Process and Procedure of Guarantee

Other than taking legal charge and assignment as a form of security, Bank Oceana also
request for a guarantee from all the Directors of Agro Shrimp Farms Sdn Bhd by undertaking
a joint and several personal guarantee. Joint and several guarantee commonly used by banks
to further secure their loan. Bank Oceana may enter into the contract as the creditor of the
loan, Directors enter as the guarantor who also called as surety and the Agro Shrimp Farms
Sdn Bhd enter as the principal debtor. The contract of guarantee secured Bank Oceana from
the event of the company default and unable to cover the outstanding loan, as the Directors
are liable to perform their promise to undertake the liability in the case of Agro Shrimp Farms
default and they have to cover the outstanding loan owned by the company. Where joint and
several liability is a joint contract of each guarantor as a whole, therefore guarantors with the
joint and several liability are legally bound jointly as one guarantor, but it may also severally
as a separate guarantor at the same time. With the joint and several liability, bank can sue all
or any of the guarantors for the debt. In the event of the respective guarantor failed to fulfil
the obligation, bank may pursue another charge to other guarantors until the debt is fully
satisfied. However, the remedy against Directors are not alternative oriented but are based on
cumulative oriented, where remedy against Directors will be taken until the outstanding debt
has recovered. Also, in the event of death or bankruptcy of the guarantor, the estate of the
party remains liable for advances made prior to each of these events. However, the discharge
of liability of the guarantor will be executed once the Agro Shrimp Farms has fully settled the
loan with Bank Oceana, and no further claims will be executed against the guarantor after the
discharge of liability.
To undertake a joint and several personal guarantee from all the Directors, Bank Oceana may
first require to conduct an evaluation on all the Directors current financial position and credit
status before accept any of the directors as the guarantor. After obtaining the information of
all the Directors, Bank Oceana can now construct a contract of guarantee for the approved
guarantor to sign on it. All the approved guarantors are required to sign on the guarantee
document to show their consent on the terms and conditions of the guarantee, if fail to satisfy
this action the guarantee will become void on enforcement. At this point of view, the
guarantors are advised to seek for legal advice from their respective solicitors before signing
the contract. It is important for the solicitors of Agro Shrimp Farms to explain the terms and
conditions of the guarantee to the guarantors before the guarantors sign on the document. It

could prevent the guarantors from any claims of signing the contract under voidable
circumstances, which are fraud, misrepresentation, undue influence or coercion.
The witness of the solicitors also said to be important during the execution of personal
guarantee, it is to verify the validity and capacity of the guarantor as well as the validity of
the guarantors signature to avoid future disputes. Therefore, the execution of the personal
guarantee is preferred to be undertaken at the lawyer chamber. After all the necessary
procedure has been undertaken according to the legal procedure, the personal guarantee can
be dated and stamped at a nominal sum. After the guarantee is stamped, the guarantor now is
legally bound to the contract and Bank Oceana has the right to sue on the guarantor for the
loan repayment in the event that Agro Shrimp Farms default. In addition, once the guarantee
is stamped no further dealings can be done without the prior consent from the guarantor, as it
will cause the guarantee become void on enforcement. Furthermore, to prevent any fraudulent
act or misrepresentations, the guarantee document must never consign to the principal debtor
which is the Agro Shrimp Farms Sdn Bhd and it should be deposited under Bank Oceanas
safe custody for future verification.