Indonesian Law | Hukum Indonesia - Blog: Secured Transactions in Indonesia – in a Nut Shell

Monday, September 10, 2012

Secured Transactions in Indonesia – in a Nut Shell

Secured Transaction Indonesia
Introduction 

In Indonesia, for financing purposes or other transactions, it is highly recommended to secure the transactions by attaching security agreements or documents as accessory rights upon the main agreement.

There are three widely use forms of security in Indonesia, which are :-

  • Hak Tanggungan (Indonesian Security Right upon Land or mortgage); 
  • Fiduciary security; and 
  • Pledge. 

A. Hak Tanggungan (Mortgage)

By virtue of Law No. 4 of 1996 on Hak Tanggungan (Mortgage), a security interest, known as a real property mortgage or Hak Tanggungan, may be encumbered on a land title with or without other fixtures forming a totality with the land for security of a particular loan, which gives priority to a particular creditor over other creditors (preferred creditor). The Hak Tanggungan shall provide a right for the creditor to sell the land via public auction, 
on the debtor’s default, without a court order permitting it to do so as the certificate of Hak Tanggungan serves as a court order. The Hak Tanggungan only provides the creditor with an in jure right which means that there is no immediate occupancy right attached to the mortgage.

The land title which can be placed under Hak Tanggungan are: (1) Hak Milik (right of ownership); (2) Hak Guna Usaha (right to exploit); (3) Hak Guna Bangunan (right to build); (4) Hak Pakai (right of use) and (5) Hak Milik atas Satuan Rumah Susun (Strata Title). Hak Tanggungan can also be attached to the land including the buildings and fixtures on that land. Evidence of land title is a certificate issued by Badan Pertanahan Nasional / BPN (Indonesian National Land Authority).

Procedure

The procedure of Hak Tanggungan are :-

1. The signing of Deed granting the Hak Tanggungan (Akta Pemberian Hak Tanggungan or “APHT” or mortgage deed) before the Land Deed Official (Pejabat Pembuat Akta Tanah or “PPAT”). This deed must be in Indonesian, in the prescribed PPAT form and the APHT must clearly identify the plot or plots of land being used as security and the total amount of the loan/money being secured. Any buildings, plant or others fixtures attached to the land sought to be covered in the Hak Tanggungan must also be specifically described in the APHT; and

2. The Registration of APHT at relevant BPN (Indonesian National Land Authority).

The BPN then will record the APHT in the Hak Tanggungan land book and note the date of registration. At this stage, the Hak Tanggungan shall be effective and provide the creditor with the status as a preferred creditor. The BPN shall also record the Hak Tanggungan in the original land book and original land title certificate. As evidence of the registration of Hak Tanggungan, BPN issues a certificate of Hak Tanggungan to the creditor.

B. Fiduciary Security

Fiduciary security is governed under Law No. 42 of 1999 on Fiduciary Security (“Fiduciary Law”).

Fiduciary security is a form of security right over moveable property either tangible or intangible and immovable property which cannot be encumbered with a Hak Tanggungan (mortgage), 
whereas the control of the secured property shall remain with the security provider. Fiduciary security also grants priority to a particular creditor over other creditors (preferred creditor).

Receivable is also one of the intangible assets that may be secured by fiduciary security (Article 19 of the Fiduciary Law).

The exceptions on Fiduciary Security includes :-

a. Land, buildings and all things appurtenance thereto (including machinery affixed thereto), which are subject to the Hak Tanggungan;

b. Hypothec on registered vessels with a gross weight 20 cubic meters or more;

c. Hypothec on aircraft; and

d. Pledges.


A fiduciary security is an additional agreement to the initial agreement and must be made with a Notarial Deed in Indonesian language and should specifically state that it is a Fiduciary Security Deed.

The fiduciary security must be registered at the Fiduciary Registry Office. The fiduciary grantee themselves, or their attorney, or proxy can complete the application for registration. The Registry Office will then note the fiduciary security in the Fiduciary Register Book, then issue a Fiduciary Security Certificate to the fiduciary grantee and date the certificate on the day it received the application.

C. Pledge

A pledge in Indonesia is only for tangible movable properties (such as machinery, equipment, and vehicle) and intangible movable property (such as bank accounts, shares, bonds, receivables, and intellectual property rights) which are regulated under Articles 1150 - 1160 of the Indonesian Civil Code (“ICC”).
However, since enactment of the Fiduciary Law, moveable properties which are subject to the Fiduciary Law can also be secured by fiduciary security.

A pledge is also an additional agreement to the initial agreement. 
A pledge agreement can be executed in a notarial deed or executed privately, setting out the pledge’s particulars. 

As regards pledge of shares, no physical possession of the share certificate is required. The pledge takes effect on notification of the pledge to the company in which the shares are held and recording of the pledge in the company's register of shareholders.

For security over Shares, it is important to also include Power of Attorney to Vote (“POA to Vote”) and a Power of Attorney to Sell Shares (“POA to Sell”) in addition to the Shares Pledge. Under Indonesian law, a Shares Pledge does not include voting rights as the voting rights are not assigned through a pledge.


by: tnrlawfirm

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