Yaya Bhd: Analysis of Loan Charges on Assets and Debentures

This report provides a comprehensive analysis of the loan agreement between Yaya Bhd and its bank, focusing on the implications of various charges and asset classifications. The analysis begins with an overview of stamp duty and legal fees associated with the loan, referencing the Stamp Act of 1949 and the Companies Act of 2016. The report then delves into the two primary types of charges: fixed and floating. It examines how fixed charges are applied to immovable properties like land and the printing machine, emphasizing the need for creditor consent for asset disposal and referencing relevant case laws such as Siebe Gorman Company Limited v Barclays Bank Limited and Affin Bank Bhd v. Malayan Banking Bhd. The report also explores floating charges concerning movable assets such as printing papers, computer prints, newsprints and computers bought on credit, with reference to case law like Malaysian International Merchant Bankers Bhd v Highland Chocolate Confectionery SdnBhd and Re Yorkshire Woolcombers Association case. The report highlights the differences between fixed and floating charges and their implications on asset management and debt repayment, providing a detailed analysis of the charges imposed on the land, printing machine, printing papers, computers, and fax machines. The conclusion summarizes the appropriate charge types for each asset, emphasizing the importance of fixed charges for assets that are functional and support the company's business.

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Question 2
a) Yaya Bhd is in need of capital. The directors have approached various banks
that are willing to give long term loans to the company. The loans will be repaid
within 15 years. The company had the following assets:
An agreement is to be made between Yaya Bhd and the bank which would be granting the
loan to the directors. The charges would be applicable in the form of stamp duty and legal
fees taking into consideration the amount which is to be granted by the bank as loan. If the
loan amount is 500,000 RM, then the stamp duty for the loan agreement would be 2500 RM.
The key thing with regard to the imposition of the stamp duty is the compliance with the
Stamp Act of 1949. The guidelines with regard to the relief concerning stamp duty in
compliance with Section 15 and Section 15 A of the Stamp Act of 1949 have been released
off late by the Malaysian Inland Revenue Board. In addition to the stamp duty, the legal fees
are also charged on the basis of the amount of loan as far as the drafting and execution of the
loan agreement is concerned. If the loan amount is 500,000 RM, then the legal fees for the
loan agreement would be 5000 RM (Khalid, Iqbal & Associates, 2019).
According to Sub-section 16 of Section 2 of the Companies Act of 2016, charge implies a
mortgage and an agreement for execution of charge or mortgage as per the situation in
question. The main objective of a charge is to imply security over property with reference to
loan accordingly. Two types of charges can be imposed over properties. Such charges include
fixed charges and floating charges depending upon the nature of the property which can be
immovable or movable respectively. A charge can also imply the repayment of debt
accordingly as per the demands of the creditor or the charge as far as mortgage is concerned.
With regard to loan, a charge is necessarily to be imposed on the property which is the asset
of the company concerned as it would help in the creation of a security in the desired manner.
The charges imposed over property are to be registered as per the National Law Code of 1965
as far as its aspect of legality is concerned. It is imperative form Section 353 of the
Companies Act of 2016 that both floating and fixed charges are to be registered.
I) A pieces of land in Jalan Kampar worth RM1.5 million.
As far as the aspect of security over the land of Yaya Bhd amounting to RM 1.5 million is
concerned, it would include charges along with the statutory liens and assignments. Since the

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amount of RM 1.5 million is huge, charges would be taken into consideration with regard to
security in terms of money borrowed by the bank. It further implies that the bank granting
loan would acquire an interest in the land legally but the ownership of the land would be
retained by Yaya Bhd. The debentures in the form of fixed charges are imposed for movable
property (Ramesh, 2016).
In the case ofTan Aik Tech v Tang Soon Chye[2007] 5 CLJ 441, it was held by the Court of
Appeal of Malaysia that interests cannot be charged if the loan is granted by the drafting and
execution of a Friendly Loan Agreement (Lim, 2019).
In Lekchumanan’s case[2016] MLJU 1316, it was held by the Court of Appeal of Malaysia
that the land transfer to respondent was in contravention of the National Land Code of
1965.A fixed charge is imposed over immovable property such as land and building. Such
kinds of charges are registered in accordance with Section 353 of the Companies Act of 2016
as far as the procedure for such registration under Section 352 is concerned.
In the case of Siebe Gorman Company Limited v Barclays Bank Limited(2 Lloyd’s Rep 142),
it was held by the High Court of England and Wales that a property on which charge is
imposed cannot be disposed of by the company unless the consent is granted by the creditor.
As a result, the demarcation between fixed and floating charges was taken into consideration
as far as their definitions are concerned.
In Affin Bank Bhd v. Malayan Banking Bhd[2009] 3 CLJ 320, it was held by the Singapore
High Court that a charge over any shares owned or acquired by the borrower is a fixed
charge. It is imperative that a fixed charge is imposed over a property which is in an
ascertained form which can include a piece of land. As a result, the piece of land which is
RM 1.5 million would be under the ambit of fixed charge with reference to mortgage as a
result of loan as far as the concept of specified property is concerned.
II) A printing machine, which is used for the company’s printing business. The
machine is on lease from Bobo Finance Bhd.
The printing machine would be under the ambit of fixed charge. The term of lease agreement
is to be taken into consideration. In this case, Bobo Bhd provides a printing machine for Yaya

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Bhd on an lease agreement. In other words, the printing machine was rented out by Bobo Bhd
to Yaya Bhd for an amount agreed by both parties.
In the case of Public Bank, the Court of Appeal held that the debentures help in the creation
of fixed charges. The printer is an integral part of the business and therefore, fixed charges
would be imposed. To apply in this case, by referring to the Public Bank case, the printing
machine is an important asset to a business which is why it shall be registered under a fixed
charge.
In the case of Siebe Gorman Company Limited v Barclays Bank Limited (2 Lloyd’s Rep
142), it was held that a property which charge is imposed cannot be disposed of without the
consent of the creditor. As a result, by referring to the case of Siebe Gorman, it is imperative
that Yaya Bhd cannot sell the printing machine without Bobo Bhd's consent. A fixed charge
is imposed over a definite property as per the judgment in the case of Affin Bank Bhd v.
Malayan Banking Bhd[2009] 3 CLJ 320.
It is observed that a fixed charge is imposed over a property which is static in nature as far as
security with reference to the repayment of loan is concerned. As a result, the real property of
a company such as printing machine is under the purview of a fixed charge in terms of
mortgage as far as the aspect of loan is concerned accordingly. Any creation of a fixed charge
is to be registered under Section 353 of the Companies Act of 2016. In other words, to
register a fixed charge, we must refer to Section 352 of the Companies Act 2016.
Moreover, fixeed charge on the machine is of a higher priority beacuse the machine is
valuable. It is functional and can work for longer years to support the company running the
business. So, the debt is protected by the value of the asset. The asset also can be cintrolled
and it is limited to protect the creditor. It is possible to hold a fixed charge over fluctuating
assets (i.e. trade recievable). Also, it is possible that a fixed charge can be created on assets
within a certain class covered by a floating charge. Unlike, the floating charges the fixed
charge does not primarily benefit the charger. It has priority for payment in situations like
bankrupcy. For this reasons, fixed charges can be classified as secured charges unlike the
unsecured floating ones. The creditors with a fixed charge will have priority. Fixed charges
provide securer methods guaranteend a debt. Availability of fixed charges creates
competative and versatile debt market. Therefore, despite some disadvantages, fixed charge is
rigid and much valuable. The printing machine being charged this way is a advantageous

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situation because of its value and functionability. It is practicable as well as preferrable to
take a fixed charge over certain assets, such as in the concerned case.
In conclusion, by referring to the decided cases, the printing machine shall be registered as a
fixed charge under Section 352 of the Companies Act 2016.
Remark: Need separate become few paragraph.
REMARK : Add “computer was higher price and valuable” or “ computer can functional
and work for more longer year to support company running the business”
Because this answer should be Floating charge but now answer in Fixed charge so need
the 2 points or more to support the answer for Fixed charge. If possible look for some
reference or related law cases to support the 2 points
III) Several tons of printed papers, ‘ computer prints and newsprints’.
Debentures on printing papers are converted into floating charges as implied by the case of
Malaysian International Merchant Bankers Bhd v Highland Chocolate Confectionery
SdnBhd(1998) MLJU 477 with regard to the creation of charge over a particular piece of
property provided that the property is to be owned by the company(Ibrahim et al., 2019). A
floating charge is created over a movable property unlike fixed charge which is created over
an immovable property.
A floating charge needs to be registered as per Section 353 (g) of the Companies act of 2016
as per the procedure under Section 352 of the Companies act of 2016. In Barker v
Eynon[1974] 1 WLR 462, it was held that a floating charge is imposed over a property which
is shifting in nature which is converted into fixed charge after an event with regard to the
settlement accordingly.
The ambulatory aspect of floating charge was emphasised for the first time by Lord
McNaughton in the case of Illingworth v Houldsworth [1904] AC 355. Movable property
such as raw materials in the form of various kinds of papers are under the ambit of floating
charges since they change their form on a constant basis as far as their utilities in different
aspects are concerned depending upon their nature. The property on which a floating charge
is imposed upon can be disposed of by the company only after it is crystallized as far as its

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conversion into fixed charge is concerned. As a result, the concept of floating charge is
justified. Since computer prints and newsprints can change their form as per the business
requirements of Yaya Bhd, a floating charge is to be imposed on such assets.
Remark: Need separate become few paragraph.
IV) Several computers and fax machines which were bought on credit from Kong
EngSdn. Bhd.
Debentures for assents like computers and fax machines are converted into floating charges
as observed by the judgement in the aforesaid case ofMalaysian International Merchant
Bankers Bhd v Highland Chocolate Confectionery Sdn(1998) MLJU 477. A floating charge is
indefinite in nature which is converted into a fixed charge once the property acquires a
definite form accordingly.
In Re Yorkshire Woolcombers Association case [1903] 2 Ch 284, it was held that a floating
charge is imposed over a certain set of assets which are changing in nature. Section 353 (g)
of the Companies act of 2016 implies mandatory registration of a floating charge. As a result,
it is imperative that the crystallization into fixed charge would be executed once the debt is
paid off to Kong EngSdn. Bhd.
The key thing in terms of a floating charge implies the change of the nature of the asset or the
property as a result of the requirements of the business activities of the company in terms of
the scenario concerned. Such a change of nature of the asset of the company is to occur on a
regular basis. The assets under the ambit of floating charge are to be utilized by the company
not only on the current basis but are also to be considered for usage in the future. The
concept “bought on credit” implies that an item is purchased with a promise that the payment
would be made in the future. As a result, it is imperative that the floating charge would
crystallize into fixed charge once the payment for the computers and fax machines are made.
Remark: Need separate become few paragraph.

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Reference List
Ibrahim, M.H., Salim, K., Abojeib, M. and Yeap, L.W., 2019. Structural changes,
competition and bank stability in Malaysia’s dual banking system. Economic Systems, 43(1),
pp.111-129.
[Accessed on July 13, 2019]
Khalid, Iqbal & Associates, 2019. Calculators. Info Centre. [online] Khalid, Iqbal &
Associates. Available at:
<http://www.khalidiqbal.com.my/info-center/calculators/legalfee.html>
[Accessed on July 15, 2019]
Lim, J.S., 2019. Are you allowed to charge interest for loans to friends and family in
Malaysia? [online] Ask Legal. Available at:
<https://asklegal.my/p/friendly-loans-friends-and-family-charge-interest-malaysia>
[Accessed on July 15, 2019]
Ramesh, M., 2016. Funds in Malaysia and Singapore. Transforming the Developmental
Welfare State in East Asia, p.191.
[Accessed on July 11, 2019]
Ramlan, H. and Adnan, M.S., 2016. The profitability of Islamic and conventional bank: Case
study in Malaysia. Procedia Economics and Finance, 35, pp.359-367.
[Accessed on July 11, 2019]

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