According to the statistical data of foreign investment in Indonesia during the past 10 years indicates that the number of international business activities has increased in significant rate within the domestic scope. The success story of the government to bring the economic progress require subsequent homework in order to maintain the recognition. The economic growth of Indonesia is expected to further accelerate after becoming the member of Financial Action Task Force (FATC), an intergovernmental organization aiming to combat money laundering and prevent the terrorism funding. This membership is envisioned will impact the national economic credibility and positive perception upon the Indonesia financial environment, with that also will increase the economic growth through the foreign investment.
As a member of FATC, Indonesia committed to comply with the values of FATC, where lead the government to the awareness that convenience and security of the investment climate should not be discounted in order to support and attract the foreign investors in Indonesia. One of the crucial matters highlighted by the government is pertaining to the disclosure of beneficial ownership of the business entities. Indonesia perceives that it is important to present the transparency of the business entities owners, while supervise those business actors in purpose to prevent the illicit activities such as money laundering, funding of terrorism, tax evasion, corruption, etc.
Pursuant to the Article 1 Paragraph (2) of the Presidential Regulation No. 13 of 2018 on Implementation Principle on Identifying Beneficial Owner of Corporation for the Prevention and Eradication of Money Laundering and Terrorism Financing Crimes (“PR 13”) the beneficial owner is described as:
“Individual who has authority to appoint or dismiss member of board of directors, board of commissioners, management, advisor, or supervisor of a corporation, possesses power to control the corporation, entitled to and/or receive either direct or indirect benefits from the corporation, constitute the actual owner upon the fund or shares of the corporation and/or meets the criteria prescribed within this Presidential Regulation.”
According to PR 13, there are several business entities that are obliged to notify the government regarding their beneficial owner, among others:
a. Limited Liability Company
b. Foundation
c. Organization
d. Cooperative
e. Limited Partnership
f. Firm
As one of the included entities to the above-mentioned disclosure mandatory, the PR 13 requires a Limited Liability Company to appoint someone in the corporation to uphold the “Identifying the Beneficial Owner” principle by referring to several criteria of what constituted a beneficial owner of a Limited Liability Companies as regulated under the PR 13, they are involved individuals who meet these below criteria:
- Possess more than 25% of shares on the Limited Liability Company as set out within the Article of Association;
- Entitled to more than 25% voting rights on the Limited Liability Company as set out within the Article of Association;
- Gain more than 25% benefit out of the annual profit of the Limited Liability Company;
- Entitled to appoint, replace, or terminate the member of the board of directors and the board of commissioners;
- Entitled to direct or control the Limited Liability Company without prior authorization from any party; and/or
- Constitute the actual owner of funds or shares of the Limited Liability Company.
In order to supplement the PR 13, the government also enacted 2 ministry regulations to implement the beneficial owner disclosure regime, those regulations are:
- Minister of Law and Human Rights Regulation No. 15 of 2019 on Procedures for Implementing the Principles of Identifying the Beneficial Owners of Corporations (“MOLHR 15”)
- Minister of Law and Human Rights Regulation No. 21 of 2019 on Procedures for Supervising the Implementation of the Principles of Identifying the Beneficial Owners of Corporations (“MOLHR 21”)
According to the PR 13 jo. MOLHR 15 jo. MOLHR 21, every Limited Liability Company must provide information of at least 1 of its beneficial owners to the Ministry of Law and Human Right (“MOLHR”). There are 3 subjects eligible to submit such information, those are including:
- Founder or management of the corporation;
- Notary; or
- Another party authorized by the founder or the management of the corporation.
The disclosure of beneficial owner information should be notified upon the application of the corporate establishment (by public notary) and also when the Limited Liability Company has run the business (by 1 out of 3 from the previous-mentioned eligible subjects). The Limited Liability Company is also required to update the information related to the beneficial owner to the MOLHR gradually once in a year. The information of beneficial owner is submitted through AHU Online website (https://bo.ahu.go.id/site/login). The said information regarding the beneficial owner are involving:
a. Complete name
b. Identity number, driving license, or passport
c. Place and date of birth
d. Nationality
e. Residential address attached on the identity card
f. Address in origin country (if foreigner)
g. Tax identity number
h. Relationship between corporation and the beneficial owner
A Limited Liability Company is also mandated to notify any amendment regarding the beneficial owner to the MOLHR within 3 business days as of the amendment occur. The said amendment is including the addition or withdrawal of the beneficial owner information as regulated under the MOLHR 15.
The PR 13 jo. MOLHR 15 jo. MOLHR 21 regulate that The Directorate General of the MOLHR will supervise the compliance of the “Identifying the Beneficial Owner” principle by the Limited Liability Company and conducting assessment based on the risk evaluation result in regards with the potential rate of money laundering and terrorism funding crime. Upon the evaluation, the Ministry will convey the recommendation to the corporation in order to comply with the disclosure requirement. It is mandatory to enforce the recommendation from the MOLHR within 14 business day starting from the day the recommendation delivered to the corporation according to the MOLHR 21.
Once the corporation fails to respect the recommendation, the Ministry is going to impose sanction against the corporation. According to the MOLHR 21, the corporations violating such obligation will bear serious consequences from the Ministry, they are involving:
1. Restriction/blocking of access of the corporation data in AHU Online, it is a platform provided by MOLHR where corporation shall submit its registration, amendment of the Article of Association, and application for the other permits. The restriction of the data will bring adverse impact to the corporation, those are at least:
a. The corporation is unable to conducting the amendment of the Articles of Association; and
b. The corporation is unable to amend, upload, and update the latest corporate data.
These might cause the inaccurate information between the registered information in the Ministry through the AHU Online and the actual business activity of the corporation. Once the officials find the provided data is unreliable, it will jeopardize the corporation due to difference of information of the actual business activity to the registered business license in the AHU Online, this could lead to the revocation of the business license of the corporation according to the Regulation of Investment Coordinating Board No. 5 of 2021 on the Guidelines and Procedure for Risk-Based Business Licensing Supervision (“RICB 5”).
2. The MOLHR will refer recommendation to the relevant institution authorized to issue the business license of the related corporation containing proposed sanction whether to suspend, revoke, or annul the business license of the said corporation.
Considering of such disclosure obligation above, it is important for the Limited Liability Company to underpin the collective effort with the government in order to safeguard not only investment, but also legal enforcement environment in Indonesia as both parties will earn positive feedback through the concrete collaboration taking place.
