Materi Workshop Legal Due Diligence (LDD) yang di selenggarakan oleh EMLI Training. Materi di sampaikan oleh Bapak Dendi Adisuryo, beliau adalah Partner at ADCO Attorneys at Law.

1. Legal Due Diligence
By: Dendi Adisuryo (ADCO Attorneys at Law)
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2. AGENDA OF DISCUSSION
 Introduction to acquisition
 Acquisition deals flow
 Roles of legal due diligence
 Workflow of legal due diligence
 Preparing due diligence checklist
 Key areas for legal due diligence review
 Frequent findings
 Preparing legal due diligence report
 How LDD Report will affect the deal?
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3. INTRODUCTION TO ACQUISITION
WHAT’S THE ACQUISITION?
 Acquisition may be defined as an act of one enterprise of acquiring, directly
or indirectly of SHARES, voting rights, assets or control over the
management, of another enterprise
 Acquisition is a legal action taken by a legal entity or an individual to take
over shares in a company which will change the control of the Company
(Article 1 (11) of Company Law)
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4. ACQUISITION RATIONALE
 Enhance, build and preserve markets
 Achieve rapid business growth
 Secure new resources
 Develop globally-competitive companies
 Establish a new business unit
 Supporting tools for core business unit
INTRODUCTION TO ACQUISITION
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5. ACQUISITION DEALS FLOW
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6. ACQUISITION DEALS FLOW
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7. ACQUISITION DEALS FLOW
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8. 8
ROLES OF LEGAL DUE DILIGENCE
Obtaining objective information
Identifying legal risks
Arguments for negotiations
Transaction structuring
Determining conditions precedent to transaction
Determining holdback amounts in transaction

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10. 10
LEGAL DUE DILIGENCE WORKFLOW
START UP
Management
Meeting
Information
Gathering
Analysis The Report
 Term of
Reference
 Initial
manageme
nt meeting
 Site visit
 Reassure
management that
LDD will not
disrupt
commercial
activities of the
target
 Establish timings
and reporting
 Review initial
proposed
transaction
structure
 Obtain person in
charge in the
data room
 Gather info from
dataroom/documen
t provided
 Gather info from
internet and other
resources
 Close liaison with
the target’s official
 Gather info from
financial/environm
ent/technical
counsel
 Obtain infofrom
government
agencies
 Site Visit
 Legal issues
 Legal
consequences
 Legal Solution
 Clear, easily-
read document
 Address what
the commercial
people need to
know
 Timely manner
 Good news is
nice, but the
truth is the aim
 Presentation to
client
 Q & A
 Next stage of
the transaction
Post Report

11. Obstacles to Due Diligence in Indonesia
 No sophisticated public data base
 Reluctance to present full package of documents
 Delays in gathering and presentation of documents (from usually remote
sites)
 Differences: so many interdisciplinary issues (e.g. forestry, transportation,
overlapping, counterfeited documents
 More important than in developed countries – not purely a data room
exercise
 Legal uncertainty – clear title (in licenses, buildings, property)
 Lawsuits: difficult to access
 Representations and warranties may be useless because sellers are often
“big” local person
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12. 12
LEGAL DUE DILIGENCE CHECKLIST / QUESTIONS

13.  Corporate legal standing
 Establishment
 Capital structure (eg. change of capital structure, minimum capital requirement
for PMA Co)
 Shareholding composition
 Company management
 Authorities of management and corporate approval
 Domicile of the company
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KEY AREAS FOR LEGAL DUE DILIGENCE REVIEW

14.  Operating Licenses
 Validity
 Compliance
 Possibility of license revocation
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KEY AREAS FOR LEGAL DUE DILIGENCE REVIEW

15.  Third Party Comitment
 Sale agreement
 Exclusivity, duration, committed volume, price adjustment, payment methode, quality
and quantity determination, exit clause, Exclusifity, commited amount, price
determination, pre shipment payment,
 Services / contractorship agreement
 Scope of work, service fee, fall and rise, exclusivity, evaluation based on performance
indicator, parties responsibility
 Joint Venture/Joint Operation/ Shareholder agreement
 Scope of cooperation, parties’ responsibilities, rights of first refusal, quorum, minority vs
majority roles, tag along vs drag along, additional investment and capital injection, pre
agreed matters, changes of control
 Financing agreement
 Indebted amount, security, prepayment, change of control, covenants, breach of
agreements, debt reschedule / restructurisation
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KEY AREAS FOR LEGAL DUE DILIGENCE REVIEW

16.  Assets
 Types of assets
 Ownership title
 Land compensation?
 Encumbrances
 Property rights
 List of property – owned, occupied, leased
 Supporting documents of ownership, occupation or leasing
 Physical checking to BPN – Lurah for land properties
 Appraisal or valuation of assets
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KEY AREAS FOR LEGAL DUE DILIGENCE REVIEW

17.  Disputes
 Court searches in PN, PTUN, PHI, P Niaga, BANI, PN Jakarta Pusat
 Court search cannot reach potential disputes
 Disputes in international arbitration forum?
 Court search – must be authorized by the targeted company through a
formal PoA
 Cost may vary, depends on where, who, how big is the company, time
frame
 No full reliance to court search result
 Potential dispute
 Always asked for indemnity in the definitive agreement
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KEY AREAS FOR LEGAL DUE DILIGENCE REVIEW

18.  Environment
 AMDAL Documents / approval
 AMDAL requirement – time line
 RPL – RKL documents
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KEY AREAS FOR LEGAL DUE DILIGENCE REVIEW

19.  Corporate Matters
 The shares have been transfered to other parties
 Unreported amendment to the AoA
 Lack of deed of shares transfer
 Absence of spousal consent
 Lack of corporate approval for certain transaction (eg. Loan, establishment of
subsidiary, assets encumbrance, assets divestment)
 Absence of shareholder registry
 Absence of annual general meeting of shareholders
 No BoD for certain period of time
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FREQUENT FINDINGS

20. FREQUENT LDD FINDINGS
 General matters
 Discrepancy in assets ownership (eg. Land)
 No financial statement
 Liabilities in the financial statement
 disputes
 Target company has not submited any annual tax return
 Lack of compliance documents
 Wrong business model (legally)
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21. FREQUENT LDD FINDINGS
 Contractual
 Long-term contract with onerous provisions and no possibility to adjust
 Contract with its affiliated party
 Contracts with no-perfect provisions
 Agreement to pay “royalty” to un-disclosed party
 Exclusife offtake agreement or marketing agreement
 Business contract contradicts with the laws and regs
 One-sided services agreement
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22. PREPARING LEGAL DUE DILIGENCE REPORT
 Golden rules:
 Findings
 Legal consequences
 Proposed action
 A glancing through a LDD Report
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23. HOW LDD REPORT WILL AFFECT THE DEAL?
 Subtance of the report:
 Information of the target company
 Risk identification
 What to do with the risk:
 Transfer of risk (eg. Insurance, seller)
 Limit the risk
 Absorb the risk
 Reject the risk
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24. HOW LDD REPORT WILL AFFECT THE DEAL?
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Buyer Seller
Get discount as much as possible Get selling price as high as possible
Calculate future / contingent risks Release from any future risk
Get full representation and warranties Minimize representation and warranties
Maximize indemnity Minimize indemnity

25. HOW LDD REPORT WILL AFFECT THE DEAL?
 Drafting acquisition agreement
 Definitions and Interpretation
 Sale and Purchase
 Consideration
 Condition
 Pre-Completion and Post-Completion Obligations
 Completion
 Warranties
 Indemnities
 Share Purchaser’s Undertakings
 Security for Claims
 Share Purchaser’s Rights to Terminate
 Confidentiality
 Governing Law and Dispute Resolution
 Notices
 Miscellaneous
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26. The contents of this presentation are intended for informational
purposes only and are not in the nature of a legal opinion or
advice. They may not encompass all possible regulations and
circumstances applicable to the subject matter and readers are
encouraged to seek legal counsel prior to acting upon any of the
information provided herein.
© ADCO Attorneys at Law
2014
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27. Legal Due Diligence for Acquisition Deal
in Indonesian Mining Projects 27
DendiAdisuryo
Practice Description
He specializes and has practical experience in energy and mining projects
and the banking/finance sector. He also has broad experience in
assignments related to foreign capital investments and corporate
restructuring.
Lawyer/Consultant Biographies
Please contact us if you have any questions regarding our firm:
ADCO Attorneys at Law
Setiabudi Building 2 6th Floor , Unit 605C
Jl. HR. Rasuna Said, Jakarta 12920
Jakarta Selatan - Indonesia
Telp: +6221-52903034
Fax: +6221-52903035
email: dendi.adisuryo@adisuryo.com

28. Legal Due Diligence
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