INDONESIA Law and Practice Contributed by: Yogi Sudrajat Marsono, Heru Pamungkas, Agnes Maria Wardhana and Andin Aditya Rahman, Assegaf Hamzah & Partners
3.5 Legal Requirements Before an Entity Can Give Valid Security There is no requirement under Indonesian law, such as financial assistance or corporate ben - efit rules, that restricts the imposition of security over properties. Under Law No 4 of 1996 on Mortgages (“Mort - gage Law”), a mortgage must be preceded by a loan agreement (or any document underlying the indebtedness) that obliges the debtor to provide the mortgage as security for repayment. Some banks or creditors may have stricter rules. For working capital loans, companies often need to submit yearly financial reports and updates on loan usage. For real estate loans, proof of purchase may be required. 3.6 Formalities When a Borrower Is in Default Based on the Mortgage Law, the execution of a mortgage involves the following mechanisms. • Default by the debtor: mortgage execution typically begins when the debtor defaults. • Notice of default: upon default, the mortga - gee typically issues a notice of default to the debtor, providing them with an opportunity to remedy the default within a specified period. • Enforcement options: if the default is not remedied, the mortgagee can execute the mortgage by way of a public auction based on the executorial title granted in the mort - gage certificate, or through a private sale if mutually agreed as stipulated in the mortgage deed. Such a sale can only occur after one month from the date of written notification to the debtor and announcement in two region - ally circulated newspapers, provided no objections are raised.
still necessitate a public auction or private sale in Indonesia. Repayments to foreign lenders under security documents or loan agreements are like - wise not subject to restrictions, except for the general limitation on foreign exchange controls, which include a restriction on payments outside of Indonesia using the Indonesian Rupiah, and the conversion of IDR beyond a specific nominal threshold requires an underlying document. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security Mortgage security is granted by a mortgage deed drawn up by a PPAT in the location of the land. The PPAT is entitled to a service fee of up to 1% of the transaction amount specified in the deed for this service. Registering the mortgage deed to obtain a mortgage certificate from the land office incurs non-tax state revenue ( Penerimaan Negara Bukan Pajak, or PNBP) based on the mortgage value. Fees range from IDR50,000 for values up to IDR250 million to IDR50 million for values exceeding IDR1 trillion. These rates are correct at the time of writing and are subject to change from time to time by the government. The execution of a mortgage right is carried out through a public auction based on the execu - torial title granted in the mortgage certificate, known as parate execution, or through a private sale, agreed upon by the mortgage holder and the debtor. For parate execution, auction fees apply as set out by each State Assets and Auction Service Office ( Kantor Pelayanan Kekayaan Negara dan Lelang, or KPKNL), which include registration fees, announcement fees, auctioneer fees and relevant PNBP.
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