Establishment of a Branch of Foreign Foundation in Indonesia

PERTANYAAN

The NICMCR Foundation is registered with the Dutch Chamber of Commerce. Its board members are domiciled in both the Netherlands and Indonesia. The Dutch Chamber of Commerce advised that they should establish a branch in Indonesia. What is the procedure and where can the Indonesian branch of the foundation be registered? Thank you.

INTISARI JAWABAN

A branch of a foreign foundation in Indonesia can be established as a legal entity based on Indonesian law with reference to the holding foundation or by directly partnering with an Indonesian foundation. General provisions regarding the establishment of this foundation are contained in Foundation Law as amended by Law 28/2004, and Government Regulation 63/2008 as amended by Government Regulation 2/2013.

The establishment of the foundation is carried out by notarial deed and made in Indonesian and the foundation only obtains the status of a legal entity after the deed of establishment of the foundation obtains authorization from the Minister of Law and Human Rights.

Please take a look at the review below for a further explanation.

ULASAN LENGKAP

This article is an English translation of Pendirian Cabang Yayasan Asing di Indonesia, written by Ulya Yasmine Prisandani, S.H., LL.M from International Business Law Program Universitas Prasetiya Mulya, and was published on Monday 20 January 2020.

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

Netherlands-Indonesia Consortium for Muslim-Christian Relations

According to the official website of the Netherlands-Indonesia Consortium for Muslim-Christian Relations (“NICMCR”), NICMCR is:

The Netherlands-Indonesia Consortium for Muslim-Christian Relations is a non-governmental network of universities and civil society organizations in the Netherlands and Indonesia, consisting of Muslim and Christian scholars, religious leaders, and practitioners.

NICMCR has a mission, as follows:

The Consortium intends to contribute to the enhancement of mutual understanding and common action among communities in Indonesia and in the Netherlands, and therefore to use and expand the resources that the Participants share in terms of knowledge, experience, networks, and funding.

Based on the information and description if translated independently, NICMCR is a foundation consisting of universities and non-governmental organizations in the Netherlands and Indonesia including scholars, religious leaders, and practitioners, both Christians and Muslims who aim to strengthen understanding in Indonesia and the Netherlands to develop resources.

Establishment of Foundation by Foreigners

Article 9 section (1) Foundation Law as amended by Law 28/2004 stipulates that foundations are established by one person or more by separating part of the assets of the founders, as initial assets.

According to Article 9 section (5) Foundation Law, a foundation can also be established by a foreigner or together with foreigners, and the terms and procedures for the establishment of the foundation shall be regulated by a Regulation of the Government.

This provision is further regulated in Government Regulation 63/2008 as amended by Government Regulation 2/2013.

Foundations established by foreign individuals must meet the document requirements as follows:[1]

1. For foundations established by foreign individuals, they must fulfill the following requirements:

1. the founder’s identity which is proven by a valid passport;
2. the separation of part of the personal assets of the founder which are made into the initial assets of the foundation of at least IDR100 million and are proven by a statement of the founder regarding the validity of said assets; and
3. a statement of the founder that the activities of the established foundation are not detrimental to the community, nation, and state of Indonesia.
   

2. Foundations established by foreign legal entities must meet the document requirements as follows:

1. the legal entity’s identity which is proven by the validity of the legal entity as the founder of the foundation;
2. the separation of part of the personal assets of the founder which are made into the initial assets of the foundation of at least IDR100 million which is proven by a statement of the executive board of the legal entity as the founder regarding the validity of said assets; and
3. a statement of the executive board of the legal entity concerned that the activities of the established foundation are not detrimental to the community, nation, and state of Indonesia.

Further provisions include the obligation to elect one of the foundation's board members, either the chairman, secretary, or treasurer, to be held by an Indonesian citizen as well as the obligation to have a license to conduct activities or business and also a Temporary Stay Permit Card (Kartu Izin Tinggal Sementara/ "KITAS") for foreign foundation board members.[2]

The obligation to have a license to conduct activities or business and KITAS also applies to members of the foundation's trustees and supervisors who are foreign nationals, if they reside in Indonesia.[3] This provision does not apply to diplomatic corps officials and their families assigned in Indonesia.[4]

Referring to Article 9 section (2) Foundation Law, the establishment of a foundation is done with a notarial deed, and made in the Indonesian language and Article 11 section (1) Law 28/2004 explains that the foundation only obtains the status of a legal entity after the foundation's deed of establishment has been approved by the Minister of Law and Human Rights.

Foundation Registration Mark

Furthermore, if the branch of the foundation established by foreigners is located, for example, in the Special Capital Region of Jakarta ("DKI Jakarta") Province and is a social welfare institution, then there are additional provisions stipulated in Article 6 section (1) and (2) Regulation of the Governor of DKI Jakarta as follows:

1. Every foundation established by foreigners and/or together with Indonesians must have a registration mark from the DKI Jakarta Social Service (in Bahasa Indonesia is known as Dinas);
2. To obtain the registration mark as intended, the applicant must submit a written application to the Head of the Social Service by filling out the registration form available at the Social Service signed by the head/chairman and secretary of the foundation with the foundation stamp (seal) and equipped with the following requirements:

 

1. recommendation from the head of the holding foundation of a foundation established by a foreigner and/or the head of the holding foundation of a foundation established jointly by an Indonesian;
2. a report on the results of research/field observation from the Social Service Office of the Administrative City in DKI Jakarta;
3. photocopy of the deed of articles of association and bylaws of foundations established by foreigners and/or foundations jointly established with Indonesians that have been legalized/registered at the Ministry of Law and Human Rights;
4. annual work program signed by the management and affixed with the stamp of the foreign foundation and/or mixed foundation;
5. activity report for the last 1 year;
6. the composition of the foundation's board of directors with the identity card of the board and one of the board members must reside in DKI Jakarta and have an identity card of DKI Jakarta; and
7. a certificate of domicile of the foundation issued by the local village head and acknowledged by the sub-district head.

 

Foundation Partnership

Alternatively, if you do not want to establish a foundation based on Indonesian law (still referring to the Dutch NICMCR as the holding foundation), then you are required to implement the provisions contained in Article 26 Government Regulation 63/2008 as follows:

1. Foreign foundations can conduct activities in Indonesia only in the social, religious, and humanitarian fields.
2. Foreign foundations as referred to above, to conduct their activities in Indonesia must partner up with Foundations established by Indonesian People which has similar purposes and objectives with the said foreign foundation.
3. The partnership as referred to in paragraph (2) must be safe from political, juridical, technical, and security aspects.
4. Partnerships between foreign foundations and Foundations established by Indonesian People shall be conducted in accordance with the provisions of laws and regulations.

Therefore, we suggest that if the foreign foundation wants to conduct activities in Indonesia but not limited to the activities in Article 26 Government Regulation 63/2008, then the branch of the foreign foundation should be established as an Indonesian-incorporated foundation that refers to the Netherlands NICMCR as the holding foundation.

This is because the activities of foreign foundations that are not incorporated in Indonesia are limited to the social, religious, and humanitarian fields, and the procedures regarding the implementation of partnerships between foreign foundations and Indonesian foundations have not been made explicit in the laws and regulations.

This is our answer, hopefully, you find it useful.

Legal Basis:

1. Law Number 16 of 2001 on Foundation as amended by Law Number 28 of 2004 on the Amendment to Law Number 16 of 2001 on Foundation;
2. Regulation of the Government Number 63 of 2008 on the Implementation of Law on Foundation as amended by Regulation of the Government Number 2 of 2013 on the Amendment to Regulation of the Government Number 63 of 2008 on the Implementation of Law on Foundation;
3. Regulation of the Governor of DKI Jakarta Number 6 of 2012 on Procedures for Registration of Social Welfare Institutions.

Reference:

Netherlands-Indonesia Consortium for Muslim-Christian Relations, accessed on 16^th January 2020, at 11.41 West Indonesian Time (zone).

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[1] Article 11 Regulation of the Government Number 63 of 2008 on the Implementation of Law on Foundation (“Government Regulation 63/2008”).

[2] Article 12 section (1) and (3) Government Regulation 63/2008.

[3] Article 13 section (1) Government Regulation 63/2008.

[4] Article 14 Government Regulation 63/2008.