Procedures to Establish a Foundation in Indonesia

PERTANYAAN

What licenses do we need in order to establish a foundation? What are the laws and regulations?

INTISARI JAWABAN

There are basically 3 stages to establishing a foundation according to Law Number 16 of 2001 on Foundations and its amendments. These stages are the establishment, legalization/validation, and announcement.

The process of the establishment itself is conducted through a notarial deed and drawn up in Bahasa Indonesia or the Indonesian language, except for the establishment of a foundation by foreigners or in cooperation with foreigners which is further regulated under Government Regulation Number 63 of 2008 on the Implementation of the Law on Foundations and its amendments. Legal entity status for a new foundation arises after the deed of foundation establishment has been validated by the Minister of Law and Human Rights. The deed of foundation establishment which has been validated as a legal entity must be announced in the Supplement to the State Gazette of the Republic of Indonesia.

Please read the review below for a further explanation.

ULASAN LENGKAP

This article is an English translation of Prosedur Pendirian Yayasan di Indonesia which was written by Eryanto Nugroho and was published on Thursday, 21 February 2019.

All legal informations which are available through Klinik hukumonline.com have been prepared for educational purposes only and are general in nature (read the complete Disclaimer). In order to obtain legal advice specific to your case, please consult with Justika Partner Consultant.

Prior to the enactment of Law Number 16 of 2001 on Foundations (“Law 16/2001”), in Indonesia, there were no laws and regulations which specifically addressed foundations. The word foundation is indeed found in several articles of the Indonesian Civil Code (Article 365, 899, 900, 1680) and Reglement op de Rechtsvordering or Rv (Article 6 Section 3, and Article 236), however, in said articles it is not contained a clear definition or "rules of the game" on foundations.

The Netherlands has had a Wet Op Stichtingen since 1956, hence, foundations in Indonesia so far only refer to the Jurisprudence Decision of the Hoogerechtshof of 1884 and the Supreme Court Decision June 27, 1973 Number 124/Sip/1973.

However, since Law 16/2001 has now come into force, we have chosen to answer this question in accordance with this regulation. In its development, Law 16/2001 has been amended by Law Number 28 of 2004 on the Amendment to Law Number 16 of 2001 on Foundations ("Law 28/2004").

Foundation is a legal entity consisting of separated assets and is intended to achieve certain goals in the social, religious, and humanitarian sectors, which has no members.[1]

Foundations have organs consisting of advisors, administrators, and supervisors.[2]

There are basically 3 stages in the process of establishing a foundation, namely:

1. Establishment

Foundations may be established by one or more persons ("person" may refer to either an individual or a legal entity), by separating a portion of the founder's assets as initial assets.[3]

The basis for the establishment of this foundation may be in the form of an agreement between the founders of the foundation to carry out social, religious, and humanitarian activities or it can also be based on a will/testament.[4]

The establishment process itself is carried out with a notarial deed and drawn up in Bahasa Indonesia,[5] except for the establishment of foundations by foreigners or in cooperation with foreigners which will be further regulated under Government Regulation.[6] In this regard, it has been regulated in Chapter V of Government Regulation Number 63 of 2008 on the Implementation of the Law on Foundations (“Government Regulation 63/2008”) as amended by Government Regulation Number 2 of 2013 on the Amendment to Government Regulation Number 63 of 2008 on the Implementation of the Law on Foundations (“Government Regulation 2/2013”).

However, since you did not specify mention, whether the foundation you are referring to was established by an Indonesian citizen or by a foreigner, we will only discuss it as if it was established by an Indonesian citizen.

It should be noted that the initial assets of foundations established by Indonesian citizens, which are from the segregation of the founder's personal assets, in equivalent terms amount to a minimum of IDR 10 million.[7] "In equivalent terms" means that if the separated assets are not in the form of rupiah currency, then the value of said assets is equal to IDR 10 million.[8]

If the establishment of a foundation is based on a will, then it should be conducted through an open will[9] and implemented as described in the following Article 9 Law 16/2001:

1. the establishment of the foundation shall be directly contained in the relevant will, by including the provisions of the articles of the foundation that soon will be established; or
2. the establishment of a foundation shall be implemented by the executor of the will, as ordered in the will, by the testator in accordance with the provisions of this Law and Government Regulation.

 

2. Legalization/Validation

Legal entity status for a new foundation arises after the deed of establishment of the foundation has been validated by the Minister of Law and Human Rights.[10]

In order to obtain validation, the founders or proxies shall submit an application for validation to the Minister of Law and Human Rights through the notary who draws up the deed of establishment of the foundation. The Notary is obliged to submit the application for validation to the Minister of Law and Human Rights within a period of no later than 10 (ten) days from the date the deed of establishment of the foundation is signed.[11]

The validation of said application shall be granted or rejected within a period of no later than 30 (thirty) days from the date the application is submitted.[12]

If it is rejected, then the refusal of validation by the Minister of Law and Human Rights must be notified in writing along with the reasons to the applicant. The reason for the refusal is that the application submitted is not in accordance with the provisions of the law and/or its implementing regulations.[13]

It should be noted that legal actions which are undertaken by the administrator on behalf of the foundation before the foundation obtains the status of a legal entity become the administrators’ joint and several liabilities.[14]

3. Announcement

The deed of establishment of a foundation that has been validated as a legal entity must be announced in the Supplement to the State Gazette of the Republic of Indonesia. Such announcement shall be made by the Minister of Law and Human Rights within a period of no later than 14 (fourteen) days from the date of the deed of establishment of the Foundation is validated. Announcements are subject to a fee, as stipulated in a Government Regulation.[15]

After the three stages are implemented (establishment, validation, and announcement), then the foundation has been legally established as a legal entity.

These are the answers we can provide, we hope you will find them useful.

Legal Basis:

1. Law Number 16 of 2001 on Foundations as amended by Law Number 28 of 2004 on the Amendment to Law Number 16 of 2001 on Foundations;
2. Government Regulation Number 63 of 2008 on the Implementation of the Law on Foundations as amended by Government Regulation Number 2 of 2013 on the Amendment to Government Regulation Number 63 of 2008 on the Implementation of the Law on Foundations.

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[1] Article 1 Section (1) Law Number 16 of 2001 on Foundations (“Law 16/2001”).

[2] Article 2 Law 16/2001.

[3] Article 9 Section (1) and Explanation to Article 9 Section (1) Law 16/2001.

[4] Article 9 Section (1) jo. Article 9 Section (3) and Article 1 Section (1) Law 16/2001.

[5] Article 9 Section (2) Law 16/2001.

[6] Article 9 Section (5) Law 16/2001.

[7] Article 6 Section (1) Government Regulation Number 63 of 2008 on the Implementation of the Law on Foundations (“Government Regulation 63/2008”).

[8] Explanation to Article 6 Section (1) Government Regulation 63/2008.

[9] Article 8 Government Regulation 63/2008.

[10] Article 11 Section (1) Law Number 28 of 2004 on the Amendment to Law Number 16 of 2001 on Foundations ("Law 28/2004").

[11] Article 11 Section (2) and (3) Law 28/2004.

[12] Article 12 Section (2) Law 28/2004.

[13] Article 13 Law 16/2001.

[14] Article 13A Law 28/2004.

[15] Article 24 Section (1), (2), and (4) Law 28/2004.