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KNOW YOUR BENEFICIAL OWNERS PRINCIPLE
Who’s in charge? Where’s the head hancho? How do I find the big boss?
Sometimes discerning just who is legally responsible for a company can be problematic. In Indonesia however, the process of identifying the top dog is one step closer to transparency in business.
On 5 March, 2018, The President of Indonesia issued President Regulation No.13 Year 2018 concerning the Implementation of the Principle on Recognizing Beneficial Ownership of Corporations in the Framework of the Prevention and Eradication of Money Laundering and Criminal Acts of Terrorism Financing (“PR13”) .Other regulations regarding Money Laundering and Terrorism Financing can be found in the Financial Services Authority Regulations No.12/POJK.01/2017.
Highlights of PR 13
According to Article 1 Point 1 PR13, ‘Corporations’ is defined as “Organized groups of persons or assets, whether being in the form of a legal entity or not” . Hence, the definition clearly covers and applies to all kinds of business entities legal or non-legal. Furthermore, Article 2 Point 2 PR13 clarifies that ‘Corporations’ include:
- Limited liabilities companies;
- Limited Partnerships;
- Firm Partnerships and;
- Other forms of corporations.
Every Corporation that fulfills the criteria as ‘organized groups of persons or assets’ or classified as an A to G type corporation as mentioned above is obliged to determine the Beneficial Owners of the Corporation. Moreover, PR13 regulates that Corporations shall apply the Know Your Beneficial Owners Principle with the method of appointing one employee to identify and verify the Beneficial Owners of Corporation and to provide all related information of the corporation and its Beneficial Owners to any Related Government Institution/Government Agency when requested.
In reference to PR13 Article 1 Point 2, ‘Beneficial Owners’ is defined as “an individual who possess the power to appoint and remove the directors, commissioners, managers, trustees, or supervisors of a corporation, who has control over the corporation, who is entitled to receive, and /or actually receives, direct or indirect benefit from the corporation,who is the true owner of the assets or share capital of the corporation, and / or who fulfill the other criteria set out in this Presidential Regulation”. As you can see, this definition does not explicitly define whether a corporation such as a limited liability company can be referred to as Beneficial Owners. However, the definition of “true owner of the assets or share capital” is explicity referring to a person.
The regulations regulate a criteria to identify Beneficial Owners from Point A to Point G as mentioned above. For more specificity, the criteria to determine a limited liability company’s Beneficial Owners are as follows :
- The Beneficial Owners possess more than 25% of the shares in the limited liability company as stated in the articles of association.
- The Beneficial Owners possess more than 25% of the voting rights in the limited liability company as stated in the articles of association.
- The Beneficial Owners receive more than 25% of the annual profits earned by the limited liability company.
- The Beneficial Owners possess the authority to appoint and remove member of Board of Directors and Board of Commisioners.
- The Beneficial Owners possess the Power to influence or to control the limited liability company without authorization from any party.
- The Beneficial Owners receive benefits from the limited liability company.
- The Beneficial Owners are the actual owners of the fund used to subscribe for the shares of the limited liability company.
Moreover, PR13 Article 4 point 2 has stated that an individual who fulfills the criteria in Points E, F and G is an individual (person) who does not fulfill the criteria in Points A, B, C, and D.
Further interpretation of Article 4 point 2 on Letterlijk reveals that Points A to D are the criteria to determine the Beneficial Owners on general terms as stated in Articles of Association; however Points E, F, and G are the criteria to determine the Beneficial Owners in the event there’s some kind of shares ownership arrangement.
Company Obligations in Relation to PR13
The obligations of a Company subject to PR 13 are the following :
- To appoint one of its employees to implement Know Your Beneficial Owner Principle and to provide related information to relevant authorized government institutions or agencies.
- To determine the Beneficial Ownership through identification and verification.
- To update the information on the Beneficial Ownership on an annual basis.
- To provide a statement letter or registration of the Beneficial Ownership to a related government agency.
- To fill the Beneficial Ownership data and information in terms of a minimum of five years.
The Beneficial Ownership data and information to be collected include the following :
- Full name of the Beneficial Owner; Identity card number or driving license number or passport of the Beneficial Owner;
- Place and date of birth of the Beneficial Owner;
- Residential address on the identity card of the annual ;
- Residential address in the country of origin if the Beneficial Owner is a foreign citizen;
- Taxcard number of the Beneficial Owner;
- The link between company and the Beneficial Owner.
Yet at the end of the day, the complete guide to implement a report on Know Your Beneficial Owner Principle is still not entirely clear under the PR13. However, we do anticipate further regulations on implementation will be issued in the near future.
Written by Erick Sanjaya Perkasa, SH., M.Kn