INDONESIA: Mandatory Disclosure of Beneficial Owners in Indonesia

Thursday March 15 2018

Legal entities in Indonesia are now required to declare the identity of beneficial owners and provide information on their beneficial ownership, following the recent enactment of Presidential Regulation No. 13 of 2018 regarding the Implementation of the Principle on Recognizing Beneficial Ownership of Corporations in the Framework of the Prevention and Eradication of Money Laundering and Criminal Acts of Terrorism Financing .

This Regulation is part of the Indonesian government’s new disclosure regime to create more transparency in the ownership of business entities and to monitor and control the entities, as well as to reduce opportunities for the misuse of such legal entities for illicit purposes such as money laundering, terrorism financing, tax evasion and corruption.

The Regulation came into effect on March 5, 2018 and applies to all types of business entities in Indonesia including limited liability companies, foundations, cooperatives and firms, as well as associations (persekutuan perdata).

As an example, a beneficial owner of a limited liability company is defined as an individual who:

1. holds more than 25 percent of the shares in the limited liability company as stated in the articles of association;
2. has more than 25 percent of the voting rights in the limited liability company as stated in the articles of association;
3. receives more than 25 percent of the annual income or profit earned by the limited liability company;
4. has the authority to appoint, replace or dismiss members of the board of directors and/or board of commissioners;
5. has the authority or power to influence or control the limited liability company without obtaining authorization from any party;
6. receives benefits from the limited liability company; and/or
7. is the true owner of the source of funds for the company’s shares.

The Regulation requires corporations to reveal their beneficial owners. In reality, the beneficial owners are often found after layers of ownership are peeled away and the Regulation seems to lack a mechanism to address this issue.

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