Equity Pledge Agreement Template for Indonesia

When you need to secure debt obligations using shares in an Indonesian company as collateral, an Equity Pledge Agreement provides the legal framework to create and enforce this security arrangement. This document creates a pledge over company shares, giving the lender (pledgee) specific rights over the pledged shares until the secured obligations are fully satisfied. Under Indonesian law, share pledges are governed by the Civil Code and must comply with additional requirements from the Financial Services Authority (OJK) to ensure legal validity and enforceability.

When do you need this document?

You need an Equity Pledge Agreement when securing corporate loans with shares as collateral, particularly in acquisition financing where the target company's shares secure the purchase price debt. This document is essential for project finance transactions where sponsors pledge their project company shares to lenders, and in syndicated lending arrangements where multiple lenders require security over the borrower's shares. The agreement is also crucial for restructuring existing debts where shareholders provide their shares as additional security, and when foreign lenders need enforceable security over Indonesian company shares in cross-border financing transactions.

Key legal considerations

Your Equity Pledge Agreement must address critical voting rights arrangements, specifying whether the pledgor retains voting rights or transfers them to the pledgee during the pledge period. The document should clearly define enforcement triggers and procedures, including the pledgee's right to sell pledged shares upon default and the distribution of sale proceeds. You must include comprehensive representations and warranties regarding the pledged shares, covering matters such as clear title, absence of encumbrances, and compliance with corporate approvals. The agreement should establish detailed procedures for dividend and distribution treatments, specify information rights for the pledgee, and include provisions for share substitution or release under certain circumstances.

Legal requirements in Indonesia

Under Indonesian law, your Equity Pledge Agreement must comply with Civil Code requirements for valid contracts, including mutual consent, legal capacity of parties, and lawful subject matter. For public company shares, you must follow OJK Regulation No. 6/POJK.04/2019 requirements, including mandatory registration with OJK and specific disclosure obligations. The agreement must respect Company Law restrictions on share transfers and obtain necessary corporate approvals from the company's board of directors or shareholders. You need to ensure proper notification procedures to the company and maintain compliance with any existing shareholder agreements or articles of association that may restrict share pledges. The document must be executed with proper Indonesian notarial procedures when required and include appropriate governing law and dispute resolution clauses recognizing Indonesian jurisdiction.