Similarities between Association and Company/Society and Their Establishment Procedures

PERTANYAAN

At this time, our company and several other companies are looking to establish associations, which we would like to inquire as follows:

1. Are incorporated associations the same as companies/societies?
2. Do the founders of associations have to be individuals or can they be legal entities?
3. Are associations also subject to Law Number 17 of 2013 on Community Organizations?

INTISARI JAWABAN

According to the Regulation of the Minister of Law and Human Rights 3/2016, a company/society is a legal entity in the form of a group of people to realize certain common aims and objectives in the social, religious, and humanitarian fields and does not distribute profits to its members."

Then what about associations, are associations the same as societies? And what is the procedure for the establishment?

Please read the review below for a further explanation.

ULASAN LENGKAP

This article is an English translation of Persamaan Asosiasi dengan Perkumpulan dan Prosedur Pendiriannya which was written by David Christian and was published on Tuesday, 6 September 2022.

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.

Incorporated Association

According to Article 1 Section (1) Regulation of the Minister of Law and Human Rights 3/2016, a company/society is a legal entity that is a collection of persons established to realize the commonalities of certain aims and objectives in the social, religious, and humanitarian fields and does not distribute profits to its members.

Association, based on the Kamus Besar Bahasa Indonesia (“KBBI”) or also known as the Indonesian official dictionary, is an association of persons with similar interests.

Paramita Prananingtyas in her journal entitled Association of Businesses in Reviewing Indonesian Competition Law explains that an association or assemblage is a society that is usually established by professionals and entrepreneurs based on similarities, namely the similarity in the production of goods and services, as well as similarities in the marketing sector (p. 607).

Based on the explanations, from our point of view, an incorporated association is the same as an incorporated society.

Also read: Are Associations the Same as Societies?

Are Societies Subject to the Law of Community Organizations?

In order to answer your question as to whether associations are subject to Law 17/2013, we first need to explain to you what a community organization is.

Community organizations are organizations that are established and formed by the community voluntarily based on common aspirations, wills, needs, interests, activities, and objectives to participate in development in order to achieve the purpose of the Republic of Indonesia according to Pancasila and the 1945 Constitution of the Republic of Indonesia.[1]

Community organizations may be incorporated or unincorporated.[2] Incorporated community organizations may take the form of societies or foundations.[3] Community organizations that are incorporated as societies are established on a membership basis, while community organizations that are incorporated as foundations are not established on a membership basis.[4]

Therefore, are associations also subject to Law 17/2013? Law 17/2013 does not explicitly mention associations. However, as we mentioned earlier, the definition of association is the same as company/society.

The association in question is an incorporated community organization, which is established on a membership basis. In addition, the approval or legalization of the incorporated society is also carried out by the Minister of Law and Human Rights.

Moreover, according to Ikhwan Sapta Nugraha, a notary and land deed official in Yogyakarta, practically, the deed of establishment of an incorporated association requires verification from the Ministry of Law and Human Rights. Why is verification necessary? This is because the contents of the deed of association must not conflict with Law 17/2013, and the purpose of the association establishment must be in accordance with Pancasila and the 1945 Constitution of the Republic of Indonesia. The aims and objectives of the association establishment are also determined only in 3 (three) sectors, namely social, humanitarian, and religious which in each derivative may not be commercial in nature. In terms of the association structure, it is also necessary to refer to Law 17/2013 and Regulation of the Minister of Law and Human Rights 3/2016.

Thus, in order to answer your question, to establish an association you will also need to pay attention to the provisions of Law 17/2013.

Establishment of Incorporated Associations

It is important to note that in order to establish an incorporated association, the following requirements must be fulfilled:[5]

1. deed of establishment issued by a notary containing a Memorandum of Association/ Articles of Association;
2. work program;
3. sources of funding;
4. certificate of domicile;
5. taxpayer identification number on behalf of the association; and
6. An affidavit that states that they are not currently in a management dispute or in a court case.

How many people are the founders of the association? Article 9 of Law 17/2013 stipulates that community organizations shall be established by 3 (three) or more Indonesian citizens, with the exception of community organizations that are incorporated as foundations.

After the requirements for the establishment of associations have been fulfilled, then any newly established associations shall be legalized by the Ministry of Law and Human Rights.

In order to submit an application for the legalization of an incorporated association, it shall be preceded by the submission of the name of the association.[6] The applicant shall submit an application for the use of the association's name to the minister through the Legal Entity Administration System (Sistem Administrasi Badan Hukum/ "SABH").[7]

The applicant in question is a notary who is authorized to submit an application for the legalization of an incorporated association through SABH.[8]

After obtaining the approval for the name of the association, the applicant must submit an application for the legalization of the legal entity to the minister through the SABH.[9] Applicants are required to pay an application fee for the legalization of an association prior to filling out the establishment form.[10]

Furthermore, to fill out the form of association establishment shall also be completed with supporting documents which are submitted electronically.[11] Documents for the association establishment are deposited by a notary, which are:[12]

1. a copy of the deed of association establishment or a copy of the deed of change of association establishment which is known by the notary in accordance with the original;
2. Affidavit of domicile along with the complete address of the association signed by the association's members and acknowledged by the sub-district/village head or by any other name;
3. sources of funding for the association;
4. association work program;
5. an affidavit that states that they are not currently in a management dispute or in a court case
6. minutes of association establishment meeting; and
7. an affidavit of ability from the founder to obtain a taxpayer identification number card.

According to Andrey an Easybiz consultant, there are no regulations that limit individuals or legal entities to establish associations. However, based on his experience in practice, he has never encountered the establishment of associations conducted by legal entities.

In addition, according to Ikhwan Sapta Nugraha, in principle, the establishment of associations refers to the subject of law, i.e. can be established by individuals or legal entities.

However, based on the definition of association in Article 1 Section (1) Regulation of the Minister of Law and Human Rights 3/2016, it is stipulated that an association is a group of people. Technically, the establishment of incorporated associations can only be done by individuals (persoon) because according to this regulation, the legalization of incorporated associations is embodied in the online registration system, namely SABH which does not contain an option for association founders from legal entities.

Also Read: Procedures for the Legalization of Incorporated Associations

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

Legal Basis:

1. Law Number 17 of 2013 on Community Organizations as amended by Law Number 16 of 2017 on Determination of Government Regulation in Lieu of Law Number 2 of 2017 on Amendment to Law Number 17 of 2013 on Community Organizations to become an Act;
2. Government Regulation in Lieu of Law Number 2 of 2017 on Amendment to Law Number 17 of 2013 on Community Organizations;
3. Regulation of the Minister of Law and Human Rights Number 3 of 2016 on Procedures for Submission of Legalization for Legal Entity and Approval of Amendment on Memorandum of Association as amended by Regulation of the Minister of Law and Human Rights Number 10 of 2019 on Amendment to Regulation of the Minister of Law and Human Rights Number 3 of 2016 on Procedures for Submission of Legalization for Legal Entity and Approval of Amendment on Memorandum of Association.

Reference:

1. Paramita Prananingtyas, Asosiasi Usaha Dalam Tinjauan Hukum Persaingan Indonesia. Masalah-Masalah Hukum, Vol. 43 No. 4, 2014;
2. KBBI, accessed on 2 September 2022, at 14.05 Central Indonesia Time (zone).

NB:

1. We have conducted an interview with the Easybiz Consultant, Andrey, via WhatsApp on 6 September 2022, at 16.12 Central Indonesian Time (zone);
2. We have conducted an interview with the Ikhwan Sapta Nugraha, S.H., M.Kn, notary and land deed official in Yogyakarta, via WhatsApp on 6 September 2022, at 14.52 Central Indonesian Time (zone).

 

 

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[1] Article 1 Section (1) Government Regulation in Lieu of Law Number 2 of 2017 on Amendment to Law Number 17 of 2013 on Community Organizations (“Government Regulation in Lieu of Law 2/2017”) as legalized by Law Number 16 of 2017 on Determination of Government Regulation in Lieu of Law Number 2 of 2017 on Amendment to Law Number 17 of 2013 on Community Organizations to become an Act (Law 2/2017”).

[2] Article 9 Section (1) Law Number 17 of 2013 on Community Organizations (“Law 17/2013”).

[3] Article 11 Section (1) Law 17/2013.

[4] Article 11 Section (2) and (3) Law 17/2013.

[5] Article 12 Section (1) Law 17/2013.

[6] Article 2 Regulation of the Minister of Law and Human Rights Number 3 of 2016 on Procedures for Submission of Legalization for Legal Entity and Approval of Amendment on Memorandum of Association (“Regulation of the Minister of Law and Human Rights 3/ 2016”).

[7] Article 3 Section (1) Regulation of the Minister of Law and Human Rights 3/ 2016.

[8] Article 1 Section (3) Regulation of the Minister of Law and Human Rights 3/ 2016.

[9] Article 9 Section (1) and (2) Regulation of the Minister of Law and Human Rights 3/ 2016.

[10] Article 11 Section (1) Regulation of the Minister of Law and Human Rights 3/ 2016.

[11] Article 12 Section (1) Regulation of the Minister of Law and Human Rights 3/ 2016.

[12] Article 12 Section (4) Regulation of the Minister of Law and Human Rights 3/ 2016.