LEGAL AUDIT & LEGAL OPINION
Legal Audit Long
Form;
Legal Opinion Short
Form
Purposes: extension and restructuring of
loans, issuing instruments in stock
exchanges, merger and acquisition:
Addressee >< Counsel
Full Disclosure Limitation of liabilities
- Assumptions
- Qualifications
Full Disclosure:
♦ Articles of Association and any amendments thereof.
♦ History of equity and shareholders.
♦ Management and
Supervisor.
♦ Permits.
♦ Assets and encumbrance
: movable (Art. 1977 Civil Code), immovable, IPR.
♦ Contracts.
♦ Litigation.
♦ Special Conditions: M&A.
♦ Corporate Guarantor, Holding Company, Subsidiaries,
Affiliates (full or limited audit).
Assumptions:
¾ General:
Good Faith Concept (Art. 533 Civil Code).
¾ Genuine
of signatures.
¾ Conformity
of copies to originals.
¾ Accuracy
of translations.
¾ Due
authority and execution by all parties other than the party being opined upon.
¾ Absence
of conflict with other contracts of the party being opined upon.
Qualifications:
™ Express
no opinion is respect of matters
governed by foreign laws.
™ Rely
public records.
GUIDELINES
TO REVIEW LOAN AND SECURITY
DOCUMENTATION
GENERAL
Notarial/Non Notarial
Deed
• Loan Agreement may
be in the form of notarial deed or not.
• Akte Pemberian
Hak Tanggungan/Akte Hipotik shall be made
by PPAT.
• Sertifikat
Hipotik shall be issued by the appropriate Land Office.
• Akte
Kuasa
Memasang Hak Tanggungan/Akte Hipotik shall
be
made by notary public or PPAT.
Consent
• If the loan given to a PT or other legal entities, check the Articles of Association on how the procedure should be followed (who is entitled to sign, who should give approval, etc). Check
also whether the amendments of the loan agreement follow the procedure.
• If the security
is given by a PT or other legal entities, check who
is entitled to sign the
security document and whether
the consent of commissioners is needed. Check with
the Articles of Association of the PT/other legal
entities and their amendments.
• If the security constitutes more than 50% of the assets of the security giver, article 88
UUPT shall be complied with (the consent
from RUPSLB and announcement in 2 newspapers). Ask the client about the ”50% of the assets”.
Please note that article 88
UUPT shall only be considered if
the security is given after March 7,
1996.
• If the security is given by a married giver, check whether the security
document was co-signed by his/her spouse as consent
or whether the spouse consent was given in a separate document (the consent letter is
usually attached to the security document,
except for Akte Pemberian Hak Tanggungan/Akte Kuasa Memasang Hak Tanggungan/Hipotik the consent letter is kept by the PPAT/notary public.
It is not necessary for us to check with the PPAT/notary public of the consent letter as the Akta
will mention about the
consent. However, please check the wording in the Akta whether consent letter is in the notarial
or in the underhand form).
• However, if there is an agreement of segregation of marital
assets, the spouse’s consent is not needed.
• If the document
is
made in notarial
Deed,
you
may not check
the
Articles
of
Association of the borrower/security giver as you can rely on the information in the
notarial deed that the consent has been given.
Please note that you NEED to check the Articles of Association if the notarial deed does not give such information.
• Check if there are
two witnesses signed any non-notarial deed.
Enforcement
Forum
• Check the forum of Loan Agreement and every security
documents. Different forum among
them may make the
enforcement difficult.
• In the case of the assignment of the borrower’s deposit with the client, we can neglect the enforcement forum since the client may
simply enforce the assignment by set off.
Unsecured
Loan
• ”Negative Pledge” clause is required
to protect the client creditor’s interest against newer creditor. Look for it in
”Covenants” or ”Negative Covenants” clause.
• ”Pari Passu” clause is required to protect
the client creditor’s interest against
other unsecured creditor. Look for it in ”Representation and Warranties” clause.
Power of Attorney
• Power of Attorney by a borrower to the creditor shall be given with a waiver of articles 1813, 1814 and 1816 of the
Indonesian Civil Code.
MORTGAGE
• See Sertifikat Hak
Tanggungan/Sertifikat Hipotik.
• See Sertifikat Tanah being mortgaged. If ”Hak Milik”, look for spouse
consent, if
”HGB”,
look for the expiry date of the Land Certificate.
• Offer the client to check with the appropriate Land Office the originality
of Sertifikat Hak Tanggungan/Sertifikat
Hipotik/Sertifikat Tanah. Do not forget to advise the
client that there will be some disbursement for this.
• If the client does not feel it necessary to have that checking we have to make our
assumption in our legal opinion that Sertifikat
Hak Tanggungan/Sertifikat Hipotik and Sertifikat Tanah the client made available to
us are the same as those knitted in Buku Tanah in the appropriate Land
Office.
• No Akte Kuasa Memasang Hak Tanggungan/Hipotik is valid after one month of its date.
• If there
is Akte Kuasa
Memasang Hak Tanggungan/Hipotik ask for Sertifikat Hak
Tanggungan/Sertifikat Hipotik.
PLEDGE
OF SHARES
• See the share certificates being pledged. Note that no pledge is valid, unless the pledgee (the bank) retains the share certificates.
FIDUCIARY TRANSFER
OF OWNERSHIP
for
stocks/inventories
• Look for the waiver
of articles 1750 to 1753 (inclusive)
and 1759 to 1762 (inclusive).
• Look for the
specific go-down to store the
stocks/inventories.
• Look for the provision which says that at any time the stocks/inventories (i) shall have a certain value, or (ii) shall have the value which at least the same as the
aggregate amount of the loan if the FTO is the only security given to that loan.
• Please ask client
whether they know other creditor(s) of the borrower
receiving the FTO of stock or inventories. If
there is such other creditor(s), ask client who first receive the FTO.
for
machinaries
• Look for the list
of the machinaries being pledged.
GUARANTY (PERSONAL
OR CORPORATE)
• Look for the waiver of articles
1430, 1831, 1833, 1837, 1838, 1843, 1847, 1848,
1849,
1850 of the Indonesian Civil Code.
• Please check whether there is spouse consent appears in the guarantee or in separate letter for the guarantee given by married
persons without asset separation.
• An indemnity clause shall appear (usually at the end of the guaranty document). The clause says that if for whatever reason the guaranty cannot
be enforced or invalid,
then the
guarantor
commits itself
to pay the
loan
as
a
primary borrower (or something like
that).
• Value of the Guarantee. Some guarantees address or limit the value of the guarantee,
some only say that all debts of
the borrower are guaranteed.
BANK
GUARANTY
• All items required
by SKDir BI No. 23/72/KEP/Dir and SEBI No. 23/5/UKU both
dated February 28, 1991 shall be satisfied.
• Value of Bank
Guarantee.
• Expiration
Date and Period
of Claim. Please note that any claims against
a bank
guarantee submitted to the guarantor bank after the end of the period of claim
may likely be rejected by the bank. The end of the period of claim is usually
either 14 or
30
days after the expiration date of
the bank guarantee.
ASSIGNMENT
OF RECEIVABLES FOR SECURITY PURPOSES
• Look for the list
of Receivables assigned.
• Ask the client whether
the debtors of the borrower
have been notified
about such assignment.
• It is better if there is provision in the Assignment document which obliges the borrower to deposit any payment
it receives in an escrow account
with the client.
ASSIGNMENT
OF DEPOSIT FOR SECURITY PURPOSES
Deposit with the client
• There should be a provision
in the Assignment Document which says that as long as there
is any money owed by the borrower, the deposit and its
interest cannot be remitted which result that the amount of the outstanding loan is bigger than the
amount of the deposit and its
interest.
• Check whether there is authorization in the Assignment Document to the bank to cash
the deposit or whether
there is separate power of attorney to do so if the debtor
is default.
Deposit
with
another bank
• There should be a provision
in the Assignment Document which says that as long as there
is any money owed by the borrower the deposit and its interest cannot be
remitted.
• The client shall
retain the certificate/the book of
deposit.
• The depositor bank shall give the client an undertaking not to let the borrower to call for
the deposit and its interest.
• Check about
authorization clause or separate
power of attorney as above mentioned.
• The Borrower shall give a power of attorney to the client to call for the deposit and its interest from the depositor bank.
ASSIGNMENT
OF INSURANCES
• Pursuant to the Indonesian law, only claims or proceeds of the claims that can be assigned not the object insured.
• Check the list of all policies assigned to the bank.
• Ask the client
whether it holds/retains the policies described in the list.
• Check whether the policies are still valid (see the period of the insurance).
• Check whether the policies contain a ”Banker’s Clause” ie. the name of the bank/creditor is addressed as the co-insured. It is very important since with the Banker’s Clause, the bank can directly
receive payment from the insurer, while with the absence of this clause, the insurer may not feel obliged to pay directly to the
bank.
• Check whether
the insurer has been notified/or at least if there is a notice clause in the Assignment Agreement.
