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Debt Forgiveness Agreement for Malaysia

Debt Forgiveness Agreement Template for Malaysia

A legally binding document under Malaysian law that formalizes the creditor's agreement to forgive all or part of a debtor's outstanding debt obligations. The agreement operates within Malaysia's dual banking system, accommodating both conventional and Islamic financial principles, and must comply with the Contracts Act 1950 and relevant financial services legislation. It includes detailed provisions for the amount forgiven, any conditions attached to the forgiveness, representations and warranties, and relevant tax implications, while ensuring proper documentation for both parties' legal protection.

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Debt Forgiveness Agreement

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What is a Debt Forgiveness Agreement?

The Debt Forgiveness Agreement is a crucial legal instrument used in Malaysia when a creditor agrees to relinquish their right to collect all or part of an outstanding debt. This document is particularly relevant in scenarios involving financial hardship, debt restructuring, or settlement negotiations. It must comply with Malaysian legislation, including the Contracts Act 1950, Stamp Act 1949, and where applicable, the Islamic Financial Services Act 2013. The agreement typically details the original debt, the amount being forgiven, any conditions attached to the forgiveness, and includes necessary provisions for tax implications and future obligations. It's essential in both conventional and Islamic banking contexts, requiring careful consideration of Malaysia's dual banking system requirements.

What sections should be included in a Debt Forgiveness Agreement?

1. Parties: Identification of the creditor and debtor, including full legal names and addresses

2. Background: Recitals explaining the original debt, its current status, and the parties' intention to forgive all or part of the debt

3. Definitions: Definitions of key terms used throughout the agreement, including 'Original Debt', 'Forgiven Amount', and 'Settlement Date'

4. Acknowledgment of Debt: Clear statement of the original debt amount and confirmation of the current outstanding balance

5. Terms of Forgiveness: Specific details of the debt forgiveness, including the amount being forgiven and any conditions precedent

6. Release and Discharge: Formal release of the debtor from the specified obligations and any related claims

7. Representations and Warranties: Statements by both parties regarding their authority to enter into the agreement and the validity of the debt

8. Tax Implications: Acknowledgment of potential tax consequences and responsibility for any tax liabilities

9. Governing Law: Specification that Malaysian law governs the agreement

10. Execution: Signature blocks and execution requirements for both parties

What sections are optional to include in a Debt Forgiveness Agreement?

1. Partial Payment Terms: Required if only part of the debt is being forgiven, detailing the payment schedule for the remaining amount

2. Security Release: Needed if there are any existing security interests or collateral that need to be released

3. Confidentiality: Optional clause regarding the confidentiality of the agreement terms

4. Continuing Obligations: Required if any obligations continue after the forgiveness

5. Shariah Compliance: Required if the debt involves Islamic banking principles

6. Third Party Rights: Needed if there are guarantors or other third parties involved in the original debt

7. Dispute Resolution: Optional detailed dispute resolution procedures beyond simple governing law clause

What schedules should be included in a Debt Forgiveness Agreement?

1. Schedule 1 - Original Debt Details: Details of the original debt agreement, including date, amount, and terms

2. Schedule 2 - Calculation of Forgiven Amount: Detailed breakdown of the debt amount being forgiven, including any interest or charges

3. Schedule 3 - Payment Schedule: If partial forgiveness, detailed schedule of remaining payments to be made

4. Schedule 4 - Security Documents: List of security documents to be released or modified

5. Appendix A - Original Loan Agreement: Copy of the original loan agreement or debt instrument

6. Appendix B - Release Forms: Forms for releasing any registered securities or charges

Authors

Alex Denne

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

Jurisdiction

Malaysia

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions


























Clauses


























Relevant Industries

Banking & Financial Services

Islamic Banking

Legal Services

Real Estate

Commercial & Industrial

Retail

Healthcare

Education

Construction

Manufacturing

Small and Medium Enterprises (SMEs)

Professional Services

Relevant Teams

Legal

Finance

Credit Control

Risk Management

Compliance

Islamic Banking

Treasury

Debt Recovery

Corporate Affairs

Business Recovery

Relevant Roles

Chief Financial Officer

Finance Director

Credit Manager

Debt Recovery Officer

Legal Counsel

Corporate Lawyer

Compliance Officer

Islamic Banking Officer

Risk Manager

Account Manager

Collections Manager

Financial Controller

Treasury Manager

Business Recovery Specialist

Insolvency Practitioner

Industries






Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks, 聽Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination, 聽Severance Pay, Governing Law, Entire Agreemen

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