“Fiducia Security is a Security Right upon the object, which still under possession of the debtor, as collateral for the repayment of the loan, which prioritizes the creditor against other creditors.”
Indonesian Law has stipulated creditor’s rights within a loan transaction either from bank/financial institutions or individual (private). Within the loan transaction, the creditor has the right upon the debtor’s wealth to ensure the loan repayment already obtained by the debtor. Further, this right is known as Security, which has many forms depending on the object’s type and location during the loan’s duration.
Further, the forms of Security consist of Mortgage (Law No. 4 of 1996 on Mortgage Right), Pawn (Article 1150 – 1160 Indonesian Civil Code (“ICC”)), Fiducia (Law No. 42 of 1999 on Fiducia Security), hypothec (Article 1162 – 1232 ICC), and Warehouse Receipt (Law No. 9 of 2006 on Warehouse Receipt System and its amendment on Law No. 9 of 2011).
Moreover, this article would explain one of the forms of Security that are known to be implemented usually upon movable objects, a Fiducia.
Fiducia Definition
Law No. 42 of 1999 on Fiducia Security (“Fiducia Law”) has defined Fiducia as the transfer of ownership right upon an object based on trust with the provision that the object its right is transferred remains in the control of the owner of the object.
Meanwhile, Fiducia Law also defines Fiducia Security as Security Right upon the movable object either tangible or intangible and immovable object specifically property that could not be encumbered by mortgage right as referred to Law No. 4 of 1996 on Mortgage Right which still under posses of the debtor (“Fiducia Grantor”), as collateral for the repayment of the loan, which gives priority to the creditor (“Fiducia Grantee”) against other creditors. Based on the definition above, Fiducia has main characteristic features, which are:
- The ownership right has been transferred to the Fiducia Grantee, but the object is still under possession or remains in the control of the Fiducia Grantor.
- As collateral for the loan transaction, which concluded that Fiducia would not exist if there was no loan transaction.
- Fiducia Grantee’s priority is whether there is any object execution against other creditors (preference right).
Object of Fiducia
As referred to the Fiducia Law, an object that Fiducia Security could encumber are as follow:
- Movable object, either tangible or intangible (for example, cars, stock opname, shares);
- Immovable object (for example, upon property that its ownership different from the land that cannot be encumbered by mortgage right); and
- A ship registered with a gross weight less than 20m3.
Fiducia Security Deed and Registration
Fiducia Law has stipulated that Fiducia Security is the derivative agreement (accessoir) from the main agreement (loan agreement). Therefore, the agreement (Fiducia Security Deed) must be made in a notarial deed and the Indonesian language. Further, the Fiducia Security Deed must contain at least the following matters:
- Identity of Fiducia Grantor and Fiducia Grantee;
- Details of the main agreement (loan agreement);
- Description of the fiduciary object;
- Collateral value; and
- Object’s value.
Further, the registration of Fiducia Security is conducted by a notary through the Ministry of Law and Human Rights’ Online System (Fiducia Registration Office).
Afterward, the Fiducia Registration Office will issue a Fiducia Security Certificate that states the phrase “Demi Keadilan Berdasarkan Ketuhanan yang Maha Esa” which remarks that Fiducia Security Certificate has the executorial title as equal to legally binding court decision. Moreover, Fiducia Security was born on the date as same as Fiducia Security is registered in Fiducia List Book organized by Fiducia Registration Office.
Fiducia Security Execution
As referred to the executorial title that owned by Fiducia Security, Fiducia Law has stipulated that in the event of a debtor is in default, the fiduciary object could be executed by the implementation of the executorial title (Fiducia Grantee’s right to sell the fiduciary object) with the following methods (parate execution):
- Selling the object through public auction; or
- Underhand sales are based on the private agreement between Fiducia Grantor and Fiducia Grantee if the underhand sales could obtain the highest price that benefits the parties).
Along with its implementation, the execution of Fiducia Security has led to multiple interpretations, specifically on the phrase “Executorial Title” and “Equal to Legally Binding Court Decisions”. Phrase “Executorial Title” implicates that the Fiduciary Grantee may execute the fiduciary object without following any legal procedures, which then enables the Fiduciary Grantee to take unlawful actions when executing fiduciary object. Further, the equality as binding court decisions also causes whether the execution must be requested first to the District Court.
As referred to the aforementioned multiple interpretations, Constitutional Court, through its Decision No. 18/PUU-XVII/2019, has construed the execution of Fiducia Security by the following procedures:
- Execution through parate execution must meet the conditions of:
- The fiduciary Grantor and Fiduciary Grante clearly agree that default has occurred based on the default indicators stipulated in the loan agreement.
- A debtor (Fiduciary Grantor) is voluntary release the fiduciary object.
- Execution through legal procedures for the execution of a court decision in District Court:
- Both/one of parties disagrees that default has occurred or the default indicators are not stipulated in the loan agreement.
- A debtor (Fiduciary Grantor) is reluctant to release the fiduciary object.
Author: Kristalia Andiani Puteri
Gaffar & Co., an Indonesian Boutique Law Firm specializing and focusing on commercial law areas e.g. Information & Technology.
For further queries and information, contact us:
+62 811 877 216 | info@gaffarcolaw.com | www.gaffarcolaw.com
