Account Control Agreement Template for Indonesia
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What is a Account Control Agreement?
An Account Control Agreement is a crucial document in secured financing transactions under Indonesian law, used when a lender requires control over a borrower's bank accounts as collateral security. The agreement creates a mechanism whereby the deposit bank agrees to comply with the secured party's instructions regarding the account without requiring additional consent from the account holder (debtor). This arrangement is particularly important in project finance, corporate lending, and other secured transactions where cash flow control is essential for the lender's security package. The document must comply with Indonesian banking regulations and typically includes detailed provisions on control mechanisms, operating procedures, and the rights and obligations of all parties involved. The agreement becomes especially relevant in enforcement scenarios, ensuring the lender can effectively control the account upon the occurrence of specified events of default.
About the Account Control Agreement
An Account Control Agreement is a fundamental security document in Indonesian secured financing that allows lenders to exercise control over borrowers' bank accounts. Under Indonesian law, this tri-party agreement between the secured party, debtor, and deposit bank creates a legally binding framework that enhances the lender's security position by providing direct control over cash flows and account funds.
When do you need this document?
You need an Account Control Agreement when structuring secured lending transactions where account control is critical to your security package. This document becomes essential in project finance deals where cash flow monitoring is paramount, syndicated loan facilities requiring coordinated account management, and corporate restructuring scenarios where lenders need assured repayment mechanisms. The agreement is particularly valuable in cross-border transactions involving Indonesian entities, where international lenders require certainty over local banking relationships and account operations.
Key legal considerations
The agreement must clearly define the control mechanisms and specify when the secured party can exercise control rights over the account. Critical provisions include the scope of control instructions, the bank's obligation to comply with secured party directions, and the procedures for account operation during normal and enforcement periods. You should ensure the agreement addresses notification requirements, as Indonesian banking law requires specific procedures for account control transfers. The document must also establish clear priority rights among multiple secured parties and define the circumstances triggering control activation, such as events of default or breach of financial covenants.
Legal requirements in Indonesia
Under Indonesian law, Account Control Agreements must comply with the Indonesian Civil Code's contract formation principles and Banking Law No. 10 of 1998 governing banking relationships. The agreement requires proper execution by authorized representatives of all parties, with corporate resolutions supporting the bank's commitment to follow third-party instructions. Financial Services Authority (OJK) regulations may impose additional requirements on participating banks, particularly regarding customer protection and banking secrecy obligations. The document must also consider Law No. 42 of 1999 on Fiduciary Security when the account control forms part of a broader security package over movable assets. Proper legal documentation is essential to ensure enforceability, as Indonesian courts scrutinize the validity of security arrangements that restrict account holders' normal banking rights.
GOVERNING LAW
Applicable law
This Account Control Agreement is drafted to comply with Indonesia law. Key legislation includes:
Law No. 7 of 1992 on Banking as amended by Law No. 10 of 1998: Primary banking law that governs banking operations, bank accounts, and banking relationships in Indonesia
Law No. 42 of 1999 on Fiduciary Security: Regulates secured transactions and security interests in movable assets, including bank accounts
Financial Services Authority (OJK) Regulation: Regulations issued by OJK governing financial services institutions and their operations in Indonesia
Law No. 9 of 2016 on Prevention and Resolution of Financial System Crisis: Provides framework for financial system stability and may affect control arrangements over bank accounts
Bank Indonesia Regulations on Payment System: Regulations governing payment systems and fund transfers that may affect account control mechanisms
Law No. 3 of 2011 on Fund Transfers: Regulates fund transfers and may impact the operation of controlled accounts
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