Fiduciary security (Indonesian: jaminan fidusia) is a security right over movable assets, tangible or intangible, and over buildings that cannot be encumbered with a mortgage, in which ownership is transferred to the creditor "on trust" while the debtor keeps possession and use of the asset.
Legal Basis
Fiduciary security is governed by Law No. 42 of 1999 on Fiduciary Security. It is widely used for vehicle and consumer financing, inventory, receivables and machinery, because the debtor can continue to use the assets in its business.
Creation and Registration
A fiduciary security must be created by a notarial deed in Indonesian and registered online with the Fiduciary Registration Office of the Ministry of Law. Registration produces a fiduciary certificate bearing the words "For the Sake of Justice Based on Belief in the One Almighty God", which gives it executorial force, and it establishes the creditor's priority over other creditors.
Enforcement and the Constitutional Court
On default, the creditor may enforce through the executorial title, by private sale or by public auction. In Decision No. 18/PUU-XVII/2019 and subsequent rulings, the Constitutional Court held that where there is no agreement on the occurrence of default and the debtor does not voluntarily surrender the asset, enforcement must proceed through the court in the same way as a final judgment. Creditors may not seize assets by force.
Debtor's Duties
The debtor may not transfer, pledge or lease the secured assets to third parties without the creditor's written consent, except inventory sold in the ordinary course of business. Doing so is a criminal offence under the Fiduciary Law.