Parent Guarantee Agreement Template for Indonesia

The Parent Guarantee Agreement is a crucial document in Indonesian business transactions where a parent company provides financial backing for its subsidiary's obligations. This agreement is commonly used when a subsidiary requires additional credit support for obtaining financing, entering into significant commercial contracts, or participating in major projects. The document must comply with Indonesian law requirements, particularly the Civil Code (KUH Perdata) and Company Law (Law No. 40 of 2007), and often requires specific corporate approvals and potentially regulatory clearances. The agreement details the scope of guaranteed obligations, enforcement mechanisms, and includes provisions for currency considerations, especially relevant in cross-border transactions. It's essential for establishing clear legal obligations while ensuring compliance with Indonesian regulatory requirements regarding corporate guarantees.

1. Parties: Identifies the guarantor (parent company), the beneficiary (creditor), and references the principal debtor (subsidiary)

2. Background: Sets out the context of the underlying obligation and the relationship between the parties

3. Definitions and Interpretation: Defines key terms and establishes interpretation principles, including currency, time references, and Indonesian law concepts

4. Guarantee and Indemnity: Core section establishing the guarantee obligations, including scope, nature (conditional/unconditional), and indemnity provisions

5. Representations and Warranties: Guarantor's confirmations regarding capacity, authority, and financial condition

6. Continuing Security: Establishes the guarantee as continuing security regardless of intermediate payment or settlement

7. Payments: Terms for making payments, including currency, timing, and method

8. Tax Gross-up: Provisions for tax deductions and requirements for gross-up payments

9. Costs and Expenses: Allocation of costs related to preparation, enforcement, and maintenance of the guarantee

10. Duration and Release: Term of the guarantee and conditions for release

11. Enforcement and Recovery: Rights and mechanisms for enforcing the guarantee under Indonesian law

12. Communications: Notice provisions and contact details

13. Governing Law and Jurisdiction: Confirms Indonesian law as governing law and jurisdiction for disputes

14. Language: Specifies Indonesian and English versions (if dual language) and which prevails