Equity Loan Agreement Template for Malaysia

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Key Requirements PROMPT example:

Equity Loan Agreement

"I need an Equity Loan Agreement for a RM 5 million facility to a technology startup, with the lender receiving 10% equity participation through share issuance, including board representation rights and standard Malaysian security package."

Document background

The Equity Loan Agreement is a sophisticated financing instrument used in the Malaysian market when traditional debt financing alone may not be suitable or optimal for both parties. This hybrid agreement combines the security of a loan with the potential upside of equity participation, making it particularly attractive for growing companies seeking capital while allowing lenders to participate in the borrower's success. The document is structured to comply with Malaysian financial regulations and corporate law, including the Financial Services Act 2013 and Companies Act 2016. It is commonly used in growth financing, business expansion, project financing, or restructuring scenarios where the lender seeks both regular interest payments and potential equity returns. The agreement includes comprehensive provisions for loan terms, equity participation mechanisms, security arrangements, and both parties' rights and obligations.

Suggested Sections

1. Parties: Identifies and defines the Lender and Borrower with their full legal details

2. Background: Sets out the context of the loan and the intention to create an equity component

3. Definitions and Interpretation: Defines key terms and establishes interpretation rules for the agreement

4. Loan Amount and Purpose: Specifies the principal amount and permitted use of the loan funds

5. Equity Component: Details the equity participation structure, including share allocation or profit-sharing mechanism

6. Interest and Returns: Specifies interest rates, equity returns, and calculation methods

7. Disbursement: Sets out conditions precedent and the mechanism for loan disbursement

8. Repayment Terms: Details the repayment schedule, methods, and prepayment provisions

9. Security: Describes the security arrangements and collateral requirements

10. Representations and Warranties: Contains statements of fact and assurances from both parties

11. Covenants: Lists positive and negative obligations of the borrower

12. Events of Default: Defines circumstances constituting default and consequences

13. Remedies: Outlines available remedies in case of default or breach

14. Notices: Specifies how formal communications between parties should be made

15. Governing Law and Jurisdiction: Establishes Malaysian law as governing law and jurisdiction for disputes

16. Execution: Signature blocks and execution formalities

Optional Sections

1. Guarantees: Required when there is a third-party guarantor for the loan

2. Share Conversion Rights: Include when the equity component involves potential conversion to shares

3. Tag-Along Rights: Add when minority shareholders need protection in case of share sales

4. Drag-Along Rights: Include when majority shareholders need the right to force minority participation in sales

5. Board Representation: Required when the lender gets board appointment rights

6. Information Rights: Add when specific reporting requirements beyond standard covenants are needed

7. Exit Mechanisms: Include when specific exit routes for the equity component need to be defined

8. Anti-dilution Provisions: Add when protecting the equity component from future dilution is required

9. Shariah Compliance: Required for Islamic finance structures

Suggested Schedules

1. Repayment Schedule: Detailed amortization table showing payment dates and amounts

2. Conditions Precedent: Comprehensive list of conditions to be satisfied before disbursement

3. Security Details: Detailed description of all security arrangements and assets

4. Equity Calculation Formula: Mathematical formula and examples for calculating equity returns

5. Form of Drawdown Notice: Template for requesting loan disbursements

6. Corporate Information: Company details, shareholding structure, and corporate approvals

7. Financial Covenants: Detailed financial ratios and thresholds to be maintained

8. Permitted Security Interests: List of pre-approved security interests and encumbrances

9. Form of Compliance Certificate: Template for periodic compliance reporting

Authors

Alex Denne

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

alex.den.21@genieai.co

Relevant legal definitions

Clauses

Relevant Industries

Financial Services

Real Estate

Manufacturing

Technology

Healthcare

Renewable Energy

Infrastructure

Agriculture

Mining

Retail

Education

Hospitality

Transportation

Telecommunications

Construction

Relevant Teams

Legal

Finance

Treasury

Compliance

Risk Management

Corporate Development

Investment

Credit

Corporate Finance

Company Secretarial

Relevant Roles

Chief Financial Officer

Finance Director

Legal Counsel

Corporate Lawyer

Investment Manager

Credit Risk Manager

Compliance Officer

Company Secretary

Treasury Manager

Investment Banker

Private Equity Manager

Corporate Finance Manager

Managing Director

CEO

Financial Controller

Risk Manager

Business Development Director

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Authors

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