Security Account Control Agreement Template for Indonesia
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What is a Security Account Control Agreement?
The Security Account Control Agreement is a crucial document in secured financing arrangements under Indonesian law, typically used when a lender requires security over a debtor's financial assets held in an account. This agreement is essential in transactions where account control is a key component of the security package, such as in project finance, corporate lending, or structured finance transactions. The document establishes the rights and procedures for the secured party to exercise control over the account, while defining the role and protections of the securities intermediary. It must comply with Indonesian banking regulations, OJK requirements, and Law No. 10 of 1998 on Banking, among other relevant regulations. The agreement is particularly important in the Indonesian context where specific regulatory requirements must be met for creating and perfecting security interests over financial assets.
Frequently Asked Questions
Is a Security Account Control Agreement legally enforceable under Indonesian banking law?
Yes, Security Account Control Agreements are legally binding and enforceable in Indonesia under Law No. 10 of 1998 on Banking and OJK regulations. The agreement must comply with Indonesian Civil Code provisions and banking regulations to be valid. Proper execution and registration with relevant authorities strengthens enforceability in Indonesian courts.
Can a lender seize account funds without a Security Account Control Agreement in Indonesia?
No, lenders cannot legally control or seize debtor account funds without a properly executed Security Account Control Agreement under Indonesian banking law. Without this agreement, lenders lack legal authority over the secured accounts and cannot perfect their security interests. The agreement is essential for establishing valid claims over account assets.
How does a Security Account Control Agreement differ from a general pledge agreement in Indonesia?
A Security Account Control Agreement specifically governs bank account assets and requires compliance with banking regulations under Law No. 10 of 1998, while a general pledge covers movable property under the Civil Code. The account control agreement involves three parties (debtor, creditor, bank) and requires bank acknowledgment, whereas pledges typically involve two parties.
How long does it typically take to finalize a Security Account Control Agreement in Indonesia?
Creating and executing a Security Account Control Agreement in Indonesia typically takes 2-4 weeks, depending on bank cooperation and document complexity. This includes drafting time, bank review and approval, OJK compliance verification, and final execution by all parties. Complex multi-bank arrangements may require additional time for coordination.
Must Security Account Control Agreements be registered with OJK or Indonesian authorities?
Security Account Control Agreements don't require direct registration with OJK, but must comply with OJK banking regulations and reporting requirements. Banks must maintain proper records and may need to report significant agreements to OJK as part of their regulatory obligations. Compliance with Law No. 10 of 1998 banking provisions is mandatory.
Can foreign lenders use Security Account Control Agreements for Indonesian bank accounts?
Yes, foreign lenders can enter Security Account Control Agreements for Indonesian bank accounts, but must comply with Indonesian banking law, foreign investment regulations, and Bank Indonesia currency requirements. Cross-border arrangements may require additional approvals and must follow foreign exchange regulations under applicable Indonesian law.
Which common drafting mistakes invalidate Security Account Control Agreements in Indonesia?
Common mistakes include inadequate bank acknowledgment clauses, non-compliance with OJK regulations, unclear account identification, and missing governing law provisions under Indonesian banking law. Failure to specify proper notice procedures, inadequate security interest descriptions, and non-compliance with Law No. 10 of 1998 requirements can also invalidate the agreement.
About the Security Account Control Agreement
A Security Account Control Agreement is a specialized legal document that establishes a secured party's control over financial assets held in designated accounts under Indonesian law. This agreement creates a triangular relationship between the account holder (debtor), secured party (lender), and securities intermediary or bank, providing the lender with enhanced security and control mechanisms over the debtor's financial assets.
When do you need this document?
You need a Security Account Control Agreement when entering into secured financing arrangements where account control is required as part of the security package. This commonly occurs in project finance transactions where lenders need control over project cash flows, corporate lending arrangements involving substantial credit facilities, and structured finance deals requiring enhanced security measures. The agreement is particularly crucial when dealing with securities accounts, investment portfolios, or cash management accounts that form part of the collateral structure. Indonesian banks and financial institutions often require this agreement to comply with prudential banking requirements and OJK regulations when extending credit facilities secured by financial assets.
Key legal considerations
The agreement must clearly define the scope of control granted to the secured party, including rights to give instructions to the securities intermediary and restrictions on the account holder's ability to withdraw or transfer funds. Critical clauses include the trigger events that activate full control, notification procedures, and the securities intermediary's obligations and limitations. You must address the ranking of security interests, especially in transactions involving multiple secured parties or existing encumbrances. The document should specify the treatment of interest, dividends, and other account proceeds, along with clear procedures for enforcement and realization of security. Insurance and indemnity provisions protecting the securities intermediary are essential, as Indonesian banks require comprehensive protection when participating in these arrangements.
Legal requirements in Indonesia
Under Indonesian law, Security Account Control Agreements must comply with Law No. 10 of 1998 on Banking, which governs banking operations and account management procedures. OJK Regulation requirements mandate specific disclosure obligations and operational procedures for securities intermediaries participating in control arrangements. The agreement must align with Law No. 42 of 1999 on Fiduciary Security for creating and perfecting security interests over financial assets. Corporate parties must ensure proper board resolutions and authorized signatory appointments under Indonesian company law. The document typically requires notarization and may need registration with relevant authorities depending on the underlying security structure. Compliance with foreign exchange regulations under Bank Indonesia requirements is mandatory when dealing with foreign currency accounts or cross-border transactions.
GOVERNING LAW
Applicable law
This Security Account Control Agreement is drafted to comply with Indonesia law. Key legislation includes:
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