Syndication Loan Presentation Part III (Security in ... · SECURITY IN SYNDICATION LOAN ARRANGEMENT TYPES OF PREFERENCE SECURITY 1. Security Right Over Land 2. Fiduciary Security

Syndication Loan Presentation Part III

(Security in Syndication Loan)

By Eko Prasetio and Md. Kadri

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SECURITY IN SYNDICATION LOAN ARRANGEMENT

TYPES OF PREFERENCE SECURITY

1. Security Right Over Land2. Fiduciary Security3. Pledge of Share (Including Dividend)4. Pledge of Deposit5. Warehouse Receipt (New Type of Preferred Security)

ADDITIONAL SECURITY

1. Personal Guaranty (1822 ICC etc)2. Corporate Guaranty (1831 ICC)3. Conditional Assigment Of Material Agreements (Cessie)4. Set-off (1425 to 1435 ICC)

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GENERAL SECURITY (1131-1132 ICC)


SECURITY RIGHT

TYPES OF SECURITY

1. DEED OF POWER OF ATTORNEY TO GRANT SECURITY RIGHT (SKMHT)

• Must use standard form but can be modified;• Can be executed before a notary anywhere in Indonesia or a

Land Deed Official (“PPAT”) having his/her practice area covering the location of the intended security right object(s);

• Term: 1 Month for certificated land and 3 months for uncertificated land;

• Prepare or review authorities of the undersigned;• Include information on the intended security right object(s);• Include information on the intended security right rank, security

right value, underlying loan agreement(s) and amount of loan indebtedness; and

• May include security right grantor’s covenants in Deed of Grant of Security Right.

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2. DEED OF GRANT OF SECURITY RIGHT (APHT)

Security Right, cont’d…

• Must use standard form but can be modified;• Must be executed before a PPAT having his/her practice

area covering the location of the security right object(s);• Prepare or review authorities of the undersigned;• Include information on the security right object(s);• Include the same information on the security right rank,

security right value, underlying loan agreement(s) and amount of loan indebtedness as agreed in Deed of Power of Attorney to Grant Security Right; and

• Include the same provisions on the security right grantor’s covenants as agreed in Deed of Power of Attorney to Grant Security Right (if any).

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Required Documents for Registration of Security Right:


1. PPAT's letter identifying submitted documents to the relevant land office (to be prepared by PPAT);

2. Application letter for registration of security right from the security right holder (to be prepared by PPAT and executed by a person who is appointed by the lenders/security agent as their/his/her attorney-in-fact or by PPAT based on the substitute power of attorney from such person to PPAT);

3. Copies of identities of the security right grantor and security right holder, namely resident identity card or passport for individual and Articles of Association or By Law for corporate body;

4. Original land certificate;5. Second minutes of Deed of Grant of Security Right (to be prepared by

PPAT);6. Authentic copy of Deed of Grant of Security Right (to be prepared by

PPAT); and7. Deed of Power of Attorney to Grant Security Right (if any).

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Usually Requested Additional Documents for Registration of Security Right:


8. Original notarized, consularized and duly stamped power of attorney from the lenders/security agent that appoints a person to act astheir/his/her attorney-in-fact to execute and register Deed of Grant of Security Right, along with its Indonesian sworn translation;

9. Original power of attorney from the security right grantor to its attorney-in-fact to execute and register Deed of Grant of Security Right;

10. Copies of resident identity card or passport of the authorized person who grants the abovementioned powers of attorney;

11. Copy of resident identity card or passport of the undersigned of Deed of Grant of Security Right;

12. Original substitution power of attorney from the person appointed by the lenders/security agent as their/his/her attorney-in-fact to the PPAT to carry out the registration of security right (to be prepared by PPAT);

13. Copy of the underlying loan agreement(s); and14. Previous Lender(s) Release Letter and Roya application for

Refinancing Facility.

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Notes:

Please do not forget to conduct land search on all information contained in the land certificate with the relevant land office. Formal land search with the relevant land office will result in a Land Registration Statement Letter (“SKPT”). Formally, you will need to present an original power of attorney from the landowner to conduct such land search for an SKPT.

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• Type of security for fiduciary (account receivables, vehicles, movable assets, inventory, insurance claim, etc;;

• Must be executed in notarial deed before a notary in Indonesia;

• Prepare or review authorities of the undersigned;

• Include information on fiduciary security grantor, fiduciary security holder, fiduciary security value, fiduciary security object(s) value, underlying loan agreement(s) and amount of loan indebtedness; and

• Prepare or review fiduciary security object(s) and their evidence of ownership.

FIDUCIARY SECURITY

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Fiduciary Security, cont’d…

1. Fiduciary security over accounts receivable:

• Prepare or review a list containing information on third party debtors, underlying agreements, maturity dates and amount of each current receivable.

2. Fiduciary security over movable assets:

• Prepare or review a list of each movable asset item and its current value; and

• Prepare or review a statement letter signed by the authorized person of the fiduciary security grantor stating that all movable assets as set forth in the list are owned by the fiduciary security grantor if invoices or other evidences of purchase of such movable assets cannot be presented.

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3. Fiduciary security over motor vehicles:


• Prepare or review a list containing information on police numbers, machine numbers, types, colors and trademarks of motor vehicles; and

• Provide copy of evidence of motor vehicles ownership (BPKB).

4. Fiduciary security over inventories:

• Provide a list containing information of type, trademark and quality of the inventories; and

• No need to provide any evidence of ownership for the purpose of fiduciary security registration of the same.

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5. Fiduciary security over insurance claim:

• Provide or review a list of insurance claim containing information of insurance policy, insurer, type of insurance and covered amount;

• No need to provide copy of insurance policy for the purpose of fiduciary security registration of the same; and

• Do not expressly state “Insurance Policy” in the respective deed.


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6. Fiduciary security over buildings:

• Provide a copy of the landowner title certificate where a third party building is constructed thereon;

• Provide a copy of Building Construction Permit (IMB) of the respective building; and

• Provide an underlying agreement for the construction or utilization of the building between the landowner and building owner that isusually in the form of lease agreement.

7. Others

(a) Fiduciary security over dividend.

• Fiduciary Registration Office is is unwilling and never register this type of fiduciary security. Reason: Dividend has not been declared on the submission of registration and it does not exist for certain period until it’s declared by the company’s EGMS.




(b) Fiduciary security over bank accounts receivable:

• Prepare or review a list containing information on banks, account numbers and their current balance accounts;

• Obtain relevant bank accounts statements with certain cut off date; and

• The Department of Law and Human Rights recently rejected the registration of this type of fiduciary security. Reason: Bank accounts are individual ownership right.

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REQUIRED DOCUMENTS FOR REGISTRATION OF FIDUCIARY SECURITY:


1. Original application letter for registration of fiduciary security deed executed by the attorney-in-fact of the lenders/security agent;

2. Original notarized, consularized and duly stamped power of attorney from the lenders/security agent that appoints a person to act astheir/his/her attorney-in-fact to execute and register the fiduciary security deed along with its Indonesian sworn translation;

3. Original substitution power of attorney from the person appointed by the lenders/security agent as their/his/her attorney-in-fact to the notary official to carry out the registration of fiduciary security (if required, to be prepared by notary);

4. Original notarial deed of fiduciary security;5. Original fiduciary security registration statement; and6. Original evidence of payment of fiduciary security registration fee.

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Notes:

Please do not forget to conduct fiduciary security search on allinformation contained in the fiduciary security certificate withthe relevant fiduciary registration office and the Central Fiduciary Registration Office at the Department of Law and Human Rights.


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PLEDGE OF SHARE

• Can be executed in private or notarial deed and in the Indonesian or other languages;

• Prepare or review authorities of the undersigned;

• Prepare or review pledged share certificate(s) and shareholder register book to record the pledged share;

• Deliver original pledged share certificate(s) to the pledgee;

• Prepare a Power of Attorney to Sell Share and Consent to Transfer from the pledgor to be used in future private sale enforcement;

• Can include dividend; and

• Pledge of listed shares must involve broker and KSEI.

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• New type of preferred security provided in Law No. 9 of 2006 (July 14, 2006);

• One warehouse receipt can only secure one debt;

• Prepare Deed of Security Right Agreement (Akta Perjanjian HakJaminan);

• Notify the Akta Perjanjian Hak Jaminan to the Registration Center and Warehouse Management;

• Secured warehouse receipt must be kept by the creditor as the security recipient; and

• Further Government Regulation will be issued to regulate among others the encumbrance of warehouse receipt.

WAREHOUSE RECEIPT

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• Preferred security governed by foreign law especially in common law system;

• Recorded with certain government authority; and

• Objects can include any goods that vary from country to country.

CHARGE

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ADDITIONAL SECURITY(NO PREFERENTIAL RIGHTS)PERSONAL AND CORPORATE GUARANTIES


• Prepare or review authorities of the undersigned; and

• Common waiver of Articles 1402, 1430, 1831, 1833, 1837, 1843 and1847 through 1850 of the Indonesian Civil Code.

ASSIGNMENT OF DIVIDEND



• Identify information of the assignor’s share certificate(s) and the company’s shareholder register book.

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CONDITIONAL ASSIGMENT OF MATERIAL AGREEMENTS



• Ask for certified true copies of the assigned material agreements.

SET OFF

• Set-off rights arise by operation of law under Article 1425 of the ICC as long as the requirements are satisfied, namely, (i) that the parties are one another's creditor and debtor concurrently, (ii) that the claims are monetary claims or claims relating to replaceable goods, (iii) that the claims are due and payable (meaning that both claims have matured and are currently owing) and (iv) both claims are sufficiently determined (meaning that the amounts respectively owed are clear and are not subject to reasonable dispute).

Additional Security, cont’d…

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• Under the Indonesian Civil Code, the set-off rights are automatic and occur by operation of law if these conditions are met; no action is required of the account creditor to obtain or exercise such rights of set-off, such as notice.

• Contracting parties are free to effectively modify the above statutory requirements by expressly providing for set-off rights in their contract, but the automatic feature of the set-off right may be disallowed if the modifications change the basic legal requirements.

Additional Security, cont’d…

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