Bank finance and regulation

Multi-jurisdictional survey

Indonesia

Enforcement of security interests in banking transactions

Darrell R Johnson, Mohamad Kadri and Astrid A Sihomibing

Soewito Suhardiman Eddymurthy Kardono

darrelljohnson@ssek.com/mohamadkadri@ssek.com/astridsihombing@ssek.com

Part I types of security

1. What are the most common types of security in banking transactions in your
jurisdiction (eg, standard security package)? Please provide a brief characteristic of each
type of security.

Standard security packages in banking transactions in Indonesia depend on the type of

financing (eg, acquisition financing, project financing, real estate financing, long-term and
working capital financing for corporations, and consumer financing for individuals), the
industrial sector of the borrower and the requirements of Indonesias central bank (Bank
Indonesia or BI).

Acquisition financing typically requires the acquirer (not the target company) to secure re-
payment with the assets of the acquirer. The collateral provided depends on the industrial
sector in which the acquirer is engaged. If the acquirer is engaged in a multi-finance
business, the collateral assets provided are mainly receivables. If the acquirer is a
manufacturing company, it would be normally required to provide its plant as the main
collateral, possibly supported by other assets ie, inventory, receivables and a pledge of
shares of the acquirer. With respect to a pledge of shares, Bank Indonesia 1 allows banks to
accept listed shares as additional collateral but not as the only collateral. Further, shares can
only be taken as collateral for the purpose of financing a business expansion or acquisition
and not for speculative share trading.

With project financing, the project sponsors are required to provide the collateral to secure
repayment of the loan. This collateral is the project itself, ie, land, plant, inventory and
receivables, together with a share pledge. A real estate financing is secured by the object
financed, ie, the land and buildings mortgaged under a specific form of Indonesian land
security right. The security for the loan to a corporation is also based on the type of facility,
ie, a long term loan or a working capital loan. A long term facility typically requires the land
and buildings by which the borrower operates its business to be given as collateral, while a
one-year revolving working capital facility is normally secured by inventory and receivables.
Furthermore, in the case of consumer financing to an individual borrower, the object financed
(eg, a house or a motorcycle) is normally provided as collateral.

The requirement for a borrower to provide collateral is driven by the necessity of the bank to
reduce its loss allowance by taking collateral to secure the loan pursuant to Bank Indonesia

1
Decision of the Board of Directors of BI No. 26/68/Kep/DIR Regarding Shares as Additional Collateral (7 September 1993).

Marketing.10.Survey_Indonesia 1
regulations. 2 Bank Indonesia requires commercial banks to classify the productive assets of
their portfolios in one of five categories. These classifications are used to determine the
minimum levels of loss allowances the banks are required to maintain. Performing assets are
described as pass and special mention. Non-performing assets are divided into three
categories, having different specific allowances: sub-standard, doubtful and loss.

Banks are required to establish sufficient allowances for possible losses (reserves) for each
classification mentioned above. The reserve for possible losses must be a minimum of one
per cent of loans that are classified as pass, at least five per cent for special mention, 15
per cent for sub-standard, 50 per cent for doubtful, and 100 per cent for loss. In such
case, the percentage is calculated after deduction of the value of allowable collateral. The
higher the allowance, the more impact it has on the banks capital.

As noted, Bank Indonesia permits certain types of collateral to reduce the loss allowance.
The collateral value to be taken into account as a deduction from allowances includes
pledged negotiable securities and shares actively traded on a bourse or having an
investment grade rating, properties and machinery attached to land which is encumbered by
a mortgage (a land security right), aircraft or vessels with a size of more than 20 cubic
meters encumbered by a mortgage, vehicles and inventory pledged by a fiduciary transfer
and a warehouse receipt encumbered by security right to warehouse receipt. A loan secured
entirely by cash collateral (eg, deposits) is deemed as having been classified as pass.

Corporate guarantees, pledged non-listed shares and assigned receivables (even if the
relevant assets may be properly encumbered) are not classified as allowable collateral and
their value cannot be deducted from loss allowances. Hence, a bank is not likely to give
much importance to those types of security when it loans money to a borrower.

The most common types of security and their basic characteristics in Indonesia, are the
following:

Pledges

Under Indonesian Law, a pledge is a security device pursuant to which the owner of movable
and intangible property grants the pledgee a security interest over such property. The
Indonesian Civil Code defines a pledge as a right of a creditor (pledgee) to movable property
or intangible assets (eg, gold, time deposits, shares and certain marketable securities) that
are physically delivered into the possession of the pledgee by a debtor. The pledge gives the
pledgee a preferential right to the proceeds from the sale of the goods with regard to other
creditors.

Shares of a company may be pledged or secured by a fiduciary security, unless a companys

Articles of Association (AOA) provide otherwise. 3 In practice, an Indonesian companys AOA
do not restrict a security interest over shares. Law No. 40 of 2007 Regarding Limited Liability
Companies (16 August 2007) (the Company Law) and a companys AOA will require that a
pledge of or fiduciary security over shares must be recorded in the share register of the
company to ensure that the company or other interested parties are aware of the pledge of
shares or the fiduciary security. 4

2
BI Regulation No 7/2/PBI/2005 Regarding Assets Quality Ratings for Commercial Banks (20 January 2005), as it has been
amended several times and last was amended by BI Regulation No 11/PBI/2009 Regarding the Third Amendment to BI
Regulation No 7/2/PBI/2005 Regarding Assets Quality Ratings for Commercial Banks (January 20, 2005).
3
The Company Law, Article 60 (2). The concept of a fiduciary security over shares has been added by the new Company Law.
However, given the fact that the new Company Law has recently been issued, implementing regulations governing fiduciary securities
over shares have not yet been issued.
4
The Company Law, Article 60 (3).

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A pledge is generally perfected by taking physical possession of the pledged property. Article
1152 of the Indonesian Civil Code states in relevant part:

A pledge right over movable assets and over bearer receivables (piutang-
piutang bawa) shall be established by placing the pledged assets in the
possession of the creditor or a third party who has been mutually agreed by
the parties.

A pledge right shall become void, if the pledged assets are no longer
controlled by the pledgee.

In the case of intangible property involving a registered instrument, such as shares,

perfection occurs pursuant to Article 1153 of the Indonesian Civil Code, when the party
against whom the pledged right shall be exercised (in the case of shares, the company that
issued those shares) has been notified of the pledge. Article 1153 provides as follows:

A pledge right over intangible movable assets, with an exception for those
assets evidenced on bearer paper, shall be placed through notification of the
pledge to the party against whom the pledged right must be exercised. Such
party may request written proof of the notification and consent from the
pledgor.

Land Security Rights (Hak Tanggungan)

Under Law No 4 of 1996 Regarding Security Rights Over Land and Goods Attached to Land
(April 9, 1996) (the Security Rights Law), security interests may be granted over certain
types of titles to land. This security right can only be imposed on hak milik title (similar to a
fee simple title in common law jurisdictions), hak guna bangunan title (a right of
development) and hak pakai title (a right of use). The security right also applies to only
goods attached to such land, in order to secure the repayment of a loan. A Hak Tanggungan
is perfected when registered with the local land office where the property is located. A
registered Hak Tanggungan grants its holder a preferential right for settlement of a debt prior
to other creditors. A Hak Tanggungan does not grant its holder ownership of the secured
land, but does give the right to sell the land, either informally or by public auction, to settle
unpaid debts. Multiple security rights can be imposed over a single plot of land by several
creditors. However, typically the first priority security right holder will not permit, or will
condition, the rights of any inferior security right holder.

Fiduciary Security

Under Law No 42 of 1999 Regarding Fiduciary Security (30 September 1999) (the Fiduciary
Security Law), a fiducia is a security interest on movable assets, whether tangible or
intangible, and on immovable goods that are not subject to a (i) Hak Tanggungan under the
Security Rights Law; (ii) hypothecs on ships with gross tonnage of 20 M3 or more; (iii)
hypothecs on aircraft; or (iv) pledges.

With a fiduciary security, the owner transfers title to its asset in a fiduciary capacity, or in
trust, to the fiduciary grantee for the purpose of granting a security interest over that asset.
The fiduciary provider retains possession of the asset with the provision that title to the asset
will be transferred back to the fiduciary provider upon full payment of the secured debt.

Fiduciary security may be granted in respect of one or more security objects, whether
existing at the time of granting or subsequently acquired. Fiduciary security is created by the
execution of a deed of fiduciary security by and between the fiduciary provider and the

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fiduciary recipient before a notary. The fiduciary security is perfected by its registration at the
fiduciary registration office where the fiduciary provider is domiciled. Only one fiduciary
security may be registered over a particular item at any time. The registered fiduciary
security grants the fiduciary recipient priority over other creditors in case the fiduciary
provider defaults under the terms of the underlying agreement.

Collateral Right to Warehouse Receipt

Law No 9 of 2006 Regarding the Warehouse Receipts System (14 July 2006) stipulates
warehouse receipts as an alternative method of trade financing and creates a new security
right.

Warehouse receipts are title documents issued by a licensed warehouse manager for
commodities stored in the warehouse. Warehouse receipts may be issued for commodities
that can be stored for a certain time period (ie, up to three months). Banks and certain
financial institutions may issue derivative instruments based on these warehouse receipts.

Warehouse receipts may be in the form of (a) non-negotiable warehouse receipts, which
states the name of the party entitled to receive delivery of the stored commodities, or (b)
negotiable warehouse receipts, which states an order/instruction for a party to receive the
stored commodities. Both types of receipts must contain certain information, including a
description of the goods, the location of the goods, and the expiry date of the receipt. Upon
the expiry of a warehouse receipt, the warehouse manager is required to deliver the goods to
the current owner of the warehouse receipt, which may not be the original owner. In addition
to constituting evidence of the delivery of stored goods to a warehouse, warehouse receipts
are negotiable and may be used as collateral. A warehouse receipt may only be encumbered
once. Security rights created in respect of warehouse receipts grant the beneficiary a first
priority right over the relevant goods with respect to any other creditors.

At present, only certain commodities can be the subject of warehouse receipts, namely: rice,
grain, corn, coffee, cocoa, pepper, rubber and seaweed. However, it is expected that in the
future other warehouse-receipt suitable products will be included in the list of eligible
commodities.

In addition to the above securities, there are other devices recognised under the Indonesian
Civil Code that give lenders further assurance that loans will be repaid. These are personal
guarantees (borgtocht) and corporate guarantees. These are undertakings based on contract
and none confer upon the creditor any priority right over the debtors assets. The Indonesian
Civil Code also recognises the concept of a statutory assignment of accounts receivable,
known as a cessie. A cessie is an outright assignment or transfer of legal title of account
proceeds to an assignee, which is achieved upon notice to and acknowledgement by the
account debtor. As such, this device is not a security interest, whereby the title to the asset
remains with the debtor and a preferred lien is created on the asset in favour of the creditor.
Prior to the Fiduciary Security Law, the Indonesian courts allowed parties to create a cessie
as a contractual fiduciary transfer of accounts receivable to be created, based on Dutch
precedent. With the adoption of the Fiduciary Security Law, we do not believe it is possible to
create a fiduciary transfer over accounts receivable by contract, except in compliance with
the Fiduciary Security Law. Accordingly, we have not included such an assignment of
accounts receivable as one of the types of security rights that are available in our jurisdiction.
Further, we note that a hypothec may be imposed over certain type of assets ie, aircraft and
vessels. These security instruments are rare and are not discussed further.

2. In relation to the following types of assets, please provide the types of security that
can be created or granted in your jurisdiction and give details of any registrations required:

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(a) Real estate

(i) Hak Tanggungan: Land and buildings attached to land are normally
encumbered by a security rights, known as a Hak Tanggungan. A Hak Tanggungan over
land (and any buildings or movable property attached to such land) is perfected by way of
registration with the relevant land office. Such registration must be made within seven
working days after signing of the Deed of Grant of Hak Tanggungan (in Indonesian, an Akta
Pemberian Hak Tanggungan, or APHT) before a land deed official. The land deed official
must file and register the executed APHT and other necessary documents, such as the
original land certificate and a copy of the underlying loan agreement.

The document required for the registration is a power of attorney from the grantor and the
grantee of a Hak Tanggungan, giving the land deed official the authority to conduct the APHT
registration. Land deed officials are typically Indonesian notaries licensed by the state. The
power must be drawn up in a notarial deed form. If the documents are in order the process
should take about six weeks. The fees to draw up the APHT are approximately one per cent
of the total amount specified in the Hak Tanggungan and the registration cost is 0.25 per
cent thereof. We note these fees are not prescribed by statute and are negotiable.

(ii) Fiduciary: Security involving plant and machinery that are not attached to the land
must be encumbered by way of a fiduciary security. If the plant and machinery are attached
to the land, they will be secured by a Hak Tanggungan. It is not clear which security interest
prevails between a security right and a fiduciary security in a situation where a fiduciary
security is given over plant and machinery that are not initially attached to land but is
attached subsequently, and a security right is given over the same land, plant and
equipment.

The fiduciary security must be registered at the Fiduciary Registration Office (the FRO)
located within the province in which the fiduciary provider is domiciled. All registered
information relating to the collateral will be open to the public. Once registered, the fiduciary
recipient has a pre-emptive position over other creditors should the fiduciary provider default
under the terms of the underlying agreement. The fees to draw up a deed of fiduciary
security range between Rp.50,000 to Rp.7,500,000 depending on the value of the collateral.
These fees are prescribed by statute.

The procedure for registration of a fiduciary security is as follows:

(a) Registration is effected by the grantee of the fiduciary security or by its

attorney-in-fact or other representative.

(b) Registration is made by way of submitting a registration statement of fiduciary,

containing: (i) the identities of the parties to the deed of fiduciary security (the grantor and
grantee of fiduciary security); (ii) the date, the number of the deed of fiduciary, the name and
domicile of the notary preparing the deed of fiduciary; (iii) the name of the principal
agreement which is secured by the fiduciary security; (iv) the objects of the fiduciary security;
(v) the security value; and (vi) the value of the objects of the fiduciary security.

(c) The FRO will record the fiduciary security in the registration book of fiduciary security
on the same day as the registration statement is submitted.

(d) After the above recording, the FRO will issue a fiduciary certificate on the same day
as the registration. The fiduciary certificate, when properly executed, has a direct executory
right, in the sense that the fiduciary certificate has the same effect as a final and binding
court decision.

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(e) The fiduciary security is established on the date of its registration in the registration
book of fiduciary.

(b) Charging assets (inventory, stocks etc)

Fiduciary: Inventory and stocks are tangible movable assets, which under Indonesian
Security Law will be encumbered by fiduciary security. Please see comments on fiduciary
security as mentioned above.

(c) Movables

Fiduciary: Please see comments on fiduciary security as mentioned above.

(d) Shares

(i) Pledge: Under Indonesian law a security interest over shares can be taken by
way of a pledge of shares or the imposition of a fiduciary security over such shares, a pledge
of shares in an Indonesian company is established by way of an agreement between the
pledgor and the pledgee and notification to the company whose shares are being pledged. A
pledge of shares may be created over shares in a private company (Non-Listed Shares) or
a publicly listed company on Indonesias stock exchange (Listed Shares) in the form of scrip
(Listed Scrip Shares) or scripless (Listed Scripless Shares) or a combination thereof, each
with specific features as described below.

In the case of non-listed or private companies (Non-Listed Shares), and listed companies
that issue shares in scrip form (Listed Scrip Shares), the property to be pledged is
represented by a title document, ie, the share certificate, and thus there are elements of both
tangible movable property and intangible movable property involved in the pledge of such
shares. In those cases, the pledgor and pledgee must take possession of the tangible
evidence indicating title ownership of the shares (ie, the share certificate) in addition to
providing notice of the pledge to the company that issued the shares, or other entity (such as
a share registrar) that has control over the shares, as the entity against whom the pledge will
be exercised. Finally, the pledgee should ensure that the pledgor also complies with the
relevant laws and regulations, and the issuing companys AOA, concerning creation of the
pledge.

For example, if the pledgor is an Indonesian company, the pledgor should obtain approval
from its Board of Directors (BOD), the Board of Commissioners (BOC) and the
shareholders at their general meeting of shareholders or by unanimous written consent in
lieu of a shareholders meeting, if permitted by the pledgors AOA, whichever is relevant
under the pledgors AOA, approving the grant of a security interest over the shares in the
company. In addition, if a corporate pledgors shares in the company concerned constitutes
50 per cent or more of a corporate pledgors total net assets, it will be necessary to obtain
approval of 75 per cent of the pledgors shareholders voting at a shareholders meeting
attended by 75 per cent of the issued share capital of the company. As a general rule, no
other approval or consent (whether governmental or otherwise) and no registration, filing or
notification, apart from those mentioned above, is required or necessary for the pledge to be
created and perfected in favor of the pledgee. We note, however, that certain types of
companies may require specific government approvals not specified above. For example,
regional-owned companies may need approval from their regional houses of representatives
to pledge their assets. Furthermore, there may be cases where creditors have approval
rights over the grant of security interests to third parties. Final determination of required
approvals, therefore, can only be done on a case-by-case basis.

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a. Perfection of Pledge of Non-Listed Shares and Listed Scrip Shares: Below is a
summary of the specific steps that the pledgee is required to take to create and perfect a
pledge over a pledgors Non-Listed Shares and Listed Scrip Shares:

(i) execution of the credit agreement;

(ii) execution of the pledge agreement;

(iii) delivery of the share certificates or the collective share certificate to the pledgee after
the pledge agreement is signed. It is not the practice in Indonesia nor is it legally required
that the share certificates be endorsed in blank, as is common in many other jurisdictions.
However, it is recommended that this be done. The irrevocable power of attorney that will be
given by the pledgor to the pledgee will allow the pledgee to date and deliver the share
certificates to a buyer should there be a default and the pledgee thereby becomes entitled to
enforce the pledge. The pledgors AOA will indicate who should endorse on behalf of the
pledgor. Typically, this is duly endorsed in blank by the President Director of the company, (if
the pledgor is a company), but the President Commissioner may also be required by the
AOA to do so;

(iv) next, the pledgor (either alone but typically with the pledgee) must issue a
notice of pledge to the BOD of the company whose issued shares have been pledged,
informing it that the pledgors shares have been pledged to the pledgee and instructing the
issuing company to register the pledge in the share register of the company and to block the
pledged shares from any transfer or further pledge, redemption and conversion to scripless
form in respect of Non-Listed Scrip Shares, without the prior written consent of the pledgee.
The form of notice of pledge should be scheduled to the pledge agreement. The notice of
pledge should state clearly that the pledge is made in favor of the pledgee. In respect of
Listed Scrip Shares, the notice of pledge must also be delivered to the share registrar 5
appointed by the company, in addition to the foregoing notice to the BOD of the issuing
company. The pledgee should also obtain an undated consent to transfer executed by the
pledgor, as this document must be presented to the selling broker if the pledge is enforced
and the shares are sold through the stock exchange;

(v) the BOD of the company (and the share registrar in respect of Listed Scrip Shares)
should then issue a letter of acknowledgement to the pledgor and the pledgee stating that
the pledge of the pledgors shares has been duly registered in the share register maintained
by the BOD (and the share registrar, in respect of Listed Scrip Shares) and that the
respective parties agree not to register, and to block, any further pledge, transfer,
redemption, conversion or otherwise deal with respect to the pledged shares by the pledgor,
without the prior written consent of the pledgee;

(vi) concurrently with step (vi) above, the BOD of the company (and the share registrar in
respect of Listed Scrip Shares) should provide to the pledgee a copy of the share register,
indicating the recordation of the pledge in favor of the pledgee and confirmation of the
blocking arrangement; and

(vii) the pledgor would also grant an irrevocable power of attorney to the pledgee that
allows the pledgee to perfect the pledge and enforce the pledgees rights with respect to the
shares, in the name of the pledgor. The irrevocable power of attorney should grant the
pledgee at least the following powers to:
5
A share registrar is a securities administration bureau licensed by the Capital Market and Financial Institution Supervisory Board
(Bapepam-LK) to act as a share registrar pursuant to a contract that provides that the share registrar shall provide services in the
administration, transfer of ownership and recordation of transactions relating to the companys scrip listed share.

Marketing.10.Survey_Indonesia 7
 perfect its security over the pledged shares (or any future additional
shares) and otherwise to give proper effect to the pledge;

receive dividends or any other distributions (if it has been agreed in the
pledge agreement to include the same);

attend any general meeting of shareholders and vote and sign any
resolutions on behalf of the pledgor, if the borrower fails to pay when due any part of the
outstanding indebtedness under the loan agreement or the borrower or the pledgor otherwise
respectively defaults under the loan agreement or the pledge agreement, until the
enforcement of the pledge has been completed and the pledged shares have been sold; and

sell, transfer, conclude a private sale, auction or sale as instructed by

the district court to enforce the pledgees security rights in the pledged shares, including the
right to date and submit the executed consent to transfer to a broker to effect the sale of the
pledged shares through the stock exchange and to date and complete any endorsement of
share certificates previously made by the pledgor.

b. Perfection of the Pledge of Listed Scripless Shares: The Indonesian Capital

Markets Law 6 and the Indonesian Central Securities Custodian (in Indonesian, PT.
Kustodian Sentral Efek Indonesia, or KSEI) Regulation set out the perfection mechanism to
record a pledge of shares and to block any transfer or subsequent pledge of Listed Scripless
Shares. A publicly-listed company (itself, or acting through its share registrar) must refuse to
record in its records any transfer, a subsequent pledge over or any other dealing with respect
to any pledged shares. Further, the KSEI will refuse to permit the conversion of Listed
Scripless Shares to Listed Scrip Shares and the transfer of any pledged shares from a
securities account.

In general, the KSEIs role in respect of pledged securities is as follows:

(i) the KSEI can block the securities sub-account at the request of relevant parties;

(ii) the blocked securities and funds in the securities sub-account must be recorded in the
securities subaccount on behalf of the account holder and its customer, which is specifically
used to record the blocking of the shares; and

(iii) as long as such securities sub-account has been blocked, such pledged shares, and
any funds in the securities sub-account, cannot be withdrawn or transferred by the account
holder until revocation of the block has been authorized by the pledgee to KSEI and KSEI
has issued the revocation.

The role of the KSEI and the account holder in respect of the administration of a pledge of
shares is as follows:

(i) the account holder on behalf of its customer can pledge the securities in its
securities sub-account, by submitting to the KSEI an application for the pledge of securities.
Each application must include, among other matters, information on the type of securities,
the pledgee and other requirements for a pledge;

(ii) the pledge must be recorded in the securities sub-account on behalf of the
pledgor (as the customer of the account holder) specifically established for the recording of
the pledge. The pledged securities cannot be withdrawn or transferred to settle any securities

6
Law No 8 of 1985 Regarding Capital Markets (10 November 1995).

Marketing.10.Survey_Indonesia 8
transaction as long as the pledge is recorded;

(iii) the KSEI must issue a confirmation to the account holder who has submitted
the application for recording of the pledge and to the pledgee to evidence the recordation of
the pledge;

(iv) in relation to the pledged securities, the KSEI is only obligated to administer
custody of the pledged securities for the interest of the pledgee in accordance with the
instructions of the account holder. The KSEI does not take any responsibility as to the
parties rights and obligations under the pledge agreement;

(v) the rights attaching to the pledged securities, including the right to receive
cash and stock dividends, bonus shares and other rights, do not become part of the pledge
and are retained by the pledgor, unless otherwise set forth in the instructions made by the
account holder;

(vi) the application for a revocation of the pledge of the shares must be submitted
in writing by the account holder, which will not be accepted by KSEI unless the pledgee has
consented to the revocation;

(vii) KSEI must record the pledge of the shares of the account holders customer,
including the issuance of the confirmation letter as evidence of the recording of such pledge
to the account holder of the pledgor, for the benefit of the pledgee (as mentioned in point (ii)
above);

(viii) the account holder is responsible for the implementation of the recording of
the pledge of its customers shares and the issuance of the confirmation letter confirming the
recordation of the pledge of such shares in favour of the pledgee, including the request to
block the securities sub-account of the account holder maintained with the KSEI;

(ix) for the purpose of recording the pledge of the customers shares by the
account holder in the C-BEST, 7 the account holder must submit a request to KSEI to block
the securities subaccount in which the pledged shares are maintained, together with the copy
of the request for recording such pledge from its customer and the pledgee; and

(x) KSEI must submit a notice to the public company whose shares are registered
with KSEI in respect of the suspension of the securities sub-account for the recordation of
pledged securities owned by the account holder or its customer.

Below is a summary of the specific steps that pledgee must take to create and perfect a
pledge over a pledgors Listed Scripless Shares:

(i) execution of a credit agreement;

(ii) execution of a pledge agreement;

(iii) after the pledge agreement is signed, the pledgor (either alone or with the pledgee)
must issue a notice of pledge (x) to the account holder to record the pledge of shares with
the KSEI and block the shares in the C-BEST and (y) to the share registrar informing it that
the pledgors shares have been pledged to the pledgee and instructing it to block the pledged
shares from any further pledge, transfer, redemption, and conversion to scrip form or other
dealing with respect thereto, without the prior written consent of the pledgee, and to register

7
C-Best means the Book Entry Settlement System used by KSEI to settle securities transactions.

Marketing.10.Survey_Indonesia 9
the pledge in the share register of the company created for this purpose, pursuant to Article
1153 of the Indonesian Civil Code. The pledgee should also obtain an undated consent to
transfer executed by the pledgor, as this document must be presented to the selling broker if
the pledge is enforced and the shares are sold through the stock exchange;

(iv) upon receipt of the notice referred to in paragraph (iii) above, the share registrar
would then issue a letter of acknowledgement to the pledgor and the pledgee, with a copy to
the issuing company, stating that the pledge of the pledgors shares has been duly registered
in the share register maintained by the share registrar and that the share registrar agrees not
to register and to block any further pledge by the pledgor over the pledged shares as well as
any transfer, redemption, conversion or other dealing with respect thereto, without the prior
written consent of the pledgee;

(v) the account holder must then issue an application letter to the KSEI requesting the
KSEI to record the pledge of shares and to block the pledged shares in the C-BEST;

(vi) the KSEI will then issue a letter of confirmation to the account holder that the pledge
of shares has been recorded and blocked in the securities sub-account on behalf of the
pledgor and in the C-BEST;

(vii) as evidence of the recordation of the pledge, the account holder would then issue a
confirmation to the pledgor and to pledgee that the pledge of shares has been recorded;

(viii) the share registrar would also provide to the pledgee a copy of the recordation of
such pledge in favor of the pledgee after receiving confirmation from the KSEI through the
company; and

(ix) the pledgor would also grant an irrevocable power of attorney to the pledgee to allow
the pledgee to take any further steps to perfect the pledge and enforce the pledgees rights
with respect to the pledged shares in the name of the pledgor. The irrevocable power of
attorney would grant the pledgee at least the following powers:

to perfect its security over the pledged shares (or any future additional shares)
and otherwise to give proper effect to the pledge;

to receive dividends or any other distributions (if it has been agreed to include
the same in the pledge agreement);

to attend any general meeting of shareholders and vote and sign on behalf of
the pledgor any resolutions, should the borrower fail to pay when due any part of the
outstanding indebtedness or should the borrower or the pledgor respectively otherwise
default under the loan agreement or the pledge agreement, until the pledged shares have
been sold and the enforcement of the pledge has been completed; and

to sell, transfer, conclude a private sale or public sale to enforce the pledgees
security rights in the pledged shares, including the right to date and submit the executed
consent to transfer to a broker to effect the sale to transfer of the shares through the stock
exchange.

(e) Rights under contracts (receivables)

Please see our comments on fiduciary security above.

(f) Bank accounts

Marketing.10.Survey_Indonesia 10
Bank accounts in the form of bank time deposit can be pledged. The first step in obtaining a
pledge over bank deposit is to execute a pledge agreement, which may, but need not, be in
the form of a notarial deed. The execution of a pledge agreement in notarial deed form has
certain evidentiary advantages in the event of a dispute. For example, the pledgor cannot
later assert defenses of fraud or duress against the pledgee. However, in practice it would be
difficult to successfully assert such defenses against the pledgee in the event of foreclosure
of the pledge over a bank deposit, either as a legal or practical matter, and for this reason a
banker often use only private deed pledge agreement to create an effective and enforceable
pledge.

The pledge agreement must be governed by Indonesian law, given that the object of the
pledge is a bank deposit issued by an Indonesian bank and is therefore an intangible right
created by and under Indonesian law.

We note that if the assets pledged are delivered to the pledgor, the pledge will cease to have
effect. It is important, therefore, that the pledged assets are continuously in the possession of
the pledgee.

Under Indonesian law, a security interest is accessory in nature, which means that its
creation and continued existence is dependent on the existence of the loan. If the loan is fully
paid, the pledge will then automatically terminate.

If the pledgor is an individual and is married, the loan agreement and the pledge agreement
should be approved by the pledgors spouse in a written spousal consent or by the spouses
countersigning the two agreements.

If the pledgor is an Indonesian company, the pledgor may be required to obtain approval
from its BOD, BOC and/or shareholders at its general meeting, depending on the specific
requirements contained in the pledgors AOA.

The following steps are required to be taken to create and perfect a pledge over a pledgors
bank deposit:

(i) execution of a credit agreement;

(ii) execution of a pledge agreement;

(iii) once the pledge agreement is signed, the bank deposit certificate, confirmation slip or
other evidence of ownership must be delivered to the pledgee;

(iv) the pledgor and the pledgee must issue a notice of pledge to the issuing bank of the
bank deposit, informing the issuing bank that the pledgors bank deposit has been pledged to
the pledgee and instructing the issuing bank to block the pledged bank deposit from any
further pledge, liquidation, assignment, transfer, disposal or other encumbrance without the
prior written consent of the pledgee and to record the pledge in the issuing banks records, if
any, created for this purpose. We note that each bank determines whether and how it will
record pledges in its records in favour of another. There is no system that is mandated or
otherwise required by law. The notice of pledge should be scheduled to the pledge
agreement. The notice of pledge should state clearly that the pledge is made in favour of the
pledgee pursuant to Article 1153 of Indonesian Civil Code.

(v) If the term of the loan exceeds the time period of the bank deposit, the pledgee may
require the bank deposit to be extended automatically until the loan has been repaid. The
pledge agreement and the irrevocable power of attorney, described in point (vi) below,
should give the pledgee such rights. If the pledgor and the pledgee have agreed to include

Marketing.10.Survey_Indonesia 11
any interest earned on the pledged bank deposit as part of the pledge, the pledge agreement
should require that any interest derived from the pledged bank deposit be automatically
placed in a new bank deposit. This agreement should be set forth in the pledge agreement
and in the notice of pledge described in point (iv) above. The pledgee should also be given
the foregoing right in the irrevocable power of attorney from the pledgor, discussed further
below.

(vi) The bank holding the bank deposit would then be requested to issue a letter of
acknowledgement stating that the pledge of the pledgors bank deposit has been duly
recorded in the issuing banks records and that the issuing bank agrees not to record any
further pledge by the pledgor over the pledged bank deposit as well as to block the bank
deposit from any further pledge, liquidation, assignment, transfer, disposal or other
encumbrance over the pledged bank deposit without the prior written consent of the pledgee.

(vii) The pledgor would also grant an irrevocable power of attorney to the pledgee to
perfect the pledge and to enforce the pledgees rights with respect to the collateral in the
name of the pledgor. The power of attorney would grant the pledgee the following powers,
among others:

to perfect its security over the pledged bank deposit (and any future or
additional bank deposit) and otherwise to give proper effect to the pledge, including the right
to extend the term of the deposit if the deposit is not automatically extended;

to receive interest or any other investment return assigned to the

pledgee, if the pledge agreement so requires; and

to liquidate, assign, transfer the pledged bank deposit, to enforce the

pledgees security right in the pledged bank deposit and to sell, transfer and conclude a
private sale, public auction or court ordered sale, to enforce the pledgees security rights in
the pledged bank deposit.

Bank accounts are intangible movable property under Indonesian law and may in theory be
encumbered by a fiduciary security. However, the FRO in practice will not accept the
registration of a fiduciary security over a bank account. Consequently the bank usually uses
its setoff rights under Indonesian Civil Code to protect its interest over this type of collateral.
An instruction to block and a power of attorney from the borrower to the bank to liquidate the
fund is required despite the fact that the setoff is designed to automatically offset the
borrowers debt with the borrowers account.

(g) Financial Instruments (eg, securities)

Certain types of securities such as Government Bonds Bank Indonesia Certificates (Sertifikat
Bank Indonesia or SBIs), mutual funds and corporate bonds can be pledged.

The pledge processes for those securities are similar, but may require the involvement of
different institutions. For example, a pledge of a mutual funds participation unit would involve
the investment manager and custodian, a pledge of Government Bonds and SBIs would
involve BI as the central custodian, and a pledge of corporate bonds would involve KSEI as
the central custodian. As an illustration, the specific steps that need to be taken to create and
perfect a pledge over a borrowers interest in mutual fund by way of pledge are as follows:

(i) execution of the credit agreement;

(ii) execution of the pledge agreement;

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(iii) delivery by the pledgor to the pledgee of the written confirmations of ownership of the
pledged mutual fund participation units;

(iv) issuance by the pledgor and the pledgee, of a notice of the pledge of the pledgors
mutual fund participation units, to the investment manager, the custodian and the selling
agent, informing them that the pledgors mutual fund participation units have been pledged;

(v) The issuance of a letter of acknowledgement to the pledgee by the investment

manager, the custodian and the selling agent, of the pledge of the pledgors mutual fund
participation units, confirming that the custodian, the investment manager and the selling
agent agree not to permit any redemption of the mutual fund participation units without the
pledgees consent;

(vi) the grant of an irrevocable power of attorney by the pledgor to the pledgee to enforce
the pledgees rights with respect to the collateral in the name of the pledgor. The power of
attorney would grant the pledgee at least the following powers:

to perfect its security over the pledged mutual fund and otherwise to
give proper effect to the pledge;

to receive dividends or any other profit distributions assigned to the

pledgee (if it has been so agreed in the pledge agreement); and

to sign on behalf of the pledgor any redemption of the pledgorrs

interest in the mutual fund to enforce the pledgees security rights therein.

(h) Intellectual property

Security interests over intellectual property rights are not commonly used in Indonesia. In
theory, the fiduciary security system would be applicable. Please see comments above on
fiduciary security.

(i) Plant and machinery

Please see comments above on Hak Tanggungan and fiduciary security.

(j) Other assets

Not Applicable.

3. Can a trustee or security agent be used in your jurisdiction, or must security be

granted in favour of all lenders? Is the parallel debt clause concept recognised in your
jurisdiction?

Yes, a security agent can be used in our jurisdiction based on a contractual arrangement.
The role and duties of a security agent would be governed by a security agent agreement
and the relationship between the lender and the security agent would be based on contract
rather than law.

We do not recognize the concept of parallel debt under a trust arrangement. In normal
banking practice in Indonesia, a lender will appoint a facility or security agent to represent the
lenders interests and to hold and administer security on behalf of each lender, pursuant to
contract.

4. Please explain the latest amendments to the law governing secured transactions in

Marketing.10.Survey_Indonesia 13
your jurisdiction. Are there any amendments which will be introduced in the near future
(within 1-2 years) which might have an impact on the legal framework of secured
transactions? Please also explain recent practical developments regarding secured
transactions in your jurisdiction.

On 24 July 2008, the Chairman of the Commodity Futures Trading Regulatory Agency
(Badan Pengawas Perdagangan Berjangka Komoditi) issued Regulation No
09/BAPPEBTI/PER-SRG/7/2008, which provides the technical guidelines on using
warehouse receipts as collateral. This regulation encourages the use of warehouse receipts
as an alternative form of collateral.

Part II enforcement of security

1. Please explain briefly the general rules of enforcement of security indicated in answer to
the Question 1 in Part I above (excluding rules in a bankruptcy or insolvency proceedings
see Question 3 below). In your answer please explain whether specific security may be
enforced only through judicial proceedings or whether extra-judicial methods are also
available. Furthermore, please provide an estimate of costs (if they create significant
obstacles in enforcement, including applicable taxes and any other duties/ costs) and timing
for enforcing such security. Please also explain the degree of difficulty (eg, burdensome
formalities, whether enforcement requires actions of a state body) in enforcing security. Also
please explain whether taking security by an entity from another jurisdiction influences the
possibility of establishing security and its enforcement.

In general, a security interest created by a security agreement (whether it is a pledge,

mortgage, Hak Tanggungan, fiduciary security or collateral right to warehouse receipt) can
be immediately enforceable, without judicial enforcement proceedings, if the borrower fails to
pay when due any part of the amount outstanding under the loan agreement or following a
declaration of default. No prior demand for payment is required by law, although this is a
common contractual condition. In theory, a grantee of security may exercise all the powers
and rights of a security conferred by statute or otherwise and may sell or otherwise dispose
of all the title to and interest in the secured objects through a public auction or a private sale
or by court order, as the grantee of security may, in its sole and absolute discretion, think fit.

In practice, however, auction houses often request a court order to implement the auction
process, despite the fact that the law and the security agreement do not require such a court
order. This is also done because the buyers of collateral would prefer to have an execution
order issued by a court, on the assumption that such an order would reduce the success of a
later attempt by the debtor to recover its property from the buyer.

It is not possible to estimate the costs of enforcement of security interest without first
identifying the nature and value of the assets that are subject to the security interest.

In general, enforcement of security in Indonesia is time consuming, difficult and costly,

especially if it involves judicial enforcement.

We note that all security interests are accessory in nature. This means that once the secured
indebtedness has been paid, the security interest is no longer effective. Further, if excess
proceeds are realised from the sale of collateral, such access must be returned to the debtor-
borrower. If the proceeds realized from the sale of security are insufficient to repay the debt,
the borrower remains obligated to pay the balance of the debt.

We note there are several limitations and uncertainties with regard to the private (ie, non-

Marketing.10.Survey_Indonesia 14
judicial) enforcement of a security interest.

(i) The debtor (owner of the secured property, if different than the lender) may challenge
a banks foreclosure of collateral. Typically, this is done by bringing a lawsuit to challenge the
secured partys determination of the amount of the debt and the foreclosure process, which
the debtor alleges will not realize the true value of the collateral. This latter argument does
not apply in the case of a foreclosure of participation units in a mutual fund or the liquidation
of a bank deposit where the value of the collateral is liquid and readily determinable in the
market.

(ii) Another method of attack by a debtor is to challenge a banks sale of the collateral on
the ground that it may not be made without a court order. A debtor may argue that the
security agreement does not permit a sale since it does not have the executorial force that a
court order would have. We note the foregoing claims have been accepted by the Indonesian
courts in some cases. In the case of pledge, this is not a valid legal argument since a private
sale is allowed by Article 1155 of the Indonesian Civil Code, if agreed in the pledge
agreement.

(iii) Although the power of attorney will by its terms be stated to be irrevocable, there is a
risk that it can nonetheless be revoked by the grantor and that it may be deemed terminated
as a matter of law upon the death of an individual grantor and by the bankruptcy of a
corporate grantor. Article 1813 of the Indonesian Civil Code provides as follows:

Article 1813. A power of attorney shall terminate due to revocation of the power
granted to the grantee; due to notification on termination of the power by the grantee;
due to the death, the guardianship, the bankruptcy or apparent insolvency, either of the
grantor or the grantee; due to the marriage of the woman who has granted or accepted
the power.

The power of attorney will include a waiver of this Article but there remain uncertainties
whether a court would enforce such a waiver and whether it can be waived in the case of the
grantors death, guardianship, bankruptcy or apparent insolvency. Furthermore, the grant of
an irrevocable authorization may not prevent the grantor from exercising such powers,
although a waiver by the grantor should be enforceable.

(iv) The exercise and enforcement of the lender's right of a private power of sale under
the security agreement may be challenged. As noted earlier, in the case of pledge, this right
is allowed by Article 1155 of the Indonesian Civil Code if the pledgor and the pledgee have
so agreed, and this provision should eliminate the risk of such challenge. The loan
agreement and the pledge agreement will typically provide for this right.

Article 1154 of the Indonesian Civil Code prohibits the pledgee to own the pledged interest
in the pledged assets upon an event of default. This means that a pledgee cannot simply
appropriate or take all of the collateral in satisfaction of the debt. The purpose of this
provision is to prevent a forfeiture by the pledgor and a windfall to the pledgee. The pledgee
is only secured to the extent of its debt and the value of the collateral could exceed the
amount of the debt. To avoid this, a public sale of the collateral is generally required. As
noted above, we believe a public sale will occur on foreclosure of mutual fund participation
interests by redemption on a net asset value basis as the established and only trading
market mechanism for mutual fund participation interests. Further, the liquidation of a bank
deposit to be applied against debt should not violate this provision. In any case, in the case
of pledge, Article 1155 permits a private sale if agreed by the parties to the pledge
agreement.

(v) In Indonesia, banks are allowed to temporarily own collateral as a transition step to its

Marketing.10.Survey_Indonesia 15
liquidation and the application of the cash proceeds to the debt. If a default occurs and the
collateral provider is cooperative with the bank, they can mutually agree that the bank will
assume temporary possession of the collateral to sell it to a third party.

2. Please explain briefly specific features (if any) of enforcement of security established
over following types of assets:

(a) Real estate

In the event of default, the holder of first rank Hak Tanggungan over land and
goods/buildings which are attached to the land can sell the object of the Hak Tanggungan by
way of public auction. However, a private sale may be conducted for the highest price
available for the benefit of all parties. Such private sale can be conducted after a one month
written notice by the holder of security right to the owner of the property. Such notice must be
published in at least two local newspapers and there must have been no objection to the
announcement.

(b) Charging assets (inventory, stocks etc)

Please see comments on fiduciary security below.

(c) Fixed charge over movables

The object of fiduciary security may be sold by way of public auction. A private sale may also
be conducted for the highest price available for the benefit of all parties and such private sale
is made one month after written notification by the grantee of the fiduciary security to the
owner of the property. The notice must be published in at least two local newspapers.

Unlike in a pledge, where the object of the pledge must be under the control of the pledgee,
with fiduciary security, the object of the fiduciary security remains with the grantor of the
fiduciary security. Therefore, at the time of enforcement of fiduciary security, the grantor of
fiduciary security must deliver the object of the fiduciary security to the grantee of the
fiduciary security for execution. If the grantor fails to do so, the grantors only option is to
commence judicial proceedings, which will be time-consuming and costly.

(d) Shares

A pledge of shares can in practice be enforced without involving any judicial proceedings,
because the pledged property is in the possession or otherwise under the control of the
pledgee. Therefore, upon notice of default, the pledgee may immediately proceed to sell the
pledged property to a prospective buyer.

To enforce a pledge of shares, the pledgee or lender must issue a declaration of default,
assuming this is required by the loan documentation. For enforcement for Non-Listed Shares
and Listed Scrip Shares, the pledgee should instruct the BOD of the issuing company (and
the share registrar for a public company that has issued Listed Scrip Shares) to release the
block recorded against the pledged shares and remove the annotation of the pledge from the
share register of the company for purposes of the pledgees enforcement of the pledge
agreement and sale of the pledged shares. After such instructions have been given, the
pledgee may then proceed to sell the pledged shares to a designated buyer in the following
manner:

(i) in the case of Non-Listed Shares, the pledgee may sell the pledged shares in one of
the following ways:

Marketing.10.Survey_Indonesia 16
 request an auction house to sell the pledged shares, followed by the
execution of a sale-purchase agreement with the winning bidder. In practice, auction houses
often request a court order to implement the auction process, despite the fact that the law
and the pledge agreement do not require such a court order; or

submit an application to the relevant district court if the pledgee

determines it wishes to obtain a court order to sell the pledged shares; or

sell the pledged shares in a private sale pursuant to the rights granted
in the pledge agreement and the irrevocable power of attorney, as permitted by Article 1155
of the Indonesian Civil Code;

(ii) in the case of Listed Scrip Shares, the pledgee may sell the pledged shares in one of
the following ways:

request an auction house to sell the shares, followed by the execution

of a sale-purchase agreement with the winning bidder. Again, the auction house often
requests a court order to implement the auction process, despite the fact that the law and the
pledge agreement do not require such a court order; or

submit an application to the relevant district court if the pledgee

determines it wishes to obtain a court order to sell the pledged shares; or

sell the pledged shares through the stock exchange pursuant to the
irrevocable power of attorney provided by the pledgor, as permitted by the pledge agreement
and Article 1155 of the Indonesian Civil Code that allows such a sale provided two brokers
are involved, one for the pledgee as seller and one for the buyer; and

present the executed and dated consent to transfer to a broker and a

copy of the irrevocable power of attorney from the pledgor to the pledgee, to effect the sale
of the pledged shares.

(iii) In the case Listed Scripless Shares, the pledgee must:

instruct the account holder to apply for the release of the block
recorded against the pledged shares in the C-BEST 8 and remove the annotation of the
pledge from the records of the KSEI;

instruct the share registrar to apply for the release of the block against
the pledged shares and remove the annotation of the pledge from the share register of the
company concerned and to instruct the account holder (ie, the securities broker) to sell the
pledged shares through the stock exchange, using two brokers, one for the pledgee as seller
and one for the buyer; and

present the executed and dated consent to transfer to a broker and if

necessary a copy of the irrevocable power of attorney from the pledgor to the pledgee, to
effect the sale of the pledged shares; and

(iv) once the shares have been sold in one of the ways mentioned above, the
pledgee must apply the proceeds of the sale, less all costs of enforcement, to pay the debt of

8
C-Best means the Book Entry Settlement System used by KSEI to settle securities transactions.

Marketing.10.Survey_Indonesia 17
the pledgor or the borrower, as the case may be, owing to the pledgee.

(e) Rights under contracts (receivables)

Please see comments on fiduciary security above.

(f) Bank accounts

In theory, upon default, a pledged bank account can freely be setoff by the bank against the
debt of the borrower.

In the case of a pledge of bank deposit, the pledgee may exercise all the powers and rights
of a pledgee conferred by statute or otherwise and the bank may liquidate or otherwise
dispose of the deposit. In practice, the pledgee will automatically liquidate and apply the
proceeds to repay the secured indebtedness. This is allowed under Article 1155 of the
Indonesian Civil Code as long as it has been agreed in the pledge agreement.

(g) Financial instruments (eg, securities)

The security created by a pledge of financial instrument is immediately enforceable, as

provided in the loan agreement and the pledge agreement, if the borrower fails to pay when
due or following the occurrence of another type of default. It is not necessary to give a notice
of default to exercise such rights but this is normally done as a commercial matter. In theory,
the pledgee may exercise all the powers and rights of a pledgee conferred by statute or
otherwise and may sell or otherwise dispose of all the title to and interest in the pledged
securities through a public auction or a private sale as the pledgee may, in its sole and
absolute discretion, think fit.

With regard to mutual fund participation units, under existing banking regulations, the
pledgee may liquidate the pledgors participation units in the mutual fund by requesting
redemption of such units by the mutual funds.

(h) Intellectual property

Please see comments on fiduciary security above.

(i) Plant and machinery

Please see comments on fiduciary security above.

(j) Other assets

Not Applicable.

3. How does a commencement of bankruptcy or insolvency proceeding influence the

rights of the security holder to enforce its rights? In bankruptcy or insolvency proceedings,
what are the suspect periods, is claw-back possible, and what other types of rights (tax
debts, employees, etc) have preference over security granted? Please explain briefly specific
features (if any) of enforcement of security established over following types of assets in a
bankruptcy or insolvency proceeding:

Bankruptcy proceedings in Indonesia are regulated by Law No 37 of 2004 Regarding

Bankruptcy and Suspension of Debt Repayment (October 18, 2004) (the Bankruptcy Law),
which provides that secured creditors may exercise their rights to collateral security, subject

Marketing.10.Survey_Indonesia 18
to the temporary stay period, as if there were no bankruptcy proceedings. The secured
creditor in a bankruptcy proceeding is only entitled to the amount of the sales proceeds
necessary to satisfy its claims. The secured creditor is also required to deliver a part of the
proceeds to any privileged creditor holding rights superior to the rights of the secured creditor
pursuant to Articles 1139 and 1149 of the Indonesian Civil Code. Articles 1139 and 1149 of
the Indonesian Civil Code provide, give priority to certain creditors, such as auctions costs
and court costs. Claims for payments for taxes are superior to all other claims, and claims of
employees also rank higher than the claims of secured creditors. If the sales proceeds are
not sufficient to satisfy the claims of the secured creditor, then the secured creditor becomes
an unsecured creditor for any shortfall.

Secured creditors are prevented from executing their rights for a maximum period of 90 days
as of the date of the bankruptcy declaration, or a maximum period of 270 days if the court
ratifies a settlement proposal. The Bankruptcy Law requires this stay period for the purposes
of:

(i) increasing the possibility of a composition plan being agreed;

(ii) increasing the possibility of maximizing the value of the bankrupts assets; or
(iii) allowing the receiver to carry out his duties in an optimal manner.

Certain specific assets of the debtor are subject to priority claims from certain categories of
creditors, and such claimants are entitled to the proceeds from the sale of these specific
assets prior to claims of general unsecured creditors.

In summary, creditors under the Bankruptcy Law can be divided into three categories: (i)
unsecured creditors; (ii) secured creditors; and (iii) privileged creditors. Unsecured creditors
shall be paid pro rata based on their portion of all receivables while secured creditors shall
be paid out of the proceeds of the sale of security and privileged creditors out of the sale of
assets on which they have privileged rights.

With regard to the specific features of enforcement of security established over the following
types of assets in a bankruptcy or insolvency proceedings, please be informed that the types
of assets do not determine the bankruptcy procedure. Rather, the type of security determines
the rights of the secured parties in bankruptcy proceedings.

(a) Real estate

Please see comments on bankruptcy proceedings above.

(b) Charging assets (inventory, stocks etc)

Please see comments on bankruptcy proceedings above.

(c) Fixed charge over movables

Please see comments on bankruptcy proceedings above.

(d) Shares

Please see comments on bankruptcy proceedings above.

(e) Rights under contracts (receivables)

Please see comments on bankruptcy proceedings above.

Marketing.10.Survey_Indonesia 19
(f) Bank accounts

Please see comments on bankruptcy proceedings above.

(g) Financial instruments (eg, securities)

Please see comments on bankruptcy proceedings above.

(h) Intellectual property

Please see comments on bankruptcy proceedings above.

(i) Plant and machinery

Please see comments on bankruptcy proceedings above.

(j) Other assets

Not Applicable

5. Are there any specific features or problems of enforcement proceedings if the security
is granted to a trustee or security agent or the parallel debt structure is used?

There are no specific features or problems of enforcement proceedings if the security is

granted to a trustee or security agent. However, in practice, when a security is granted to a
security agent by a number of creditors, it is unclear whether the names of all of the creditors
must be registered or it is sufficient to only register the security agent in the security
registration/certificate.

With regard to parallel debt structure, as mentioned above, we do not recognize the concept
of parallel debt under a trust arrangement in our jurisdiction.

6. Please explain the latest amendments to the law governing secured transaction in
your jurisdiction in relation to a bankruptcy or insolvency proceeding. Are there any
amendments which will be introduced in the near future (within one to two years) which might
have impact on the legal framework of the enforcement of secured transactions in the light of
insolvency law? Please also explain recent practical developments regarding secured
transactions in your jurisdiction in relation to insolvency law.

As mentioned above, the Indonesian Bankruptcy Law was issued in 2004, and no
amendments has been made to the Bankruptcy Law ever since.

The Bankruptcy Law has been submitted to the Indonesian Constitutional Court for a judicial
review for several times, lastly in 2008. However, the Indonesian Constitutional Court
rejected such judicial review petitions. No successful attempts have been made until today.

Marketing.10.Survey_Indonesia 20