[Yayasan] - A Guideline to Foundations in Indonesia
General Overview
Foundations are regulated by Law No. 16 of 2001 regarding Foundation as amended by Law No. 28 of 2004 (“Foundation Law”), Law No. 17 of 2013 regarding Civil Society Organization as amended by Government Regulation in Lieu of Law No. 2 of 2017 (“CSO Law”), as well as the Government Regulation No. 63 of 2008 regarding the Foundation Law Implementation Regulation as amended by Government Regulation No. 2 of 2013 (“GR 63/2008”). A foundation is a legal entity established for social, religious, or humanitarian purposes, which may be established for an indefinite term.¹ A foundation shall not be established for the purpose of generating profit to be distributed to its founder(s) as well as its organ members, with certain exception. Foundations has no members² and can own its own assets, which are distinct from the assets of its founders.³
This ARMA update will discuss the general provisions regarding a foundation, including the forms of foudnations, the process of establishment, and provisions regarding its organs.
Forms and Establishment of Foundation
A. Local Foundation
A Local Foundation is a foundation that is founded by all Indonesian nationals. The minimum initial contribution for a Local Foundation is Rp10,000,000 (ten million Rupiah).⁴ The Local Foundation can be established by signing a notarial Deed of Establishment before a Notary and obtaining the approval of establishment from the Ministry of Law and Human Rights (“MOLHR”). Once approved, the Local Foundation will be a legal entity.
B. Foreign Foundation
I. Foundation founded by foreign nationals (“Foreign National Foundation”)
A Foreign National Foundation is founded by foreign nationals or founded jointly by a foreign national with an Indonesian national. This form of foundation is required to have a total initial contribution of at least Rp1,000,000,000 (one billion Rupiah). The founder must be staying in Indonesia through a limited stay permit for at least 5 (five) years prior to the establishment of the Foreign National Foundation.⁵
II. Foundation foundation by foreign legal entities (“Foreign Entity Foundation”)
A Foreign Entity Foundation is founded by foreign legal entity, which the minimum of capital contribution is Rp10,000,000,000 (ten billion Rupiah). Further, prior to the Foreign Entity Foundation establishment, the foreign legal entity must have been existing in Indonesia for 5 (five) years.⁶
For the establishment, Foreign National Foundations and Foreign Entity Foundations can only be approved by the MOLHR after obtaining the consideration/recommendation (pertimbangan) from the Licensing Team of the Ministry of Foreign Affairs (“MOFA”). Further, to carry out its activities, a Foreign Foundation must work together or cooperate with a local foundation with similar activities.⁷
Foundation’s Organ
A. Board of Trustees (“BOT”)
The BOT shall consist of at least one person and if there are more than one person in the BOT, one of them shall be appointed as the Chairman of the BOT. The first BOT is appointed by the founder(s) and the founder(s) of the foundation may serve on the BOT.⁸ A member of BOT may hold their position for indefinite time or for a specified time.
The BOT has all authority that is not specifically delegated to the Board of Management or Board of Supervisors, including to amend the Articles of Association (“AOA”); appoint and dismiss members of the Board of Management and Board of Supervisors; issue by-laws or general policies in accordance with the AOA; approve work programs and draft of annual budgets of the foundation; and decide and approve merger or dissolution of foundation.⁹
For Local Foundations, the BOT must all be Indonesian nationals. On the other hand, for Foreign Foundations can have foreign nationals as members of the BOT. If such foreign BOT members of Foreign Foundations resided in Indonesia, they are required to obtain a work permit and must be a holder of a Temporary Residence Permit Card (Kartu Izin Tinggal Sementara or “KITAS”).¹⁰
B. Board of Management (“BOM”)
The BOM has the role of managing the day-to-day operations of the foundation¹¹ and represent the foundation. The BOM of the foundation shall consist of a Chairman, a Secretary, and a Treasurer. They are appointed for a period of 5 (five) years and can be re-appointed. They are appointed and can be dismissed by the Board of Trustees.¹²
The members of the BOM have a fiduciary duty to the foundation and are required by the Foundation Law to carry out all of their duties and functions in good faith and in the interests of the foundation. The members of the BOM may be held personally and jointly liable in the event of bankruptcy of the foundation or if the financial statements of the foundation are misleading as a result of their wrongful conduct or negligence. They can also be held personally liable for failure to perform their duties in accordance with the AOA.
Members of the BOM of a Local Foundation must all be Indonesian nationals. On the other hand, for Foreign Foundations it is stipulated there must be at least 1 (one) Indonesian national on the BOM of a Foreign Foundation, either the Chairman, Secretary, or the Treasurer.¹³ Thus, for the rest of the BOM member of a Foreign Foundation can be a foreign national but must reside in Indonesia.¹⁴ These foreign BOM members of a Foreign Foundation must obtain a work permit and must be a holder of a KITAS.¹⁵
C. Board of Supervisors (“BOS”)
The BOS consists of at least one supervisor whose authority includes supervising and advising the BOM as well as suspend the BOM members for any misconduct. The BOS are appointed by the BOT for a period of 5 (five) years and the term m¹⁶ay be extended, and the BOS can be dismissed by a BOT resolution.¹⁷
Similar to that of the BOM, the BOS also have a fiduciary duty to carry out all of their duties and functions in good faith and in the interests of the foundation. In the event the foundation is bankrupt as a result of an omission or failure of the BOS in performing their supervisory duties and the assets of the foundation are not adequate to cover its liabilities, the BOS can be held jointly and/or severally liable.¹⁸
Local Foundations cannot have foreign BOS members, therefore it must all be Indonesian nationals. On the other hand, for Foreign Foundations can have foreign nationals as members of the BOS. Much like the BOT, foreign BOS members of a Foreign Foundation who resides in Indonesia are required to obtain a work permit and must be a holder of a KITAS.
The organs of the foundation are not allowed to receive any salary, allowance, or other forms that can be valued with money from the foundation, with an exception for BOM who is (i) not a founder of the foundation, (ii) not affiliated to any of the founder, BOT and BOS of the foundation, and (iii) conducting the management of the foundation directly and fully. Further, when appointing members of these boards, a person cannot hold 2 (two) different positions in the foundation at the same time.
Article 1 (1) and 16 (1) of the Foundation Law
Article 11 (3) of the Civil Organization Law
Article 9 (1) of the Foundation Law
Article 6 (1) of GR 63/2008
Article 47 (2) (a), (b) and (c) of the Civil Organization Law
Article 47 (3) (a) and (b) of the Civil Organization Law and Article 6 (2) of GR 63/2008.
Article 26 (1) and (2) of GR 63/2008
Article 28 (3) of the Foundation Law
Articles 28 (1) and (2) of the Foundation Law
Article 13 (1) of GR 63/2008
Article 35 (1) of the Foundation Law
Articles 32 and 34 of the Foundation Law
Article 12 (1) of GR 63/2008
Article 12 (2) of GR 63/2008
Article 12 (3) of GR 63/2008
Article 40 (1), (2) and 43 (1) of the Foundation Law
Article 44 (1) and 46 (1) of the Foundation Law
Article 47 (1) of the Foundation Law
Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.
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