Inter-Company Loan Agreement (Malaysia)
Inter-Company Loan Agreement
INTER-COMPANY LOAN AGREEMENT
This Inter-Company Loan Agreement ("Agreement") is entered into on [Agreement Date] between:
(1) [Lender Name] (SSM Registration No. [Lender S S M]), a company incorporated in Malaysia with its registered office at [Lender Address] ("Lender"); and
(2) [Borrower Name] (SSM Registration No. [Borrower S S M]), a company incorporated in Malaysia with its registered office at [Borrower Address] ("Borrower").
The Lender and Borrower are related companies within the [Ultimate Holding] corporate group ([Group Relationship]).
1. Loan Facility
1.1 The Lender agrees to advance to the Borrower a loan of [Principal Amount] ("Principal") for a tenure of [Loan Tenure], on the terms and conditions of this Agreement.
1.2 The loan proceeds shall be used by the Borrower solely for the following purpose: [Loan Purpose]. The Borrower shall not use the loan proceeds for any other purpose without the prior written consent of the Lender.
1.3 The Lender shall transfer the Principal to the Borrower's designated bank account on the drawdown date of [Drawdown Date], subject to fulfilment of any conditions precedent.
2. Interest
2.1 The Borrower shall pay interest on the outstanding Principal at the rate of [Interest Rate] per annum ([Interest Basis]).
2.2 The parties confirm that the interest rate reflects the arm's length principle under Section 140A of the Income Tax Act 1967 (Act 53) and the Income Tax (Transfer Pricing) Rules 2012. The Borrower shall maintain contemporaneous transfer pricing documentation supporting the arm's length rate.
2.3 Interest shall accrue on a daily basis and be computed on the basis of a 365-day year on the actual number of days elapsed. Interest shall be payable on the date(s) agreed in writing or, in the absence of agreement, at the Final Repayment Date.
3. Repayment
3.1 The Borrower shall repay the Principal together with all accrued and unpaid interest by no later than [Repayment Date] ("Final Repayment Date") in accordance with the [Repayment Terms] repayment structure.
3.2 The Borrower may prepay the whole or any part of the outstanding Principal at any time without penalty, provided the Borrower gives the Lender not less than five (5) Business Days' prior written notice.
3.3 All payments under this Agreement shall be made in Malaysian Ringgit by electronic transfer to the Lender's designated bank account, free of any set-off, counterclaim, or withholding.
4. Regulatory Compliance
4.1 Companies Act 2016. The parties confirm that this Agreement has been duly authorised by each party's board of directors and, to the extent required under Section 228 of the Companies Act 2016 (Act 777), any requisite shareholder approval has been obtained.
4.2 Transfer Pricing Documentation. The Borrower shall maintain contemporaneous transfer pricing documentation in respect of this loan for each relevant year of assessment, as required under the Income Tax (Transfer Pricing) Rules 2012 and Section 140A of the Income Tax Act 1967 (Act 53).
4.3 Foreign Exchange Administration. If this loan involves a cross-border element, the parties shall comply with Bank Negara Malaysia's Foreign Exchange Administration Notices issued under the Financial Services Act 2013 (Act 758), including applicable approval thresholds.
4.4 Stamp Duty. This Agreement shall be stamped within thirty (30) days of execution in Malaysia under Item 27 of the First Schedule to the Stamp Act 1949 (Act 378).
5. Default and Governing Law
5.1 Events of Default. Each of the following constitutes an Event of Default: (a) the Borrower fails to pay any amount due under this Agreement within seven (7) Business Days of the due date; (b) the Borrower is wound up or becomes insolvent; or (c) the Borrower breaches any material term of this Agreement and fails to remedy such breach within thirty (30) days of written notice.
5.2 Consequences of Default. Upon an Event of Default, the Lender may declare the entire Principal and accrued interest immediately due and payable.
5.3 This Agreement shall be governed by and construed in accordance with the laws of Malaysia. Any dispute arising out of or in connection with this Agreement shall be referred to the courts of Malaysia or, if the parties mutually agree, to arbitration under the Asian International Arbitration Centre (AIAC) rules.
Signatures
IN WITNESS WHEREOF, the parties have executed this Inter-Company Loan Agreement as of the date first written above.
Director / Authorised Signatory
________________
Signature
Director / Authorised Signatory
________________
Signature
What Is a Inter-Company Loan Agreement (Malaysia)?
An Inter-Company Loan Agreement in Malaysia is a written contract governing a loan between two companies within the same corporate group — typically a parent company lending to a subsidiary, a subsidiary lending to another subsidiary, or a holding company lending to an associated company. The agreement documents the principal amount, interest rate, repayment schedule, and other key terms governing the intra-group financing arrangement.
The Inter-Company Loan Agreement is governed by the Contracts Act 1950 (Act 136) as a commercial loan contract and by the Companies Act 2016 (Act 777), which regulates related-party transactions. Under Section 228 of the Companies Act 2016, a company must not make a loan to a director or a company in which a director is interested without shareholder approval — inter-company loans to entities controlled by directors require careful compliance with this provision. For public listed companies, Bursa Malaysia's Main Market Listing Requirements impose additional disclosure and shareholder approval requirements for related-party transactions.
The tax treatment of inter-company loans is governed by the Income Tax Act 1967 (Act 53) and the Inland Revenue Board of Malaysia's (LHDN) transfer pricing guidelines issued under Section 140A of the Income Tax Act 1967. Section 140A and the Income Tax (Transfer Pricing) Rules 2012 require that interest charged on inter-company loans between related parties be at an arm's length rate — the rate that would be charged between unrelated parties in comparable circumstances. LHDN may disallow deductions for interest expense that exceeds the arm's length rate or impute deemed interest income where no interest is charged on an inter-company loan.
For inter-company loans involving foreign subsidiaries or cross-border related parties, Section 140A of the Income Tax Act 1967 applies to transactions between a Malaysian resident company and a non-resident related company. Transfer pricing documentation must be maintained under the Income Tax (Transfer Pricing) Rules 2012. Bank Negara Malaysia's foreign exchange administration rules under the Financial Services Act 2013 (Act 758) also govern cross-border intra-group loans exceeding certain thresholds.
The legal framework governing the Inter-Company Loan Agreement (Malaysia) in Malaysia draws on several key statutes and regulatory bodies. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Parties executing a Inter-Company Loan Agreement (Malaysia) in Malaysia should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Companies Act 2016 (Act 777) sets the foundational requirements.
When Do You Need a Inter-Company Loan Agreement (Malaysia)?
An Inter-Company Loan Agreement in Malaysia is used whenever one company within a corporate group lends money to another company in the same group.
An Inter-Company Loan Agreement is needed when a Malaysian parent company advances working capital to a wholly-owned subsidiary to fund the subsidiary's operations, capital expenditure, or expansion — the loan must be documented to satisfy LHDN transfer pricing requirements under Section 140A of the Income Tax Act 1967 (Act 53) and to establish the arm's length interest rate.
An Inter-Company Loan Agreement is required when a Malaysian holding company provides bridging finance to a subsidiary undertaking a property development project, pending the subsidiary securing external bank financing — the agreement documents the loan terms and confirms the parent can recover the advance as a creditor in the subsidiary's balance sheet.
An Inter-Company Loan Agreement is needed when a foreign parent company loans funds to its Malaysian subsidiary to fund start-up costs, with the loan subject to Bank Negara Malaysia's foreign exchange administration rules for external borrowings exceeding RM 50 million equivalent (under BNM's Foreign Exchange Administration (FEA) Notices).
An Inter-Company Loan Agreement is required when a Malaysian company restructures its intra-group financing by formalising previously undocumented director loans or shareholder advances as formal inter-company loans with defined repayment terms, to satisfy auditor and LHDN requirements.
An Inter-Company Loan Agreement is needed when two Malaysian subsidiaries within the same group lend to each other to optimise treasury and cash management across the group, with each loan documented to comply with Section 228 of the Companies Act 2016 (Act 777) and the group's internal governance policies.
Parties in Malaysia should prepare a Inter-Company Loan Agreement (Malaysia) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Inter-Company Loan Agreement (Malaysia)
A Malaysia Inter-Company Loan Agreement must include the following essential components.
Parties: Identify the lender company and borrower company, each with full legal name and SSM registration number. State the relationship between the companies (e.g., parent-subsidiary, co-subsidiaries) and the ultimate holding company.
Principal Amount: State the loan principal in Malaysian Ringgit (RM) or, for cross-border loans, the agreed foreign currency. For cross-border loans, include the applicable Bank Negara Malaysia FEA threshold and any regulatory conditions.
Interest Rate: Specify the interest rate, which must be at arm's length under Section 140A of the Income Tax Act 1967 (Act 53) and the Income Tax (Transfer Pricing) Rules 2012. State the basis for the arm's length rate — for example, the 3-month KLIBOR (Kuala Lumpur Interbank Offered Rate) plus a credit spread, or a comparable uncontrolled price benchmark.
Repayment Schedule: State whether the loan is repayable on demand, at a fixed maturity date, or in instalments. For subsidiary loans, confirm the repayment terms are consistent with the subsidiary's projected cash flow.
Transfer Pricing Documentation: Include a representation by both parties that the interest rate reflects the arm's length principle and that the borrower will maintain transfer pricing documentation under the Income Tax (Transfer Pricing) Rules 2012 for LHDN audit purposes.
Purpose of Loan: State the permitted use of the loan proceeds — for example, working capital, capital expenditure, or refinancing of existing borrowings.
Subordination (if applicable): If the inter-company loan is subordinated to external bank debt, include a subordination clause preventing repayment without the bank's consent.
Companies Act Compliance: Confirm compliance with Section 228 of the Companies Act 2016 (Act 777) for any loan to a company in which a director of the lender has an interest.
Governing Law: Specify Malaysian law and the jurisdiction of the Malaysian courts or AIAC arbitration.
Additional compliance elements for a Inter-Company Loan Agreement (Malaysia) used in Malaysia include: Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Forms-legal.com provides this template as a starting point for Malaysia-compliant documentation.
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Forms Legal. (2026). Inter-Company Loan Agreement (Malaysia) (Malaysia) [Legal document template]. Forms Legal. https://forms-legal.com/malaysia/financial/loans/inter-company-loan-malaysia
"Inter-Company Loan Agreement (Malaysia) (Malaysia)." Forms Legal, 2026, https://forms-legal.com/malaysia/financial/loans/inter-company-loan-malaysia.
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note = {Free legal document template. Based on Companies Act 2016 (Act 777)}
}Frequently Asked Questions
Yes, inter-company loans in Malaysia between related parties must be at arm's length under Section 140A of the Income Tax Act 1967 (Act 53) and the Income Tax (Transfer Pricing) Rules 2012. The Inland Revenue Board of Malaysia (LHDN) may adjust the interest rate on a related-party loan to reflect what unrelated parties would have agreed in comparable circumstances — this is the arm's length principle. If a Malaysian parent charges its subsidiary a higher-than-market interest rate, LHDN may disallow the excess interest deduction in the subsidiary's hands. If no interest is charged at all, LHDN may impute deemed interest income in the lender's hands and disallow an interest deduction in the borrower's hands. To support the arm's length rate, taxpayers should maintain transfer pricing documentation including a benchmarking study comparing the interest rate to independent loan transactions of similar tenure, amount, and credit risk.
An Inter-Company Loan Agreement in Malaysia is subject to stamp duty under Item 27 of the First Schedule to the Stamp Act 1949 (Act 378) at RM5 per RM1,000 or part thereof of the loan principal, subject to a maximum of RM500 where the principal exceeds RM100,000. For example, a RM5,000,000 inter-company loan attracts stamp duty of RM500 (capped). The agreement must be stamped within 30 days of execution in Malaysia. If the agreement is executed abroad, it must be stamped within 30 days of first receipt in Malaysia. An unstamped Inter-Company Loan Agreement is inadmissible in evidence under Section 52 of the Stamp Act 1949 (Act 378) but can be stamped belatedly with a penalty. The stamp duty is typically paid by the borrower, unless otherwise agreed. Under Malaysia law, Companies Act 2016 (Act 777), parties should seek independent legal advice from a qualified lawyer to confirm compliance with all applicable requirements. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). Forms-legal.com provides this template as a starting point for Malaysia-compliant documentation.
Inter-company loans in Malaysia may require shareholder or board approval under the Companies Act 2016 (Act 777) depending on the relationship between the parties. Under Section 228 of the Companies Act 2016, a company cannot make a loan to a director or to a company in which a director has a 20% or more interest without shareholder approval by ordinary resolution. If the inter-company loan is to a subsidiary in which the parent's directors have a personal interest, Section 228 approval may be required. For public listed companies on Bursa Malaysia, related-party transactions (including inter-company loans above prescribed thresholds) require disclosure and, where above the materiality threshold, independent shareholder approval under Bursa Malaysia's Main Market Listing Requirements. Private companies not listed on Bursa Malaysia have more flexibility, but the loan should always be authorised by a board resolution of both the lender and borrower companies.
A Malaysian subsidiary cannot simply refuse to repay a documented inter-company loan — the loan is a legally binding contractual obligation under the Contracts Act 1950 (Act 136), and the parent company (as lender) is a creditor of the subsidiary. If the subsidiary defaults on repayment, the parent may take enforcement action against the subsidiary in the Malaysian courts, including seeking a judgment debt and, if the subsidiary is insolvent, petitioning for winding up under Section 465 of the Companies Act 2016 (Act 777). However, in practice, inter-company loan repayments are subject to the subsidiary's solvency and cash flow. If the subsidiary is in financial difficulty, the parent may need to agree to defer or restructure the repayment. Directors of the subsidiary must also ensure that repayment of an inter-company loan does not constitute an insolvent transaction or unfair preference under the Companies Act 2016 — repaying the parent while unable to pay external creditors may expose the directors to personal liability.
Cross-border inter-company loans between a Malaysian company and a foreign related party are subject to Bank Negara Malaysia's (BNM) foreign exchange administration (FEA) rules under the Financial Services Act 2013 (Act 758) and the Foreign Exchange Administration Notices. Key rules include: (1) a Malaysian company may borrow in foreign currency from a non-resident (including a foreign parent) up to RM 50 million equivalent in aggregate without BNM approval — amounts above this threshold require BNM approval; (2) a Malaysian company may lend in ringgit to a non-resident related party up to RM 1 million per calendar year without approval; (3) interest payments on cross-border loans must be processed through licensed onshore banks; and (4) all cross-border transactions must be reported to BNM through the licensed bank processing the transaction. The borrower company should also maintain contemporaneous transfer pricing documentation for LHDN's income tax purposes under Section 140A of the Income Tax Act 1967 (Act 53).
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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