Fiduciary Security in Indonesia Explained
Fiduciary Security in Indonesia is defined by Law number 42/1999 on Fiduciary Security (Fiduciary Law) as the right covering moving objects both tangible and intangible and immovable objects which cannot be encumbered with a mortgage. The objects will which remain in control of the person or entity which provides a fiduciary security over the objects (Fiduciary Provider). The Fiduciary Security is used to secure repayment of certain debt and gives the beneficiary of a Fiduciary Security (Fiduciary Beneficiary) a preferred position against other creditors.
Objects which Cannot be Encumbered with Fiduciary Security
Based on article 3 of the Fiduciary Law, the following objects cannot be secured by way of a Fiduciary Security:
1. Encumbrance Rights (Hak Tanggungan) on land and land-related objects which must be registered.
2. Hypothecs on ships which are registered with the contents of gross measuring 20 M³ or more and hypothecs on airplanes; and
3. Pledges, where the debtor physically places the movable objects or intangible assets owned by the debtor into the possession of the creditor as security.
Imposition of Fiduciary Security on Objects
Fiduciary Security cannot be imposed without any underlying agreement but is always a follow-up agreement of a principal agreement (for example a loan agreement in the event of a loan). The follow-up agreement creates an obligation of the Fiduciary Provider to fulfil a performance (for example repayment of loan). If such Fiduciary Provider does not fulfil such performance the Fiduciary Beneficiary has the right to sell the object, which is the object the Fiduciary Security, on his own power.
The imposition of Fiduciary Security on certain object must be conducted by way of notarial deed, the so called Fiduciary Deed. Such deed shall at least contain the following information:
1. the identity of the Fiduciary Provider and the Fiduciary Beneficiary;
2. data of the principal agreement;
3. description of the object which will be secured;
4. value of the security provided, and
5. value of the secured object.
After the Fiduciary Deed is signed, the Fiduciary Beneficiary must register the object which is encumbered with the Fiduciary Security at the Fiduciary Registration Office. The registration shall at least contain the following information:
1. the identity of the Fiduciary Provider and the Fiduciary Beneficiary;
2. the date and number of the Fiduciary Deed, name and domicile of the notary which made the deed;
3. data of the principal agreement;
4. description of the object which will be secured;
5. value of the security provided, and
6. value of the secured object.
Based on the registration the Fiduciary Registration Office issues a Fiduciary Security Certificate to the Fiduciary Beneficiary. Such certificate has the same power as an executorial court decision, which means that the Fiduciary Beneficiary does not require a court decision in order to sell the object, in the event the Fiduciary Provider is in default.