OVERVIEW OF FOREIGN FOUNDATIONS IN INDONESIA
BACKGROUND
The existence of foundations in Indonesia has long been recognized, and with the enactment of Law Number 28 of 2004 amending Law Number 16 of 2001 on Foundations (“Foundation Law”), there is now a clearer understanding of the standing, specifically as legal entities, of foundations. The Foundations Law was successful in putting an end to the discussion over the legal status of foundations.
Following the enactment of Law Number 17 of 2013 on Community-Based Organisation (Organisasi Kemasyarakatan), as last amended by Government Regulation in Lieu of Law Number 2 of 2017, which was enacted into law through Law Number 16 of 2017 on Stipulation of Government Regulation in Lieu of Law Number 2 of 2017 on Amendments to Law Number 17 of 2013 on Community-Based Organisation (“Community-Based Organisation Law”), it is stated in the regulation that a legal community-based organisation may take the form of, one of which is, a foundation. Based on such rules, until now, there are still many misleading perceptions that community-based organisations can take the form of foundations, however, foundations are not classified as community-based organisations. It should be noted that a foundation is considered as a community-based organisation in Indonesia and therefore, since the enactment of the Community-Based Organisation Law, the requirements for the establishment and operation of foundations shall comply with the Community-Based Organisation Law (in addition to the Foundation Law). In the event of conflict between the provisions in the Foundation Law and Community-Based Organisation Law, the provisions in the Community-Based Organisation Law will prevail.
Indonesians or foreigners can establish a foundation, but the requirements for establishing foundations for the two are significantly different, with the requirements for foreigners being stricter, particularly since the implementation of the Community-Based Organization Law. Hence, we will try to highlight some key points to consider if a foreign party wishes to establish a foundation in Indonesia (“Foreign Foundation”).
ESTABLISHING FOREIGN FOUNDATION IN INDONESIA
Pursuant to Article 11 of Community Based Organisation Law, a foreigner has the right to establish a foundation in Indonesia, and there are key points that need to be considered by foreign parties who seek to establish a Foreign Foundation in Indonesia (“Applicant”):
- Types of Foreign Foundation
a. There are 3 (three) types of foreign foundation which may carry out activities in Indonesian territory:
b. Foreign foundation which established outside Indonesian territory.
c. Foundation established by foreign citizens or foreign citizens together with Indonesian citizens; or Foundation established by a foreign legal entity.
- Paid Up Capital of a Foreign Foundation
As for the establishment, the founders need to comply with initial equity requirements. For a Foreign Foundation in Indonesia, the capital amount will depend on the category of founders:
a. If established by a foreign entity, it requires an amount to at least Rp10.000.000.000,00 (ten billion rupiah) proven by a statement letter from the board of founders of the incorporated entity regarding the legality of the assets.
b. If established by foreign citizen or foreign citizen together with Indonesian citizen, it requires an amount of at least Rp1.000.000,00 (one billion rupiah) proven by a statement letter from the board of founders of the incorporated entity regarding the legality of the assets.
- Steps of Registration
The Minister of Foreign Affairs (“MFA”) will act as the primary supervisory body for the establishment of a Foreign Foundation. The Applicant should first obtain a recommendation letter from the MFA, as mandated by Minister of Foreign Affairs Decree Number 25/B/TI/VI/2021/01 on The Licensing Team Technical Instructions in Licensing Management for Community Organizations Established by Foreigners (“MFA Decree 25/2021”). For the issuance of this recommendation letter, the MFA will assign a licensing team as referred to in Government Regulation Number 59 of 2016 on Community Organizations Established by Foreign Citizen (“GR 59/2016”).
The Applicant in submitting their application to obtain a Consideration Letter, shall at least submit the following documents in accordance with the Attachment of MFA Decree 25/2021:
| a. |
letter of request for approval consideration
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| b. |
copy of founder's passport
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| c. |
copy of KITAP
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| d. |
curriculum vitae of the founder
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| e. |
foundation organisational structure
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| f. |
a copy of the draft of the deed of establishment with the proposed name of the Foreign Foundation (name reservation can be processed in parallel to system of the MoLHR).
|
| g. |
a statement from the founder stating the initial assets of the Foreign Foundation which are separated from the founder's personal assets, with the amount according to the type of Foreign Foundation to be established
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| h. |
a statement from the founder that the activities of the Foreign Foundation will not harm the people, nation and/or the Indonesian state
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| i. |
statement letter regarding the funding source of the Foreign Foundation
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After submitting the documents as mentioned above, the MFA will verify the documents within 14 (fourteen) days. If such documents are complete and meet the requirements, the Foreign Foundation must proceed to the next stage, which should be a plenary meeting with the Licensing Team, where interviews will be held with the applicant, and the Applicant is required to explain the Foreign Foundation that is to be established, the action plan for Foreign Foundation’s activities in Indonesia, and the vision and mission of the Foreign Foundation.
Following the plenary meeting, an assessment will be carried out, and a letter of recommendation will be issued if the results satisfy the Licensing Team. This recommendation letter will be required for the ratification process at the MoLHR.
To obtain ratification from the MoLHR, as stipulated in Article 11 of the Foundation Law, the deed of establishment should be signed before a public notary. After signing the deed of establishment, the public notary will submit a request for ratification to the MoLHR system by submitting the required documents, one of which is a previously obtained letter of recommendation from the MFA.
- Source of Funding
Provisions of the Community-Based Organization Law prohibit Foreign Foundation from raising funds directly from Indonesian society. To obtain funds to achieve the aims and objectives of a Foreign Foundation, it can establish another legal entity or obtain funds through grants.
- Permitted and Prohibited Actions
A Foreign Foundation has the following rights under the provisions of Article 20 and 39 of the Community-Based Organisation Law:
a. organise and manage the organization’s household independently and openly.
b. obtain intellectual property rights for the Community-Based Organization’s name and symbol in accordance with applicable laws and regulations.
c. defend the organization’s aspirations.
d. carry out activities to accomplish the organizational objectives; and
e. obtain legal protection for the organization’s existence and activities and collaborate with the government, regional government, private sector, other community-based organisations, and other parties in the context of organisational development and sustainability; and
f. establish a business entity in order to meet the organization’s demands and objectives.
The Foreign Foundation shall be prohibited from carrying out the following activities:
a. activities that are contrary to the provisions of Indonesian laws and regulations.
b. disrupt the stability and integrity of the Republic of Indonesia.
c. intelligence activities.
d. political activities.
e. activities that interfere with diplomatic relations.
f. activities that are not in accordance with the goals of the organisation;
g. raise funds directly from Indonesian society; and
h. use the facilities and infrastructure of government agencies or institutions.
- Post-Establishment Obligations
Article 51 of Community-Based Organization Law lists down the obligations of a Foreign Foundation, which includes:
a. comity to the sovereignty of the Republic of Indonesia.
b. comply with the existing laws and regulations of Indonesia.
c. respect and appreciate religious values and cultural customs that apply in Indonesian society.
d. provide benefits to the people, nation and state of Indonesia.
e. announce all sources, amounts and uses of funds; and
f. make periodic activity reports to the government or regional government and publish these reports to the public using Indonesian mass media in Indonesian language.
CONCLUSION
The key points mentioned above can be helpful, particularly for foreign parties that intend to establish Foreign Foundation in Indonesia, since the procedures for establishing Foreign Foundation are stricter than the public’s perception on Foreign Foundation and their obligations seems to be limited.
However, it does not mean that procedures and limited obligations will make it more difficult to establish and operate Foreign Foundation in Indonesia. With a proper understanding on foundations, the establishment and its operation in Indonesia will be smoother and easier to navigate.
Please note that the information contained in this article should be only used as a general guideline with respect to the subject hereof and may not contain legal advice or legal opinion for your specific cases. The information herein should not be used or relied upon in regard to any particular facts or circumstances without seeking legal advice from us. We will not be liable nor be responsible for any consequences, damages or other similar forms which may be suffered by any party who had used or relied upon this article.
If you require further information on the new regulation, please do not hesitate to contact:
Nurjadin Sumono Mulyadi & Partners
Contact information:
Iwan Nurjadin
Partner
iwan.nurjadin@nurjadinet.com
Vera Noviani Harwanto
Senior Associate
vera.noviani@nurjadinet.com
Monika Saraswati
Associate
monika.saraswati@nurjadinet.com
Ratnasari Wahono
Associate
ratnasari.wahono@nurjadinet.com