Facility Agreement Template for Indonesia

A Facility Agreement is the cornerstone legal document that governs lending relationships in Indonesia, establishing the terms and conditions under which financial institutions provide credit facilities to borrowers. This comprehensive contract serves as the primary reference for all parties involved in the lending arrangement and must comply with Indonesian banking regulations and civil law requirements.

When do you need this document?

You need a Facility Agreement whenever establishing a formal lending arrangement in Indonesia, whether for corporate financing, project development, or working capital purposes. This document is essential for term loans, revolving credit facilities, overdraft arrangements, and syndicated lending transactions. Banks and financial institutions require this agreement to document their lending activities in compliance with OJK supervision requirements. The agreement is also necessary when foreign lenders provide facilities to Indonesian borrowers, ensuring proper documentation of cross-border lending arrangements subject to Bank Indonesia foreign exchange regulations.

Key legal considerations

Several critical legal elements must be carefully structured in your Facility Agreement. The conditions precedent section requires particular attention, as it establishes the legal and documentary requirements that must be satisfied before funds can be drawn down. Interest rate provisions must comply with Indonesian usury laws and central bank regulations, while repayment terms should account for potential currency fluctuation impacts under Law No. 24 of 1999. Security arrangements require careful coordination with Indonesian security laws, particularly the Fiduciary Security Law No. 42 of 1999 for movable assets and land law requirements for real estate security. Default and enforcement provisions must align with Indonesian civil procedure and insolvency laws to ensure enforceability.

Legal requirements in Indonesia

Indonesian law imposes specific mandatory requirements on Facility Agreements that cannot be overlooked. Under Law No. 24 of 2009, agreements involving Indonesian parties must be executed in Bahasa Indonesia or include certified Indonesian translations to ensure legal validity. Banking Law No. 7 of 1992 requires compliance with prudential banking regulations, including loan classification and provisioning requirements that may affect facility terms. OJK regulations mandate specific reporting and documentation standards for financial institutions, influencing the structure and content of facility documentation. Foreign exchange regulations under Law No. 24 of 1999 impose restrictions on currency denomination and cross-border payment mechanisms that must be reflected in the agreement terms. Additionally, the Indonesian Civil Code requires compliance with fundamental contract formation principles, including legal capacity, lawful consideration, and absence of defects in consent, while notarization may be required for certain high-value or secured facilities.