5 Tips on entering into an agreement

Here are the 5 tips we would like to share with you when you are entering into an agreement with an Indonesian party for performing such agreement in Indonesia:

1. Indonesian language
Under Law No. 24 of 2009, if an agreement is entered into between an Indonesian party and a foreign party, there shall be an Indonesian version of the agreement. This means that it is not a mere translation, but the parties shall also sign the Indonesian version of the agreement.

Under certain laws, you must enter into the agreement in Indonesian language, for example mortgage deeds and fiduciary security deeds. 

2. Necessary approvals/ consent
If you would like to enter into an agreement with an Indonesian company, you will need to check the articles of association of that company, whether any corporate approval is required, for example, board of commissioners' approval or general meeting of shareholders' approval. 

If you would like to enter into an agreement with an Indonesian individual, you may need a spousal consent if he/she is married, unless the individual has a pre-nuptial agreement. This is because under the Indonesian Marriage Law, all assets obtained by the husband/ wife during their marriage will be considered marital property. Therefore the husband and wife own the marital property jointly. Without the spousal consent, it does not mean that your agreement will be considered invalid, however, in the event of default and you would like to enforce your rights and claim damages, there would be difficulties on enforcing the marital assets given that the assets are jointly between the husband and wife. The spousal who is not a party to the agreement might argue that the assets are joint assets owned by them and therefore could not be enforced without his/ her approval.

3.  Authorised signatory

If you would like to enter into an agreement with an entity, you would need to check the articles of association of such entity, who may represent the entity. For example, for a limited partnership (CV), only the active partner is allowed to represent a limited partnership. In respect of a company, sometimes, certain articles of association require two directors to represent the company, or if the president director is not available, he/ she shall give a written authorisation to another director to represent the company.

In addition, you need to request the latest general meeting of shareholders of the company appointing the current directors and commissioners and cross check it with the company profile of the company which you can download online from the Ministry of Law and Basic Human Rights website. But the payment of the company search can only be done through bank transfer to certain banks in Indonesia which you are not able to do so if you are not in Indonesia. You may also require your Indonesian counter party or your lawyer to provide the company profile to you.

4.  Power of attorney
If you are going to sign a notarial deed or a deed before a land deed official (for land related transactions) but the authorised signatory is not able appear before the notary or land deed official in person, he/ she may grant a power of attorney (POA) to a representative to sign the agreements on his/ her behalf.

You need to factor in the timeline of signing with the timing to obtain the POA. A notary or land deed official will only accept a POA which has been legalised by the Indonesian embassy at where the company which issues the POA is domiciled. For example, if it is a Singapore company issuing the POA, then the POA has to be legalised by the Indonesian embassy in Singapore.

Indonesian embassy will only accept the POA for legalisation if it has fulfil certain requirements, for example, for Indonesian embassy in Singapore, such POA has to be signed before a Singapore notary. Furthermore, the POA has to be authenticated by the Singapore Academy of Law and legalised by the Singapore Ministry of Foreign Affairs. It usually takes few days to complete the process but during this Covid-19 pandemic, it could take longer.

You need to check with the relevant Indonesian embassy what the requirements are. Furthermore, for country which does not have an Indonesian embassy, you need to check with the Indonesian Ministry of Foreign Affairs, which Indonesian embassy in the neighboring country which will be able to accept legalisation.

5.  Form of agreement
Most of the agreements can be signed in the usual forms and by way of counterparts however certain agreements have to be in a notarial deed or a land deed official deed. For example, fiduciary security has to be signed in the form of a notarial deed. Land related transactions, such as sale and purchase of land or mortgage of land has to be signed in the form of land deed official deed.

They have specific formats of the deeds. Once the agreements are in the final form, lawyers will send the final versions to the notary or land deed official and they will convert the agreements into the required forms. If the agreements are not in the required forms, they will be considered invalid.

Usually land deed officials are notaries but not all notaries are land deed officials. In respect of land matters, only the land deed official who has authority in the regency where the land is located may sign the deed. For example, a land deed office in South Jakarta may not sign a mortgage deed in respect of land in Central Jakarta.

We hope the tips are helpful for you.