Running Account Credit Agreement Template for Malaysia

A Running Account Credit Agreement is a crucial financial document that establishes a revolving credit facility between a financial institution and a borrower in Malaysia. Unlike traditional term loans, this agreement allows you to draw down funds up to an approved credit limit, repay amounts, and redraw as needed throughout the facility term. This flexible arrangement is governed by Malaysian banking law and provides businesses with ongoing access to working capital.

When do you need this document?

You need a Running Account Credit Agreement when your business requires flexible access to funds for operational needs. This is particularly valuable for companies with seasonal cash flow variations, those managing inventory cycles, or businesses that need to bridge payment gaps between suppliers and customers. The agreement is essential when you want to avoid multiple loan applications and instead maintain a ready credit line. It's also commonly used by trading companies, manufacturers with working capital needs, and service businesses requiring regular cash flow support.

Key legal considerations

Several critical legal elements must be carefully structured in your agreement. The facility terms section should clearly define your credit limit, interest rate calculation method, and facility duration. Security arrangements require precise documentation, whether through personal guarantees, corporate guarantees, or asset-based security. The drawdown and operation clauses must specify how you can access funds and any conditions precedent. Interest and fee calculations need transparency to comply with consumer protection requirements. Default and enforcement provisions should be balanced and fair, while ensuring the lender's rights are protected. Cross-default clauses, if included, should be reasonable and not overly restrictive to your business operations.

Legal requirements in Malaysia

Your Running Account Credit Agreement must comply with the Financial Services Act 2013, which governs credit facilities provided by licensed financial institutions. The agreement must adhere to Bank Negara Malaysia's guidelines on responsible financing, including proper credit assessment and documentation requirements. Under the Contracts Act 1950, all essential contractual elements must be present for validity and enforceability. If you're a consumer borrower, the Consumer Protection Act 1999 provides additional protections against unfair contract terms. For Islamic financing, the agreement must comply with the Islamic Financial Services Act 2013 and Shariah principles. The Credit Reporting Agencies Act 2010 governs how your credit information may be shared and reported. Proper stamping under the Stamp Act 1949 is required, and corporate borrowers must ensure board resolutions and authorized signatory compliance under the Companies Act 2016.