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Usance Lc Discounting Template for Malaysia

This document governs the discounting of Usance Letters of Credit under Malaysian law, establishing the terms and conditions under which a financial institution purchases LC documents at a discount from the beneficiary. It complies with Malaysian Financial Services Act 2013 and relevant Bank Negara Malaysia guidelines, incorporating international trade practices including UCP 600. The agreement details the discounting mechanism, rights and obligations of parties, security arrangements, and risk allocation, while ensuring compliance with both conventional and Islamic banking requirements where applicable.

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What is a Usance Lc Discounting?

This document is essential for trade finance transactions in Malaysia where exporters seek early payment against Usance Letters of Credit. The Usance LC Discounting agreement provides a framework for financial institutions to purchase LC documents at a discount, enabling exporters to receive immediate funds rather than waiting for the LC maturity date. It incorporates Malaysian banking regulations, including both conventional and Islamic banking requirements, while adhering to international trade practices. The agreement covers critical aspects such as discounting rates, documentation requirements, security provisions, and risk mitigation measures, making it suitable for various cross-border trade transactions.

What sections should be included in a Usance Lc Discounting?

1. Parties: Details of the financial institution (Discounter) and the beneficiary (Client) entering into the agreement

2. Background: Context of the LC discounting arrangement and the underlying trade transaction

3. Definitions: Definitions of key terms used in the agreement including LC-specific terminology

4. Discounting Facility: Core terms of the discounting facility including limit, tenure, and pricing

5. Conditions Precedent: Prerequisites that must be satisfied before the discounting facility becomes effective

6. Discounting Process: Detailed procedure for submission and processing of LCs for discounting

7. Representations and Warranties: Standard and LC-specific representations and warranties by the Client

8. Client's Covenants: Ongoing obligations of the Client during the facility period

9. Events of Default: Circumstances constituting default and consequent rights of the Discounter

10. Payment Terms: Terms regarding discounting rate, fees, charges and payment mechanics

11. Recourse and Security: Terms regarding the Discounter's recourse rights and basic security provisions

12. Governing Law and Jurisdiction: Malaysian law as governing law and jurisdiction clauses

What sections are optional to include in a Usance Lc Discounting?

1. Shariah Compliance: Required when the facility needs to be Islamic banking compliant

2. Additional Security Arrangements: Used when specific additional security or collateral is required

3. Group Company Guarantees: Include when parent company or group company guarantees are required

4. Foreign Exchange Provisions: Required when LC and discounting currencies are different

5. Tax Provisions: Detailed tax clauses required for cross-border transactions

6. Insurance Requirements: Specific insurance requirements for high-value or high-risk transactions

7. Assignment Provisions: Required when assignment of LC proceeds to third parties is permitted

What schedules should be included in a Usance Lc Discounting?

1. Schedule 1 - Facility Terms: Detailed commercial terms including facility limit, tenure, pricing

2. Schedule 2 - Conditions Precedent Documents: List of required documents to be provided before facility activation

3. Schedule 3 - Form of Discounting Request: Standard format for submitting LC discounting requests

4. Schedule 4 - Fees and Charges: Detailed breakdown of all applicable fees and charges

5. Schedule 5 - Security Documents: List and forms of required security documents

6. Appendix A - LC Documentation Requirements: Checklist of required LC and supporting trade documents

7. Appendix B - Compliance Requirements: Malaysian regulatory compliance requirements and UCP 600 provisions

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

Jurisdiction

Malaysia

Document Type

Letter of Credit

Cost

Free to use

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