Cross Collateral Agreement Template for Indonesia

A Cross Collateral Agreement creates a unified security framework where multiple assets secure multiple obligations across different credit facilities under Indonesian law. This sophisticated legal instrument allows lenders to strengthen their security position by ensuring that all collateral assets can be used to satisfy any outstanding debts, regardless of which specific facility generated the obligation.

When do you need this document?

You need a Cross Collateral Agreement when your business has multiple loans or credit facilities with the same or related lenders and you want to create an integrated security structure. This is particularly common in corporate financing where companies have term loans, revolving credit facilities, and trade finance arrangements that need to be secured by various assets including real estate, equipment, inventory, and receivables. The document is also essential during debt restructuring when consolidating security arrangements, or when establishing syndicated lending facilities where multiple lenders require comprehensive security coverage. Indonesian businesses often use this agreement when expanding their banking relationships while maintaining existing security arrangements.

Key legal considerations

The agreement must clearly define all parties, including borrowers, lenders, security agents, and guarantors, while establishing the scope of cross-collateralization. You need to carefully consider the ranking of security interests, especially when existing security holders are involved, as Indonesian law provides specific priority rules. The document should address enforcement procedures, including the rights of security agents in syndicated arrangements and the distribution of proceeds from asset sales. Release mechanisms are crucial - you want clear procedures for releasing specific collateral when loans are repaid or when substituting security. Consider the impact on future borrowing capacity, as cross-collateralization can limit your ability to grant security to new lenders. The agreement should also address default scenarios and specify which party has authority to enforce security interests.

Legal requirements in Indonesia

Indonesian law requires strict compliance with security registration requirements under Law No. 42 of 1999 on Fiduciary Security for movable assets and Law No. 4 of 1996 on Land Mortgage for real estate. The agreement must be executed before an Indonesian Notary and include proper Indonesian language versions for enforceability. Registration with the Fiduciary Registration Office is mandatory for movable collateral, while land-based security must be registered with the National Land Agency. OJK regulations under POJK.03/2019 govern collateral valuation requirements for banking institutions. The document must comply with Indonesian Civil Code provisions on contract validity, including legal capacity of parties and lawful consideration. Currency restrictions under Bank Indonesia regulations may apply if facilities involve foreign currency obligations. Proper corporate resolutions and board approvals are required for corporate borrowers, and the agreement should reference compliance with Indonesian investment laws if foreign lenders are involved.