Document background
The Letter of Subordination of Debts is a critical document in Malaysian corporate finance, used when a company has multiple creditors with varying levels of priority in debt repayment. This document becomes particularly important in scenarios where new financing is being introduced, during corporate restructuring, or when managing related-party loans. It explicitly sets out the hierarchy of debt repayment, ensuring that senior creditors' rights are protected while subordinated creditors agree to postpone their repayment claims. The letter must comply with Malaysian corporate law requirements, particularly the Companies Act 2016 and related financial regulations. Companies typically need this document when seeking new financing, as senior lenders often require existing creditors to subordinate their debt as a condition of providing new funds. The document includes detailed information about all relevant debts, payment restrictions, and the specific terms of subordination.
