“Companies are under the obligation to report Beneficial Owner information to the Ministry of Law and Human Rights at the time of establishment and at the time of any change of Beneficial Owner information. While the sanctions of incompliance have not been regulated clearly, based on practical experience, if corporation does not conduct Beneficial Owner reporting duty, then the Ministry of Law and Human Rights will impose administrative sanction in the form of blocking process, in which the AHU Online of the corporation cannot be accessed.”
Overview of Beneficial Owner
Beneficial Owner is an individual who is authorized to appoint or dismiss board of directors, board of commissioners, management, advisor, or supervisor in a Corporation, has the ability to control Corporation, is entitled for and/or obtain benefit from Corporation either directly or indirectly, is the actual owner of fund or Corporation shares and/or complies with these criteria.
The definition mentioned above is explained in President Regulation No. 13 of 2018 on Implementation of Know-Your-Beneficial-Owner Principle by Corporation for the Purpose of Prevention and Eradication of Money Laundering and Terrorism Financing (“PR 13/2018”), and in Minister of Law and Human Rights (“MoLHR”) Regulation No. 15 of 2019 on Implementing Procedures for the Application of Know-Your-Beneficial-Owner Principles by Corporations (“MoLHR Reg 15/2019”).
The Beneficial Owner criteria are determined according to the form of a corporate legal entity, where the regulated form of the corporation includes:
- limited liability company;
- foundation;
- association;
- cooperative;
- limited partnership
- commercial partnership
- other forms of corporation
Although the criteria for each corporation are different, there are 3 (three) criteria that must be met for each corporation, namely:
- has the authorization or power to influence or control the corporation without obtaining authorization from any party;
- receives benefit from the corporation; and/or
- is the actual owner of fund for paid-up capital in the corporation.
Determination of Beneficial Owner
Beneficial Owner is determined by the Corporation based on information obtained through:
- articles of association including documents of amendment to articles of association, and/or deed of establishment of the Corporation;
- documents of agreement of Corporation establishment;
- documents of general meeting of shareholders decree (rapat umum pemegang saham/RUPS), documents of meeting of foundation organ decree, documents of meeting of management decree, or documents of meeting of members decree;
- information from Authorized Agency;
- information from private institution who receives placement or transfer of fund for the purposes of purchasing limited liability company shares;
- information from private institution which provides benefit from Corporation to Beneficial Owner;
- statement from board of directors, members of board of commissioner, advisor, management, supervisor, and/or official/Corporation employee which its validity may be accounted;
- documents which are owned by Corporation or other party which indicate that such individual is the actual owner of fund for shares ownership of limited liability company;
- documents which are owned by Corporation or other party which indicate that such individual is the actual owner of fund for other assets or participation in Corporation; and/or
- other information whose validity may be accounted.
Although the Beneficial Owner has been determined by the Corporation, other Beneficial Owners may also be determined by the Authorized Institution based on information obtained through:
- results of an audit of the corporation conducted by authorized institution based on the regulation;
- information from private agencies or government institutions that manage data and/or information on Beneficial Owner, and/or receive reports from certain professions containing information on Beneficial Owner; and/or
- other information that can be accounted for the truth.
Report Obligation of the Beneficial Owner and Sanctions
Through this PR 13/2018, every corporation is required to report Beneficial Owners to the obligated authority which is the MoLHR and will get sanctions for corporations that do not report Beneficial Owners information. These sanctions are not clearly explained in the regulation, but based on our confirmation with the Directorate General of Public Legal Administration, we were informed that in the regulation the word ‘mandatory’ to determines the Beneficial Owner based on PR 13/2018 and sanctions will be given to those who do not report Beneficial Owner information will result in the blocking of the Public Legal Administration (Administrasi Hukum Umum or “AHU”) Online Account, this because those who do not reporting Beneficial Owner information have disobeyed the regulations.
However, based on our practical experience, if corporation does not conduct Beneficial Owner reporting duty then the MoLHR will impose administrative sanction in the form of blocking process, in which the AHU Online Account for obtaining decision or notification letter from MoLHR if there is a change of the corporations’ Articles of Associations, change of corporation’s data, other corporate actions such as merger, acquisition, liquidation, etc., as well as the blocking of the usage of the corporation’s Online Single Submission (“OSS”) user account.
As mentioned before, failure to comply with Beneficial Owner reporting duty will result in the blocking of the corporation’s AHU Online Account and OSS Account. Therefore, if the corporation is blocked by AHU Online, thus, the corporations cannot access the OSS system and cannot update its data according to any amendment of Articles of Associations.
Author: Adam Kausar
Gaffar & Co. an Indonesian Boutique Law Firm specializing and focusing on commercial law areas, which include investment and corporate secretarial services.
For further queries and information, contact us:
+62 811 877 216 | info@gaffarcolaw.com | www.gaffarcolaw.com
