Intercreditor Agreement Template for Malaysia

An Intercreditor Agreement is a crucial legal document that establishes the relationship between multiple creditors in complex financing arrangements. When you have various lenders providing different types of debt facilities to your company, this agreement defines each creditor's rights, priorities, and obligations regarding security interests and payment arrangements.

When do you need this document?

You need an Intercreditor Agreement when your business involves multiple layers of financing from different creditor classes. This typically occurs in leveraged buyouts, project financing, or corporate restructuring where senior lenders, mezzanine lenders, and junior creditors participate in the same transaction. The document becomes essential when these creditors share security over the same assets or when there are multiple facilities with different risk profiles and payment priorities. You'll also require this agreement in Islamic financing structures where conventional and Shariah-compliant lenders participate together, ensuring compliance with both conventional and Islamic finance principles.

Key legal considerations

The agreement must clearly establish creditor hierarchy and payment waterfalls to prevent disputes during enforcement. You need to address enforcement restrictions, including standstill periods that prevent junior creditors from taking action while senior creditors exercise their rights. The document should cover permitted payments, debt incurrence restrictions, and circumstances triggering payment blockages. Security sharing arrangements require careful drafting to ensure all creditors benefit from shared security interests while respecting their ranking positions. Consider including provisions for creditor committee formations, voting procedures for enforcement decisions, and information sharing protocols between creditor groups.

Legal requirements in Malaysia

Under Malaysian law, your Intercreditor Agreement must comply with the Companies Act 2016 regarding security interest creation and registration requirements. Any charges over company assets must be registered with Companies Commission of Malaysia within specified timeframes. The Financial Services Act 2013 and Islamic Financial Services Act 2013 impose additional compliance obligations if your creditors include licensed financial institutions. For land-based security, you must ensure compliance with the National Land Code 1965 regarding charge creation and registration procedures. The agreement should address Malaysian insolvency law under the Insolvency Act 1967, particularly regarding creditor rights during liquidation or judicial management proceedings. Consider incorporating dispute resolution mechanisms that comply with Malaysian court jurisdiction and applicable arbitration laws.