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The Foundation Law and Its Relation with Foreign NGOs as Shareholders in Limited Liability Companies

3 April 2019

Before the enactment of Law No. 16 of 2001 on Foundation, there are no specific regulation in Indonesian legislation concerning Foundation. However, the word “Foundation” does exist in several articles in Indonesian Civil Code (Article 365, 899, 900, 1680) and in RV (Article 6 (3) and article 236), but in those articles, there are no clear definitions or rules about the Foundation.

Still, before the enactment of the Foundation Law and its changes, referring to the 1884 Hoogerechtshof decision and the Supreme Court Decision dated June 27, 1973 Number 124K/Sip/1973, the Supreme Court decision has considered the foundation as a legal entity. Therefore, before the enactment of the Foundation Law and its changes, at that time to strengthen the status, the foundation was established and carried out its activities using general practice and customary law. Nevertheless, during that time the Foundation desired as a legal entity.

In connection with that, the Foundation has the same elements as other legal entities such as:

  1. Has its own property, derived from a separation of founder’s asset.
  2. Has its own purpose and objectives (definite).
  3. Has equipment.

Therefore, before and after the enactment of the Foundation Law, the Foundation is still recognized and has a status as a legal entity. As long as the foundation:

  1. It has been registered in the District Court and announced in the Supplementary State Gazette of the Republic of Indonesia (TBNRI); or
  2. It has been registered in the District Court and has permission to carry out activities from the relevant agencies.

Then, what if the foundation buys or owns Shareholder ownership in a Limited Liability Company

Because of the status of a legal entity, the foundation has its own wealth separate from the founder or management, has its own purpose and objectives, and has equipment, therefore the Foundation can carry out legal actions and legal relations.

The foundation can be a shareholder in a Limited Liability Company eventhough the foundation is a foreign foundation. This is stipulated in the Elucidation of Article 7 of Law Number 40 Year 2007 concerning Limited Liability Companies. It states that a "person" who is a shareholder, is an individual both Indonesian and foreign citizens, or an Indonesian or foreign legal entity.