian governing law clauses and jurisdiction provisions for Malaysian courts. For corporate guarantors, verify that board resolutions and necessary approvals are obtained under the Companies Act 2016.