Only a hak tanggungan (a security right over a land right) and hypothec over a vessel given by a company may rank in a specified order. If a plot of land is subject to more than one hak tanggungan, they are ranked according to their respective dates of registration. If more than one hak tanggungan is registered on the same date, they are ranked according to the number written on their respective deeds of hak tanggungan. A vessel can be encumbered by more than one hypothec, and they are ranked according to their respective dates and numbers written on their respective deeds of hypothec.

Other than a hak tanggungan and hypothec as described above, it is not possible to enter into a separate security agreement to specify the ranks of the security for other security rights as the law prohibits having double security on certain security rights. In addition, certain security rights such as a hak tanggungan, hypothec and fiducia security will come into existence and they will become perfected when they are registered in accordance with their respective regulations. Without this registration, the security holder will not have a priority right against other security holders. However, it is possible for the creditors to enter into a security sharing agreement where the parties, among other things, contractually agree to the following: (i) to have different classes of creditors; and (ii) to have a priority mechanism over the proceeds' distribution upon the enforcement of such security.

Indonesian law does not recognize the concept of floating charge per se. However, under Indonesian law, there is the concept of fiducia security. Fiducia security is the granting of security by which the ownership title of the secured object is transferred by way of fiduciary to the fiducia security holder, but the fiducia security grantor is allowed to use (or continue to use) the secured object. In relation to an item of inventory, the fiducia security grantor is allowed to sell the inventory as long as it is replaced with an object of equal value.

Fiducia security must be registered at a fiducia registration office. Fiducia security can be established in relation to fiducia objects that exist now or that will exist in the future. Therefore, a fiducia security agreement usually includes provisions that oblige the fiducia grantor to provide a periodic update of the fiducia objects and obliges the fiducia security holder to register the fiducia security on receipt of the update. Further details in relation to fiducia security are set out in the answer to question 11 of this section.

Not applicable. 

Except for the concept of: (i) trustee (wali amanat) as stipulated under Law No. 8 of 1995 on Capital Markets and Law No. 19 of 2008 on Sovereign Sukuk (Surat Berharga Syariah Negara); and (ii) special purpose vehicle (badan pengelola instrumen keuangan) and trust fund manager (pengelola dana perwalian) established to carry out securitization and trust fund activities as stipulated under Law No. 4 of 2023 on Development and Strengthening of the Financial Sector, Indonesian law does not recognize equitable principles in general, including, without limitation, the relationship of a trustee and beneficiary or other fiduciary relationships. Nevertheless, security may be granted to a trustee to be held in trust. However, enforcement of the provisions granting security in favor of third-party beneficiaries and otherwise relating to the nature of the relationship between a trustee (in its capacity as such) and the beneficiaries of a trust in the loan and security documents in the Republic of Indonesia will be subject to an Indonesian court accepting both of the following:

• Foreign law as the governing law of those documents
• Proof of the application of equitable principles under those documents

In practice, the parties incorporate the following into the facility agreement:

• A provision stipulating that in relation to a jurisdiction in which the courts would not recognize or give effect to the trust, the relationship of the finance parties to the security trustee will be construed as one of principal and agent.
• A parallel debt provision.

Furthermore, for an onshore security holding in Indonesia under a facility agreement, the parties would typically appoint a security agent rather than a security trustee since the concept of trust is not recognized in Indonesia.

Under Indonesian law, a change of lender by way of a transfer certificate or a novation agreement is considered a novation, the effect of which is that the existing security (as an accessory to the facility agreement) would cease to exist. However, Article 1421 of the ICC provides the option for the new lender and any remaining existing lenders to explicitly state that they retain the security created under the security documents to secure the secured liabilities.

Therefore, the parties usually include a provision in the facility agreement that provides that, on the transfer date, each security document and guarantee will be, and the borrower irrevocably confirms that each security document and guarantee continues to be, the legally valid, binding and enforceable obligations of each party to the facility agreement, and the security and guarantee created by each security document and guarantee respectively will continue to be valid and effective.

Please note that there are multiple interpretations of the effect of the application of Article 1421 of the ICC on the security documents. One of the interpretations is that upon the novation, the underlying agreement should be terminated and therefore the security created under the security document should be deemed to be terminated given the accessory nature of the security documents under Indonesian law.

Generally, there is no class of assets over which it is difficult or impossible to grant effective and perfected security. However, please note the limitations set out below.

Personal rights

It is not possible to grant security over a personal right that cannot be transferred to another person, such as a license.

Pledge

There is still uncertainty in relation to the enforceability of a pledge over a bank account in Indonesia due to the following:

• Fluctuating balance in a bank account.
• The fact that the pledgor still controls the bank account.
• Uncertainty about whether a bank account can be the object of a security right under Indonesian law.

The ICC specifies that a pledgee cannot own the pledged assets. The underlying principle is that a creditor may only obtain the proceeds of the pledged object to repay the debt. To the extent that any of the provisions in a pledge bank account agreement gives a security agent the right to appropriate or own money in the account, the provisions could be construed as inconsistent with the literal meaning of Article 1154 of the ICC. In our view, the underlying presumption of the ICC stipulation is that the pledged object has a market value and that value can only be determined by public auction. In the case of a bank account, the value of the pledged object is the same as the value of the money in the bank account.

There is no concept of second ranking in relation to a pledge. Therefore, it is not possible to create another pledge over an object that has been subject to a pledge.

Fiducia security

Any fiducia security (please see the answer to question 11 for the explanation on fiducia security) over receivables or insurance proceeds will not prevent the obligor(s) or the insurer(s) from the following:

• Discharging their obligations to the fiducia grantor.
• Exercising any set-off rights they may have.

This is until a receipt of acknowledgment is given from the obligor(s) of the granting of the fiducia security by the fiducia grantor to the fiducia grantee or, alternatively, by proper service by a court server of a notice on those obligor(s) in relation to the granting of the fiducia security.

Any fiducia security over receivables or insurance proceeds is enforceable only to the extent that the fiducia security relates to claims arising from an existing contractual relationship between the fiducia grantor and its obligor(s) at the time of execution of the fiducia security. It may not be enforceable to the extent that the fiducia security relates to future claims that do not have their basis in a contractual relationship between the fiducia grantor and its obligor(s) existing at the time of execution of the fiducia security, unless those future claims (which arise from a new contractual relationship) are specifically assigned by the fiducia grantor. The assignment can be effected by notifying the obligors of the receivables of the existence and the granting of the fiducia security over those future claims and the fiducia grantee registering the fiducia security over the future claims in a fiducia registration office.

The types of security recognized under Indonesian law are set out below.

Hak tanggungan

A hak tanggungan is a security right over a land right as security for a debt. A land right may include objects that are inseparable from the land (such as buildings and plants). This security right grants a priority right to certain creditors in relation to other creditors.

The creation of a hak tanggungan

The grantor must execute a deed of hak tanggungan (APHT) in Indonesian in favor of the grantee before a PPAT (land deed official). The APHT must clearly mention the identity of the parties, their domiciles in Indonesia, the secured debt, the value of the hak tanggungan, and a description of the land.

A hak tanggungan registration can be made online.

The PPAT is obliged to register the APHT with the Land Office (Kantor Pertanahan) within seven working days from the signing of the APHT. The Land Office must register the hak tanggungan in the hak tanggungan land book on the seventh day after it receives a completed application. On the registration date, the hak tanggungan comes into existence, is perfected, and the grantee becomes a priority creditor.

As evidence of the registration of the hak tanggungan, the Land Office issues to the grantee a certificate of hak tanggungan (which will have executorial power equivalent to a valid and binding court decision). If a plot of land is subject to more than one hak tanggungan, they are ranked according to their respective dates of registration. If more than one hak tanggungan is registered on the same date, they are ranked according to the number written on their respective APHTs.

As of July 2020, lenders and land deed officers may register the hak tanggungan through an online system called the HT-el system.

To be able to become a user of the HT-el system, lenders and PPATs must first register their accounts.

Before a lender submits the application for the registration of the hak tanggungan in the HT-el system, several steps need to be conducted by the PPAT, as follows:

• Land certificate check, which can also be conducted manually if the land data is not yet available in an electronic form and has not yet been provided in the database of the Ministry of Agrarian and Spatial Planning/National Land Agency.
• Reporting of APHT, which includes creating a deed code as an identification of the deed, inputting the data of the deed, uploading the APHT and its supporting data, downloading the deed cover note, and scanning and uploading the signed and stamped cover note.

In general, each of the HT-el services is carried out through the same steps, as follows:

• Submitting a request for the HT-el services by entering certain data according to the service required.
• Uploading the required documents (if any) and confirming the compatibility of the data uploaded by the PPAT and those of the physical document.
• Confirming the request.
• Paying the PNBP based on the transfer order letter.
• Reviewing the draft of the HT-el services output.

There are three types of output produced by the HT-el services, as follows:

• HT-el certificate
• Notes (catatan) of the hak tanggungan on the e-land book
• Notes (catatan) of the hak tanggungan on the land rights certificate

Costs and time frame

The costs for registering a hak tanggungan are as follows:

• The PPATs fee for preparing the APHT would be approximately up to 1% of the transaction value.
• The maximum amount of PNBP to be paid is IDR 50 million (approximately USD 3,300 using the currency rate of USD 15,000/IDR) for a secured value above IDR 1 trillion.

The period from the registration to the issuance of the certificate of hak tanggungan varies between one week and six months, depending on the Land Office and the status of the land.

Hypothec over a vessel

Hypothec over a vessel is a collateral right over a vessel to secure certain loan payments and gives priority rights to certain creditors over other creditors. The definition of "vessel" includes water vehicles of a certain shape or type that move by wind power, mechanical power or other energy, pulled or tugged, including vehicles with dynamic support power, submarine vehicles, and floating tools and fixed floating buildings (such as oil rigs).

The creation of a hypothec over a vessel

Only a vessel that has been registered in the Indonesian Vessel Registry (Daftar Kapal Indonesia) is permitted to be the subject of a hypothec. The main requirements for registration are as follows:

• The vessel has a size of at least seven gross tonnage.
• The vessel is owned by an Indonesian citizen residing in Indonesia or an Indonesian company that is established under Indonesian law.
• If it is owned by a joint venture company, the majority of the shares are owned by an Indonesian citizen.

A hypothec is created by a hypothec deed in Indonesian made before the ship registration and recording official at the place where the vessel is registered and recorded in the Main List of Vessel Registration (Daftar Induk Pendaftaran Kapal). After the registration, the hypothec will constitute a valid priority security interest over the vessel, securing up to the value stated in the hypothec deed.

A grosse deed of hypothec will be issued to the holder of the hypothec, which will have executorial power equivalent to a valid and binding court decision. One or more hypothecs can be created over a vessel. The rank of each hypothec is determined based on the date and number of the hypothec deed.

Costs and time frame

The registration costs for a hypothec include the notary fee, which is calculated from the value of the hypothec stated in the grosse deed of hypothec, and the PNBP, which is calculated from the gross tonnage of the vessel. The process of registration of a hypothec usually takes three to seven days.

Pledge

A pledge is a right of a creditor (pledgee) to movable property that is delivered into the possession of the pledgee by a debtor at the time that the pledge is created, and it gives the pledgee a preferential right to the proceeds from the sale of the pledged property over other creditors. Since the pledged property must be in the possession of the pledgee, the right of the pledgee will terminate if the pledged property is no longer in the possession of the pledgee, except if it is lost or stolen from the pledgee.

The creation of a pledge

The parties enter into a pledge agreement, and the pledgor delivers the pledged goods to the pledgee. There is no public registration. However, for a pledge over intangible property, there is a requirement to notify the party against which the pledge is to be enforced. The perfection of the pledge depends on the type of pledged property, i.e., the perfection of a pledge over intangible goods is done by way of delivery and the perfection of a pledge over intangible goods is done by way of notification.

For a pledge over shares, in addition to the pledge agreement, there is also typically an irrevocable power of attorney, a power of attorney to sell shares, and various notices or forms.

Costs and time frame

The costs for establishing a pledge depend on how the pledge agreement is drawn up and which related steps are taken. The costs increase in the following order, depending on how the pledge agreement is drawn up:

• Drawn up privately
• Drawn up privately and registered with a notary public to evidence that the document already existed at the time of registration
• Drawn up privately and legalized by a notary public to evidence that the signatures are the signatures of the signatories
• Drawn up in notarial deed form as prima facie evidence that the persons executing the agreement are the persons they claim to be and that the content of the agreement is as stated

There is no statutory timetable in relation to the documentation and registration of a pledge.

Fiducia security

Fiducia security is regulated under Law No. 42 of 1999 on Fiducia Security. The fiducia grantor transfers title to its asset in a fiduciary capacity to the fiduciary grantee (secured party). A fiducia security is a security right securing the repayment of a debt over the following:

• Tangible or intangible movable goods.
• Immovable goods that exist now or will exist in the future, can be owned and transferred, registered or unregistered, and cannot be encumbered by a hak tanggungan or hypothec ("Fiducia Property").

The Fiducia Property, unless otherwise agreed by the parties, also includes the following:

• The products resulting from the Fiducia Property.
• Insurance claims of the Fiducia Property.

Unlike a pledge, Fiducia Property remains in the possession of the fiducia grantor. This security right will grant the fiducia grantee a priority right over other creditors.

The creation of a fiducia security

To establish a fiducia security, the fiducia grantor and fiducia grantee execute the fiducia agreement in Indonesian and in a notarial deed form.

The fiducia grantee (through a notary) registers the fiducia security at the relevant fiducia registration office through an online registration system. The registration office then records the fiducia security in the Registration Book of Fiducia on the same day as the online registration statement is submitted and when the registration fee has been paid. The fiducia security is established on the date it is recorded in the Registration Book of Fiducia.

Costs and time frame

The costs incurred in the registration of fiducia security are as follows:

• The notary's fee for the preparation of the notarial deed, which is calculated as follows:
  • Fiducia security with a value of less than or equal to IDR 100 million and the maximum cost is 2.5% of the fiducia security value.
  • Fiducia security with a value above IDR 100 million and less than or equal to IDR 1 billion and the maximum cost is 1.5% of the fiducia security value.
  • Fiducia security with a value exceeding IDR 1 billion and the maximum cost is 1% of the Fiducia Property.
• The maximum amount of PNBP to be paid, which is IDR 13.3 million (approximately USD 880 using the currency rate of USD 15,000/IDR).

The fiducia security must be registered within 30 days of the date of the deed of the fiducia security agreement. If there is an error on the fiducia security certificate (except in relation to the security value), a request for correction may be submitted no later than 30 days after the fiducia security certificate is issued. For errors or changes to the security value stated on the fiducia certificate, the fiducia certificate will need to be replaced. There is an amendment fee for such request.

Security over warehouse receipts

Security over warehouse receipts is the newest type of security available in Indonesia under Law No. 9 of 2006 on the Warehouse Receipt System as amended by Law No. 9 of 2011 ("Warehouse Receipt Law"). It defines a "warehouse receipt" as a document issued by a warehouse manager evidencing the ownership of goods (any movable goods that can be stored for some time and are generally traded) stored in the warehouse. The warehouse receipt is a certificate of title, and it is therefore transferable and can be provided as security. This security grants priority rights to a certain creditor over other creditors. The warehouse receipt can only be encumbered with one security right. The security also includes any insurance claim.

However, due to the lack of implementing regulations, security over warehouse receipts is rarely used in the market.

The creation of a security over warehouse receipts

Under the Warehouse Receipt Law, security over warehouse receipts is created as follows:

• The creditor and the borrower enter into a loan agreement and a deed of security agreement.
• The creditor notifies the Registration Center (currently under PT Kliring Berjangka Indonesia (Persero)) and the warehouse manager that the warehouse receipt has been encumbered with a security to secure the loan.
• After receiving the completed security notification documents, the Registration Center records the security over warehouse receipt in the Registry Book of Security (Buku Daftar Pembebanan Hak Jaminan) and issues a confirmation on the notification of the security encumbrance over the warehouse receipt and a written confirmation to the security grantee, the security grantor and the warehouse manager, the day after the notification at the latest.
• The security grantee holds the warehouse security receipt, and therefore the warehouse receipt cannot be doubly encumbered.

Costs and time frame

The cost for establishing security over warehouse receipts mainly comprises the fees payable to the notary and the Registration Center. This includes the fees for the preparation, execution and notification of the deed of security agreement.

There is no statutory timetable for the notification of security over warehouse receipts.

Please see the answer to question 7 of the "When lending to borrowers" section for registration or notarization requirements in relation to security and guarantee documents. With regard to subordination or intercreditor documents, there is no regulatory requirement for registration or notarization. The answer to question 7 of the "When lending to borrowers" section for translation requirement is also applicable to the security, guarantee and subordination or intercreditor documents.

Other than the registration fees set out in the answer to question 8 of the "When lending to borrowers" section, no documentary, registration, notarization or other similar taxes, duties or fees are payable under the laws of the Republic of Indonesia in relation to the loan and security documents, except that stamp duty at the rate of IDR 10,000 is payable on each of the documents.