To expand the production, Furniture Trading Sdn Bhd (FTSB) bought a piece of industrial land with an existing factory building. The cost to buy the land is RM 5 million. FTSB and Oneoff Business Sdn Bhd which is the vendor of the land are carry out a Sales & Purchase Agreement, identified as Title No. 1370, Lot No. 2469, Mukim of Batu, Muar, Johor. FTSB is financing the RM 4 million which is 80% of the RM 5 million with the Export Bank. Export Bank has take the industrial land with property as a security for them. Land is the most sought after security because of it characteristics of tangible and stable in value. Since the individual title deed of the land with property is available, therefore the instrument that use to hold the security should…show more content… The reason is the owner of the land is as same as the borrower. There is no separate legal entity here. The interest is well-protected upon registration. The charge can create an encumbrance to the land. The encumbrances can avoids any further dealings to the land without the consent of the first charges also existing charges. Some of the example of the dealings are sale, transfer, creation of a second or subsequent charge and leasing. In this case, Export Bank should be the first legal charge which means it has priority over subsequent legal charge. The money gain from sale of the land to repay the loan in the case of chargor is default are always paid to the first chargee before the first legal charge follow by subsequent charge unless the subsequent charges are ranked in pari-passu or priority to first…show more content… In this case, the existing directors of FTSB should be the guarantors, Export Bank act as a bank and FTSB will be the borrower. All three parties must exist to ensure the guarantee can be recognized as valid. The existing director of the FTSB will only repay the liability when the FTSB is default. Hence, the liability of existing directors is secondary while the liability of FTSB is primarily. It is needed to access the existing guarantee to ensure the guarantee can give financial support for the credit. Export Bank cannot combine the income of FTSB and the existing director to justify the debt servicing ability for the credit. Generally, the existing directors should have the healthier financial condition than the FTSB. This is to make sure that the existing is able to repay the loan if the FTSB is default to repay the loan. If the existing directors have the healthy financial condition, Export Bank may confidence to existing directors to act as guarantee to secure