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Equity Linked Agreement for Indonesia

Equity Linked Agreement Template for Indonesia

An Equity Linked Agreement under Indonesian law is a sophisticated financial instrument that establishes a contractual relationship where payment obligations or returns are linked to the performance of underlying equity securities. The agreement is governed by Indonesian law and must comply with various regulations including the Capital Markets Law (Law No. 8 of 1995), Investment Law (Law No. 25 of 2007), and relevant OJK (Financial Services Authority) regulations. It typically includes detailed provisions for calculation methods, market disruption events, and regulatory compliance requirements specific to the Indonesian market.

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What is a Equity Linked Agreement?

The Equity Linked Agreement serves as a crucial financial instrument in the Indonesian market, facilitating transactions where financial obligations are tied to equity performance. This document is typically employed when parties seek to create investment products, financing arrangements, or risk management solutions linked to Indonesian or international equity securities. The agreement must navigate complex regulatory requirements, including compliance with OJK regulations, Capital Markets Law, and Investment Law. It includes comprehensive provisions covering calculation methodologies, market events, regulatory approvals, and risk management measures. The document is particularly relevant for financial institutions, corporations, and investment firms operating within Indonesia's legal framework, and often requires careful consideration of both domestic and international financial practices while maintaining compliance with Indonesian law.

What sections should be included in a Equity Linked Agreement?

1. Parties: Identification of the contracting parties, including their legal status and registered addresses

2. Background: Context of the agreement, including the purpose and basic structure of the equity-linked arrangement

3. Definitions and Interpretation: Definitions of key terms and interpretation rules, including specific Indonesian legal and market terms

4. Equity Linking Mechanism: Detailed description of how the agreement links to the underlying equity, including calculation methods and reference prices

5. Payment Terms: Terms regarding payments, including currency, timing, and calculation methods

6. Conditions Precedent: Conditions that must be satisfied before the agreement becomes effective, including regulatory approvals

7. Representations and Warranties: Standard and specific representations by both parties, including compliance with Indonesian regulations

8. Covenants: Ongoing obligations of the parties, including regulatory compliance and reporting requirements

9. Market Disruption Events: Provisions dealing with market disruptions and their consequences

10. Adjustment Events: Circumstances requiring adjustments to the equity linking mechanism and calculation methods

11. Early Termination: Circumstances allowing early termination and its consequences

12. Events of Default: Definition of default events and their consequences

13. Governing Law and Jurisdiction: Specification of Indonesian law as governing law and jurisdiction provisions

14. Notices: Communication procedures between parties

15. Miscellaneous: Standard boilerplate provisions including severability, entire agreement, and amendments

What sections are optional to include in a Equity Linked Agreement?

1. Foreign Investment Provisions: Required when one party is a foreign investor, addressing compliance with Indonesian foreign investment regulations

2. Security Arrangements: Required when collateral or security is provided as part of the agreement

3. Tax Provisions: Detailed tax provisions required when specific tax arrangements or withholding obligations apply

4. Corporate Approvals: Specific section on corporate approvals required when deal size or nature requires special shareholder or board approvals

5. Currency Protection: Required when payments involve foreign currency and hedging arrangements

6. Regulatory Compliance: Additional regulatory compliance section required for regulated entities or specific industry requirements

7. Force Majeure: Detailed force majeure provisions when required by specific business contexts

What schedules should be included in a Equity Linked Agreement?

1. Calculation Methods: Detailed mathematical formulae and calculation methods for equity linking

2. Form of Notices: Standard forms for various notices required under the agreement

3. Reference Assets: Details of the underlying equity instruments including any relevant corporate information

4. Payment Dates and Amounts: Schedule of payment dates and calculation of payment amounts

5. Required Regulatory Approvals: List of required regulatory approvals and status

6. Corporate Authorizations: Copies or details of relevant corporate authorizations

7. Specified Entities: List of relevant affiliated or connected entities if applicable

8. Form of Compliance Certificates: Standard forms for compliance certification

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Indonesia

Publisher

Ƶ

Document Type

Equity Agreement

Cost

Free to use

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