Collateral Control Agreement Template for Indonesia

A Collateral Control Agreement is a specialized legal document that creates a three-way arrangement between a lender, borrower, and independent collateral manager to oversee physical assets used as security in financing transactions. Under Indonesian law, this agreement ensures proper control and monitoring of collateral while maintaining compliance with fiducia security requirements and secured transactions regulations.

When do you need this document?

You need a Collateral Control Agreement when your lending arrangement involves physical goods or commodities that require independent oversight. This is particularly crucial in trade finance transactions where imported goods serve as collateral, commodity financing deals involving agricultural products or raw materials, and working capital facilities secured by inventory. The agreement becomes essential when the borrower retains physical possession of goods but the lender needs assurance of control over the collateral. It's also required when multiple lenders are involved and need a neutral party to manage the security interests, or when the collateral is stored in third-party warehouses or logistics facilities.

Key legal considerations

The agreement must clearly define the scope of the collateral manager's authority and limitations to avoid conflicts with the borrower's operational needs. Insurance provisions are critical, specifying who maintains coverage and how claims are handled if collateral is damaged or destroyed. Release mechanisms must be precisely structured, detailing conditions under which collateral can be released for sale or processing. The agreement should address potential conflicts of interest, especially if the collateral manager has existing relationships with either party. Liability allocation clauses are essential, determining responsibility for losses due to theft, damage, or negligence. The document must also establish clear reporting requirements and inspection rights to ensure transparency and compliance monitoring.

Legal requirements in Indonesia

Under Indonesian law, the agreement must comply with Law No. 42 of 1999 on Fiducia Security when movable assets serve as collateral, ensuring proper registration and perfection of security interests. The Indonesian Civil Code governs fundamental contract principles, requiring clear terms, lawful consideration, and capacity of parties. If the arrangement involves foreign currency obligations, compliance with Law No. 7 of 2011 on Currency is mandatory. Electronic documentation or monitoring systems must adhere to Law No. 11 of 2008 on Electronic Information and Transactions. The agreement should specify Indonesian law as governing law and include dispute resolution mechanisms acceptable under Indonesian legal framework. Proper execution requires compliance with Indonesian notarization requirements if mandated by the underlying security documents, and the collateral manager must have appropriate licensing for warehousing or logistics activities under Indonesian regulations.