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A Debt Assumption Agreement transfers existing debt obligations from one party to another, essentially changing who's responsible for paying back a loan. In Indonesia, these agreements commonly help businesses restructure their financial obligations, particularly during mergers, acquisitions, or corporate reorganizations.

Under Indonesian Civil Code regulations, the agreement must clearly outline the original debtor, the new debtor taking over the debt, and the creditor's explicit consent. The document specifies key details like payment terms, interest rates, and any collateral arrangements. Local banks and financial institutions often require these agreements to be notarized to ensure legal enforceability.

Consider using a Debt Assumption Agreement during business restructuring, when you need to transfer loan obligations between parties. This commonly happens during corporate mergers in Indonesia, when a stronger company takes over the debts of a financially struggling subsidiary, or when reorganizing group company finances to improve operational efficiency.

The agreement becomes essential when selling business units with existing loans, as it legally transfers debt responsibility to the new owner. Indonesian banking regulations require formal debt assumptions for corporate reorganizations, making these agreements vital for compliance. They're particularly useful for family businesses undergoing succession planning or companies executing strategic acquisitions.

• Basic Debt Transfer: The simplest form used for straightforward debt transfers between Indonesian entities, focusing on principal amount and payment terms
• Corporate Restructuring: More complex version addressing group company reorganizations, including detailed financial covenants and corporate guarantees
• Merger-Related: Specifically designed for M&A transactions, incorporating due diligence findings and contingent liability provisions
• Project Finance: Used in infrastructure projects, including step-in rights and multiple creditor arrangements
• Family Business: Tailored for family enterprise succession, with special provisions for gradual debt transfer and family member guarantees

• Original Debtors: Companies or individuals transferring their debt obligations, often during financial restructuring or business sales
• Assuming Parties: Organizations taking on the debt responsibility, typically stronger companies or strategic buyers
• Creditors: Banks, financial institutions, or lenders who must approve the debt transfer under Indonesian banking regulations
• Corporate Lawyers: Draft and review agreements to ensure compliance with Indonesian Civil Code requirements
• Notaries: Authenticate the agreement and ensure proper execution under local law
• Financial Advisors: Guide parties through financial implications and structure optimal transfer terms

• Debt Details: Gather complete loan documentation, including principal amount, interest rates, and payment schedules
• Party Information: Collect legal names, registration numbers, and authorized signatories of all involved entities
• Creditor Approval: Secure written consent from lenders before drafting, as required by Indonesian banking regulations
• Financial Records: Compile current debt balances, payment history, and any existing security arrangements
• Corporate Approvals: Obtain necessary board resolutions and shareholder agreements
• Documentation Review: Check original loan agreements for transfer restrictions or special conditions

• Party Details: Full legal names, addresses, and registration numbers of original debtor, new debtor, and creditor
• Debt Description: Precise details of the debt being transferred, including principal, interest rates, and payment schedules
• Transfer Terms: Clear statement of debt assumption and release of original debtor's obligations
• Creditor Consent: Explicit approval from the creditor as required by Indonesian Civil Code
• Security Arrangements: Details of any collateral or guarantees transferring with the debt
• Governing Law: Specific reference to Indonesian law and jurisdiction
• Execution Block: Notarized signature sections for all parties with corporate seals

A Debt Assumption Agreement differs significantly from a Debt Settlement Agreement in both purpose and effect under Indonesian law. While both deal with debt obligations, they serve distinct functions in financial transactions.

• Purpose: Debt Assumption transfers existing debt obligations to a new party, keeping the original terms intact. Debt Settlement focuses on resolving or closing out debt, often with modified payment terms or reduced amounts
• Parties Involved: Assumption requires three parties (original debtor, new debtor, creditor), while Settlement typically involves just the original debtor and creditor
• Legal Effect: Assumption maintains the debt but changes who pays it, while Settlement terminates or modifies the original debt obligation
• Timing: Assumption is common during business restructuring or acquisitions, while Settlement usually occurs when addressing financial distress or debt resolution