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Mandatory Beneficial Ownership Reporting for Entities in Indonesia

Mandatory Beneficial Ownership Reporting for Entities in Indonesia

14 May 2018

1. Introduction

Mandatory rules on reporting beneficial ownership now apply in Indonesia. The requirement came into force on 5 March 2018 ("Effective Date"), with a one year grace period for existing entities. It applies to incorporated entities, and unincorporated associations (this will include foundations, associations and cooperatives). The requirements are set out in Presidential Regulation Number 13 of 2018 dated 1 March 2018 on the Know-Your-Beneficial-Owner ("KYBO") Principle ("Reg 13/2018").

The KYBO principle requires entities to identify and file reports on beneficial ownership at the Ministry of Law and Human Rights ("MOLHR") and applicable business licensing institutions of such entities.

2. Compliance

The onus to identify beneficial owners is placed on the entity.

Who is a beneficial owner?

Entity:

A beneficial owner is an individual (not a legal entity) who:

Company

  • owns more than 25% of shares;
  • holds more than 25% of voting rights;
  • receives more than 25% of generated profits;
  • has the power to appoint/change/dismiss directors and commissioners;
  • has the authority to control/influence the company without obtaining third party authorization;
  • receives benefit from the company; and/or
  • is the actual owner of the company's capital.

Foundation

  • provided more than 25% of the initial capital;
  • has the power to appoint/dismiss board members;
  • has the authority to control/influence the foundation without obtaining third party authorization;
  • receives benefit from the foundation; and/or
  • is the actual owner of the funds/assets of the foundation.

Commercial partnership

  • owns more than 25% of the paid-up capital in the commercial partnership agreement;
  • receives more than 25% of generated profits;
  • has the authority to control/influence the commercial partnership without obtaining third party authorization;
  • receives benefit from the commercial partnership; and/or
  • is the actual owner of the funds/assets of the commercial partnership.

 

Information to be reported on beneficial owner(s) must contain (with appropriate supporting documents):

(a)          beneficial owner's full name;

(b)          Indonesian identity card, driving license, or passport;

(c)          place and date of birth;

(d)          address;

(e)          taxpayer identification number (or equivalent); and

(f)           description of relationship between the entity and beneficial owner.

 

Beneficial ownership may be determined from:

(a)          Articles of Association of the entity;

(b)          Shareholders' Agreement (or other shareholder arrangements);

(c)          minutes of management meetings;

(d)          information  made publically available by authorized institution(s);

(e)          fund transfer documents;

(f)           statements from entity management/employees;

(g)          entity or third party documents indicating an individual as beneficial owner of capital/assets belonging to the entity;

(h)          other information.

3. Reporting

Reporting obligations arise:

(a)          when applying for approval to incorporate/establish, or in applying for business licenses;

(b)          within 3 business days of changes to beneficial ownership;

(c)          annually; and

(d)          at any time as required by authorized institutions/law enforcement agencies. 

Entities which have, or are in the process of obtaining, establishment approval and business licensing prior to 5 March 2018 have 1 year from the Effective Date to comply with Reg 13/2018.

4. Public disclosure

The public is entitled to request information on beneficial ownership from the authorized institution(s).

5. Determination of beneficial ownership by an authorized institution

Any authorized institution may, in order to verify beneficial ownership, request:

(a)          an audit of the entity; and/or

(b)          information from the public or private sector.

6. Sanctions

Failure to comply with reporting obligations will be subject to sanctions. Specific sanctions are not identified in Reg 13/2018.

7. Notes

Reg 13/2018 is ambiguous in certain respects, in particular on 'receiving benefits from the entity'; triggers for reporting obligations; the scope of the beneficial owner's control over management; the admissible types of third party documents for beneficial owner determination; and sanctions for non-compliance.

For questions and comments, please contact:

Aston Goad - Foreign Legal Consultant, Indonesia: aston.goad@dnfp.com

Indra Dwisatria - Senior Associate, Indonesia: indra.dwisatria@dnfp.com

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