Minister of State-Owned Enterprises Prohibits Souvenir Gifting

The Minister of State-Owned Enterprises (the “Minister”) issued Minister Letter No. SE-8/MBU/12/2019 dated December 5, 2019 on Prohibition for Gifting of Souvenirs or the Likes (the “Circular Letter”). The Circular Letter is addressed to the Board of Directors, Board of Commissioners, and Board of Supervisors of State-owned Enterprises (“SOE”). The Circular Letter is intended to create efficiency for and to be the embodiment of the good corporate governance principles (“GCG”) within SOEs, both in the form of State-Owned Limited Liability Companies (“Persero”) and Public Service Companies (Perusahaan Umum or “Perum”). The Circular Letter shall be applicable to Perseros and Perums as defined by Law No. 19 of 2013 dated June 19, 2003 on SOE (the “SOE Law”) that were defined as follows:

  • Persero:

Persero is an SOE that is in the form of a limited liability company which capital is divided in shares which is completely or at least 51% owned by the state, whose main purpose is to gain profit.

  • Perum:

Perum is an SOE which capital is owned completely by the state and is not divided in shares, which purpose is for public benefit by providing high-quality goods and/or services as well as to gain profit based on corporate governance principles.

The Minister, through the Circular Letter, requests Perseros and Perums to not give souvenirs or similar items to anyone when holding any General Meeting of Shareholders (“GMS”) (for Perseros) and Joint Discussion Meetings (“JDM”) (for Perums). However, such prohibition is not applicable to publicly listed Perseros only for the purpose of ensuring the fulfillment of the GMS quorum while still considering fairness and the interest of the company.

It should also be noted that in a GMS or JDM, the state would be represented by a government official as authorized by the Minister. In this regard, this Circular Letter implements the provision of the Minister Regulation No. PER-01/MBU/2011 of 2011 dated August 1, 2011 on the Application of GCG on SOEs as amended by Minister Regulation No. PER-09/MBU/2012 dated July 6/2012, which already prohibit members of the Board of Commissioners of Perseros, Board of Supervisors of Perums, Board of Directors of Perseros and Perums, and employees of SOEs to give, offer, or receive, both directly and indirectly, something of value to or from customers or Government officials to influence or as a reward over their conducts, in accordance with the provision of the laws.

 

January 6, 2020

Copyright © 2020 AKSET. All rights reserved.

by Adho Fadillah Putera

New Tax Incentives Introduced for Investors in Certain Industries and/or Regions

The Government enacted Government Regulation No. 78 of 2019 dated November 13, 2019 on Granting of Income Tax Incentives for Investments in Certain Industries and/or Regions (“GR 78”) which comes into effect as at today, December 13, 2019. GR 78 revokes Government Regulation No. 18 of 2015 dated May 6, 2015 concerning the same subject.  GR 78 comes into effect on December 13, 2019.

GR 78 attempts to simplify the procedures for applying and obtaining the income tax incentives through the Online Single Submission (the “OSS”) system currently managed by the Capital Investment Coordinating Board (Badan Koordinasi Penanaman Modal/”BKPM”).

In summary, GR 78 provides certain Income Tax incentives to investors whether for new investments or business expansions (collectively, the “Tax Incentives”). The list of business activities in GR 78 that may enjoy the Tax Incentives increases from 145 to 183  business sectors. The additional industries include food, textile, coal-based products, coal refinery, basic metal, new and renewable energy power plants, pharmaceutical, drug and traditional medicine, livestock, as well as agriculture and forestry.

To be eligible to obtain the Tax Incentives, the covered business activities must meet certain criteria. The criteria are that the business activities must have (a) a high investment value or established for export purposes, (b) a high number of employees, or (c) a high local content level. The said criteria will be enumerated further in ministerial regulations relevant to the business sectors.

What are the Forms of the Tax Incentives and When Are They Applicable?

The forms of the Tax Incentives and the starting period for them to be utilized are briefly summarized in the following table.

Tax Incentives Utilization Period
Deduction of the net income in the amount of 30% of the investment value, in the form of tangible fixed assets including land used for the main business activities, given in 6 (six) years divided into 5% each year (the “Tax Incentives over Fixed Assets”). The starting date of the commercial production of a company.
Accelerated depreciation over tangible fixed assets and accelerated amortization over intangible assets obtained in the event of investment granted within certain period and tariff. The issuance of the Tax Incentives approval.
Income tax over the dividends paid to foreign Tax Payers other than permanent establishments in Indonesia at the rate of 10% (ten percent), or at a lower rate according to the applicable double taxation avoidance treaties. The issuance of the Tax Incentives approval.
Compensation for losses suffered for more than 5 years but less than 10 years with certain additional compensation as applicable. The issuance of the Tax Incentives approval (or the additional loss compensation period decision).

 

What are the Requirements for the Tax Incentives over Fixed Assets?

The Tax Incentives over Fixed Assets are given subject to the following requirements which are divided based on the form of the fixed assets (land or non-land):

Land Non-Land
a. The land is newly obtained except for purpose of relocation as an investment from another country;

b. It is stated in the investment license issued by BKPM or through the OSS system; and

c. Owned and used for the main business activities.

 a. The non-land fixed asset is obtained after the business licensed is issued through the OSS system;

b. The object is obtained after the issuance of either (i) a principal license, (ii) an investment license, (iii) an investment registration, or (iv) amendments to any business licenses issued by the OSS system.

It is worth noting that under Article 6 of GR 78, tangible fixed assets that have been granted the Tax Incentives must not be (a) utilized other than for the incentive purpose, or (b) until the later of 6 years since the start of the commercial production or the end of the incentive period of the tangible fixed assets, transferred unless it is replaced with new tangible fixed assets.

How to Apply for the Tax Incentives?

To apply for the Tax Incentives, a Tax Payer must submit an application through the OSS system before the starting date of its commercial production (a) along with the application to obtain a business identification number (for a new Tax Payer); or (b) by no later than 1 (one) year after the issuance of a business license for investment and/or expansion by the OSS system. The Minister of Finance will issue its decision upon receiving a correct and complete application.

 

December 13, 2019

Copyright © 2019 AKSET. All rights reserved.

by Adho Fadillah Putera

Indonesian Government introduces a More Developed E-Commerce Regulation

The  Indonesian Government has responded to  the rapid growth of E-commerce sector in Indonesia by issuing an implementing regulation on E-Commerce business as mandated under  Article 66 of Law No. 7 of 2014 dated March 11, 2014, on Trade, On November 20, 2019, the Indonesian Government finally issued Government Regulation No. 80 of 2019 on Trading through Electronic System (“GR on E-Commerce”).

The primary purpose of RG on E-Commerce is to regulate broad aspects of the e-commerce business, which will apply on the 2nd anniversary after its promulgation date, GR on E-Commerce. We will briefly elaborate some of the key provisions relating to the provisions of e-commerce business under GR on E-Commerce.

  • Operational aspect

First, Article 15 (1) of GR on E-Commerce now requires all Business Players to obtain a business license in conducting e-commerce. Business Players include domestic and foreign merchants, electronic platforms (Penyelenggara Perdagangan Melalu Sistem Elektronik - “PPMSE”), as well as intermediary services providers. While merchants offering goods and/or services temporarily and non-commercially are exempted from the classification, no strict threshold is stipulated to determine the temporary and commercial nature of such merchants. This means that every merchant, both in the formal and informal sectors, regardless of its size and business, is now required to obtain a business license.

Second, Business Players, particularly platform providers, are now prohibited from accepting neither domestic nor foreign Merchants that is incompliance with the requirements , among others, the licensing requirement.

The GR on E-Commerce now reimposes possible taxation towards e-commerce. Further, foreign Business Players actively offering and/or conducting e-commerce services towards Indonesian consumers that have met a certain threshold of (i) number of transaction; (ii) value of transaction; (iii) number of shipping; and/or (iv) number traffic or access would be deemed to have established a physical presence and conduct a permanent business in Indonesia. Such businesses now must appoint a representative domiciled in Indonesia that will act as and on behalf of the business owner.

Business Players now must also maintain the records of data and information on their e-commerce businesses. Data and information related to financial transactions shall be kept at least for 10 (ten) years, while data and information unrelated to financial transactions shall be kept for a minimum of 5 (five) years from the obtainment of such data or information.

  • Contract Processing

Article 28 of GR on E-Commerce requires Business Players to provide and maintain receipts of e-commerce transactions. The receipt will be legal and binding evidence towards the parties involved. Further, receipt of e-commerce transactions is now treated as valid evidence in procedural law, whereby written verifiable e-signed receipts of e-commerce transactions may even be acknowledged as authentic evidence. Electronic receipts of transactions shall no longer be rejected as evidence before the court merely for its electronic form.

GR on E-Commerce also specifically regulates electronic offer, acceptance, confirmation, as well as contract. An electronic offer shall include at least the following information:

  1. Specification of goods and/or services;
  2. Prices of goods and/or services offered;
  3. Terms and conditions;
  4. Mechanism and system of payment and payment period;
  5. Mechanism and system of shipping;
  6. Risks and unforeseeable conditions; and
  7. Limitation of liability.

An electronic offer is deemed valid and binding if it contains a clear and specific statement of intent of offer conducted in an honest and fair manner, and provides time limitation. Once an electronic offer is accepted, it shall not be withdrawn unless such withdrawal is agreed upon by the accepting party. Business Players are also required to respond to electronic acceptance by a consumer within a certain time period, in the form of electronic or non-electronic confirmation that may be used as evidence of agreement.

Meanwhile, Electronic Contracts may be in the form of sales and purchase agreement or licensing agreement, including end-user license agreement; amendment/development/modification of license agreement; public license agreement; creative common license agreement; and relicensing agreement. An Electronic Contract shall include at least:

  1. Identity of the parties;
  2. Specification of goods and/or services agreed;
  3. Legality of goods and/or services;
  4. Value of the transaction;
  5. Terms and conditions and payment period;
  6. Operational procedure of shipping;
  7. Return procedure;
  8. Cancellation procedure; and
  9. Choice of law for dispute resolution.

Business Players are also required to provide downloadable Electronic Contract.

  • Consumer Protection

Article 13 (1) of GR on E-Commerce requires Business Players to inform correct, clear, and honest information regarding the condition and assurance on the goods and/or services offered and the Electronic System used. Business Players must protect consumers’ rights in every aspect of e-commerce transaction, among others by accommodating a customer service which shall at least comprises:

  1. Address and contact number of customer service;
  2. Procedure of consumer complaint;
  3. Mechanism of complaint handling process;
  4. Competent officers to process consumer complaint; and
  5. Period of complaint settlement.

GR on E-Commerce further stipulates that Business Players must ensure that any advertisement is in accordance with the ethical standards of advertisement and consumer protection as governed under the applicable laws and regulations. This requirement is not only limited to the owner of such advertisement, but also to the parties who produce, provide any means for, and/or propagate the advertisement. Substance and material of any electronic advertisement that contradicts with consumer rights must be stopped, and relevant institutions have the authority to stop such marketing activities should Business Players fail to do so. Consumer protection is not only supervised under advertisement but also in Electronic Contracts where Article 53 (2) of GR on E-Commerce prohibits any standard clauses that may disadvantage consumers.

Business Players must also ensure customer protection to the extent of the delivery and return of goods and/or services. GR on E-Commerce emphasizes that in the event of there is an acceptance of the purchase of goods and/or services, the seller must deliver such goods and/or services to the buyer accordingly. The delivery must also ensure:

  1. Safety of the goods and/or services;
  2. Conditions of the goods and/or services;
  3. Confidentiality of the goods and/or services;
  4. Conformity of the goods and/or services; and/or
  5. Punctuality of the delivery of goods and/or services;

In addition, Business Players must inform the buyer about the delivery of the goods. In the event the delivery is done by PPMSEs, they must inform periodically to the buyer upon the delivery status. Besides goods, Digital Services is acknowledged in GR on E-Commerce. According to Article 68 of GR on E-Commerce, Business Players which distribute free or paid Digital Goods and/or Services must ensure that such goods and/or services can be operated. In the event such Digital Goods and/or Services incur any loss to the user, such loss shall be borne by the Business Players.

Exchange of goods and/or services is also provided under GR on E-Commerce in which sellers are required to provide a period of at least 2 (two) business days for an exchange of goods and/or services, if:

  1. There is an error and/or non-conformity of the goods and/or services;
  2. There is an error and/or non-conformity of the actual period delivery of the goods and/or services;
  3. There is a hidden defect;
  4. The product is broken; and/or
  5. The product is expired.

Provided that any of the above conditions have been met, consumers shall not bear the cost of the shipping fees. In connection with such provision, all PPMSEs are now required to have a mechanism that can ensure a refund for the consumers in case of an exchange. With regard to any dispute that may arise between the PPMSEs and/or sellers with consumers, such dispute may be settled through a new dispute resolution mechanism, an online dispute resolution. However, no further explanation or regulation is provided regarding the process.

  • Personal Data Protection

Pursuant to Article 59 (1) of GR on E-Commerce, Business Players must ensure data protection in accordance with data protection standards or developing business practices. According to GR on E-Commerce, the standards itself shall at least comply with the following data protection principles:

  1. Personal data must be obtained lawfully from the owner, accompanied by the choice and guarantee of safeguarding and preventing loss of the data owner;
  2. Personal data must be kept for only one purpose or more specifically described and may not be further processed in any other way;
  3. Personal data obtained must be appropriate, relevant and not too broad in relation to the goals as previously informed to the data owner;
  4. Personal data must be accurate and must always be up-to-date by giving the data owner an opportunity to update his/her personal data;
  5. Personal data must be processed according to the purpose of obtainment and may not be maintained longer than the period required;
  6. Personal data must be processed according to the subject's rights as governed under the applicable laws and regulations;
  7. The party storing personal data must have a security system that is appropriate for preventing leakage or prevent any activities of the processing or utilization of personal data against the law, as well as being responsible for unexpected loss or damage towards the personal data; and
  8. Personal data must not be sent to any countries or regions outside Indonesia except if such countries or regions have been declared by the Minister to have the same standard and protection level as Indonesia.

Notwithstanding the abovementioned, the implemented data protection standards must also take into account the data protection standards as set out in Europe and/or APEC Privacy Frameworks. Given the adoption of that international standards, it remains to be seen whether there may be further regulations (i.e., personal data protection law) to be issued in the context of personal data protection.

Furthermore, it is now regulated that PPMSEs must store financial transaction-related data and information in a period of at least 10 years and non-financial transaction-related data and information in a period of at least 5 years, that at least include data and information in relation to:

  1. Customer;
  2. Electronic offers and electronic acceptance;
  3. Electronic confirmation;
  4. Payment confirmation;
  5. Delivery status of goods;
  6. Trade complaints and disputes;
  7. Electronic Contracts; and
  8. Types of Goods and/or Services traded.

Nevertheless, in the event that data owners have stopped subscribing to or using the services in the E-Commerce transactions before the required period of data storage, such data owners have the right to request the Business Players to erase all relevant data.

  • Conclusion

GR on E-Commerce raises many questions that will be the subject of further debate as the implementing rules are yet to be seen. Some of the provisions are clearly having a stringent approach than ever. Whilst numbers of implementing regulations are expected to be issued, e-commerce businesses should seek advice on the effect of this regulation on their business operations to ensure its compliance with the regulation by the time in which GR on E-Commerce will enter into force.

***

December 12, 2019

Copyright © 2019 AKSET. All rights reserved.

by Adho Fadillah Putera

Improvements of Industrial Business Licensing Processes

The Minister of Industry (the “MOI”) issued MOI Regulation No. 30 of 2019 dated October 18, 2019 on Amendments to Minister of Industry Regulation No. 15 of 2019 on the Issuance of Industrial Business Licenses and Expansion Licenses Under the Electronically Integrated Business-Licensing Services Framework (“Regulation 30/2019”). Regulation 30/2019 eases the business licensing process and the issuance of industrial business licenses regulated under MOI Regulation No. 15 of 2019 dated May 6, 2019 on the Issuance of Industrial Business Licenses and Expansion Licenses Under the Electronically Integrated Business-Licensing Services Framework (“Regulation 15/2019”). Regulation 30/2019 is in line with the Government’s vision to increase investment in Indonesia by eliminating barriers to investment.

We set out below the main changes under Regulation 30/2019.

  • No Requirements for Location Permits and Environmental Licenses

Previously, Regulation 15/2019 required a Location Permit and an Environmental License as commitments that an Industrial Business License (Izin Usaha Industri or an “IUI”) holder must fulfill so that the IUI will be effective. Regulation 30/2019 removes these commitments.

Regulation 30/2019 also has new provisions for Small and Medium-sized Industries. Small and Medium-sized Industries are excluded from the requirement to have a Certificate (Surat Keterangan) stating that the company is exempted from the obligation of being located in an Industrial Zone. Further, for Small Industries, the commitment to have undergone technical verification is replaced by a ready-to-operate statement issued by the company.

  • Field Examinations Changed to Technical Verifications

Regulation 30/2019 replaces the requirement of a field inspection with a technical verification. The difference is that a technical verification may be carried out by way of document examination and/or field examination. Regulation 30/2019 also reduces the time for the implementation of a technical verification from 20 (twenty) working days to 7 (seven) working days after the submission of a technical verification application.

  • Amendments of Industrial Business Licenses

To amend an IUI, the relevant directorate general, provincial, or regency/city service office shall conduct a technical verification by document examination and field inspection (only if necessary). Under Regulation 30/2019, the technical verification shall be conducted no later than 7 (seven) working days from the submission of the application for the amendment of the IUI.

  • Issuance of Expansion Licenses

To obtain an Expansion License (i.e., a license to carry out expansion of production capacity in the same business line under an IUI), an industrial company shall fulfil the commitments of submittingthe  Industrial Data through the National Industrial Information System (Sistem Informasi Industri Nasional or the “SIINas”) and it shall be technically verified. Previously, Regulation 15/2019 stipulated that these commitments had to be fulfilled within 3 (three) months as of the date of an Expansion License. Regulation 30/2019 removes this deadline. A company may submit the application for the technical verification through the SIINAs whenever it is ready to carry out the expansion commercially. Before applying for the technical verification, a company shall submit the Industrial Data (also through the SIINAs) of the past 2 (two) years prior to the application for the technical verification.

  • Existing IUIs May Be Notified to OSS

Under Regulation 30/2019, a company that already holds an IUI prior to the enactment of Government Regulation No. 24 of 2018 dated June 21, 2018 on Electronically Integrated Business Licensing Services may notify its existing IUI to the OSS.  Such IUI is deemed effective as of its issuance, provided that there are no changes to the business activities of the holder. There is no need to apply for the re-issuance of an IUI by the OSS as previously stipulated in Regulation 15/2019.

 

December 3, 2019

Copyright © 2019 AKSET. All rights reserved.

by Adho Fadillah Putera

KPPU Launches New Regulation on Post-Closing Notifications on Mergers, Consolidations, and Acquisitions (Including Asset Transfers)

 

  • Overview

On October 2, 2019, the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha or “KPPU”) issued Regulation No. 3 of 2019 on Assessment of Mergers or Consolidations of Business Entities, or Acquisition of Shares of Companies which May Result in Monopolistic Practices and/or Unfair Business Competition (“Regulation 3/2019”). Regulation 3/2019 entered into force as of October 3, 2019.

Regulation 3/2019 replaces KPPU Regulation No. 13 of 2010 dated October 18, 2010 as lastly amended by KPPU Regulation No. 2 of 2013 dated April 5, 2013 (collectively, “Regulation 13/2010”). Regulation 13/2010 was the implementing regulation of Government Regulation No. 57 of 2010 dated July 22, 2010 on Mergers or Consolidations of Business Entities, and Acquisitions of Company Shares Which May Result in Monopolistic Practices and/or Unfair Business Competition (“GR 57/2010”) in terms of post-transaction notifications processes and requirements.

Regulation 3/2019 re-affirms the criteria for mergers, consolidations, and acquisitions of shares transactions that must be notified to KPPU upon its completion and re-stipulate the notification procedures and requirements as stated in KPPU Reg. 2/2013—with notable changes as follows.

  • Transfers of Assets under Regulation 3/2019

Asset transfers are not referred to in Law No. 5 of 1999 dated March 5, 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition (the “Competition Law”) nor GR 57/2010. Thus, it was understood by the market that assets transfers did not fall under the authority of KPPU. The Competition Law and GR  57/2010 only recognize mergers, consolidations, and acquisitions of shares.

Now, Regulation 3/2019 requires an asset transfer that meets the criteria set out thereunder to be notified to KPPU. KPPU then will assess and determine whether such asset transfer constitute any monopolistic practice and/or unfair business competition. Article 5 of Regulation 3/2019 provides that a asset transfer is treated like an acquisition of shares if such asset transfer (i) results in the transfer of the management and control of the asset, and/or (ii) increases the ability of control of a certain market by the acquiring party. The first criterion, in effect, requires all asset transfers to be subject to Regulation 3/2019, subject only to the value noted below.

Asset transfers that must be notified to KPPU are those that result in: (i) a combined assets value of the acquiring party and the target to exceed Rp2,500,000,000,000 (two trillion five hundred billion Rupiah), and/or (ii) a combined sales value of the acquiring party and the target to exceed Rp5,000,000,000,000 (five trillion Rupiah).

  • New Requirement on the Asset and/or Sales Value Calculation

Under Regulation 13/2010, in the case that there is a minimum of 30% (thirty percent) gap between the asset and/or sales value owned by one of the acquiring parties calculated from the latest year to the previous year, then the calculation of the asset and/or sales value of such company will be based on the average value between the asset and/or the sales value from the last 3 (three) years. Now in Regulation 3/2019, KPPU introduces a clarification regarding such calculation. The calculation applies only if the asset and/or the sales value of the latest year is lower than the previous year. Moreover, under Regulation 3/2019 if a company runs its business for less than 3 (three) years, then the value of asset and/or shares of such company is calculated based on the average of asset and/or sales value for the last 2 (two) years.

  • New Format for Post-Transaction Notification Forms

Regulation 3/2019 provides a new form of the post-transaction notification form, together with a brief guideline to fill such form.

It is to be noted that the information on competitors, consumers, and suppliers (of the parties involved in the said transaction) are categorized as ‘additional information’ which is only required to be filled at the request of KPPU—which indicates that this ‘additional information’ might not be needed by KPPU for its assessment. Previously, KPPU required the information of competitors, consumers, and suppliers to be submitted for every notification submission.

  • Use of KPPU’s own Assumption, Data, and Information

While it was a mere practice of KPPU in the past, Regulation 3/2019 now clearly stipulates that KPPU may use assumptions, data, and/or information that it owns or obtains for the purpose of KPPU’s assessment over any post-transaction notification in the case that the notifying party fails to deliver the ‘additional information’ (information on competitors, consumers, and/or suppliers) or any other supporting data/document as might be requested by KPPU.

  • Reporting Obligation on Transactions Conducted Outside Indonesia

Prior to Regulation 3/2019, business actors were not required to notify KPPU on any merger, consolidation, and acquisition of shares transactions occurring outside Indonesia that do not have any significance to the domestic competition conditions and market. Now under Regulation 3/2019, KPPU requires all mergers, consolidations, acquisitions of shares, and asset transfers that occur outside Indonesia to be notified to KPPU if all or one of the parties involved in such transactions conduct business activity or sales in Indonesia. Thus, the transactions that are required to be notified to KPPU do not have to directly impact Indonesian market.

Please note that the criteria of combined assets value and/or combined sales value applies to overseas transactions as well.

 

November 28, 2019

Copyright © 2019 AKSET. All rights reserved.

by Adho Fadillah Putera

Answers to Certain Questions Relating to Language of Agreements

  1. References
    • Law No. 24 of 2009 dated July 9, 2009 on National Flag, Language, and Coat of Arms, and Anthem (“Law 24”); and
    • Presidential Regulation No. 63 of 2019 dated September 30, 2019 on Use of Indonesian Language (“PR 63”).
  2. Facts
    • Article 31(1) of Law 24 requires that any agreement signed by an Indonesian or an Indonesian entity be executed in Indonesian language.
    • Since issuance of Law 24 (until the issuance of PR 63), the acceptable practice with regard to the requirement to use Bahasa Indonesia in agreements is as follows:
      • Agreements are negotiated in English and are signed in English and Indonesian at the same time. This applies to (i) agreements signed by all Indonesian parties, and (ii) agreements signed by an Indonesian party and a foreign party.
      • Agreements are negotiated in English, and signed in English only with a provision in the agreements that requires the parties to sign an Indonesian version of the agreements within a certain period of time and the Indonesian version will apply retroactively as of the date of the English version of the Agreements.
      • The English version prevails in the event of any conflict between the English and Indonesian versions.
      • In connection with point (ii) above, there is a waiver that no parties will claim termination of their agreement due to the lack of the Indonesian version of the agreement.
      • There is at least one case in which a court (including the Supreme Court as the case went to appeal) nullified an agreement that had been executed in English only.
    • PR 63 is promulgated to implement, among others, Article 31 of Law 24.
    • Articles 26(3) and 26(4) of PR 63 provide additional guidance on languages of agreements, as follows:
      • The English version (or any other foreign language version) of an agreement is used as the equivalent (padanan) or translation (terjemahan) of the Indonesian version of such an agreement in order to align or conform the understanding of the parties.
      • In the event there is any different interpretation between the Indonesian version and the English version (or any other foreign language version), then the prevailing version will be the version agreed by the parties.
  1. Questions and Answers
    • When do parties sign an agreement in Indonesian?

Article 31 of Law 24 does not expressly require that the Indonesian version of an English agreement be made at the same time (or before) the English version is executed by the parties.

Article 26(3) of PR 63 now suggests the English version (or any other language version) of an agreement is used as an equivalent (padanan) or translation (terjemahan) of the Indonesian version of the agreement.  In our view, this should be reasonably interpreted to mean that the Indonesian version must exist first before the equivalent (padanan) or translation (terjemahan) is made.

Consequently, as of the issuance PR 63, if parties wish to have an agreement in English, then such agreement must be signed in Indonesian and English languages simultaneously.

    • Given PR 63, is there any risk of nullification for any English agreement that had been translated into Indonesian after the signing of the English version due to the fact that the Indonesian version was made after the English version had been executed?

As PR 63 is effective expressly as of September 30, 2019, there should not be any risk of nullification for any such agreement that was translated into Indonesian after the English version had been executed solely due to the fact that the Indonesian version was made after the English version had been executed.

    • Can an agreement signed by Indonesian parties only be made in English too?

There is no provision in Law 24 and PR 63 that prevents two or more Indonesian parties from entering into agreements in English (or any other language) and Indonesian.

    • Can Indonesian parties to an agreement that is signed in English and Indonesian elect the English version as the governing language?

There is no provision in Law 24 and PR 63 that prevents two or more Indonesian parties from electing English (or any other language) as the governing language of their agreement.

    • Can parties elect the English version of an agreement as the governing language of the agreement?

Yes, Article 26(4) of PR 63 expressly allows Indonesian and foreign parties to an agreement to elect the governing language of their agreement.

 

November 20, 2019

Copyright © 2019 AKSET. All rights reserved.

by Adho Fadillah Putera

Reporting Requirements for Corporations in the Implementation of Know-Your-Beneficial-Owner Principle

Following the enactment of Presidential Regulation No. 13 of 2018 dated March 5, 2018 on Implementation of Know-Your-Beneficial-Owner Principle by Corporations for the Prevention and Eradication of the Criminal Acts of Money Laundering and Terrorism Funding (“PR 13/2018”), the Minister of Law and Human Rights (the “Minister”) issued his Regulation No. 21 of 2019 on Guidelines for the Supervision of the Implementation of Know-Your-Beneficial-Owner Principle (the “Regulation”). The Regulation will take effect as of December 27, 2019. The Regulation requires corporations to take certain further action based on the supervisory result and report the fulfillment such actions as its implementation of the Know-Your-Beneficial-Owner principle.

♦  Definitions

In the spirit of eradicating money laundering and terrorism funding as well as in the application of the Know-Your-Beneficial-Owner principle, the Regulation stipulates that the Minister through the Director General of General Law Administration (the “Director General”) to supervise the implementation of PR 13/2018. Further, the Regulation requires corporations to take further actions based on the recommendation of the supervisory result as well as to report the fulfilment of the recommendation to the Minister through the Director General.

Any failure to fulfill the recommendation will result in consequences such as (i) blocking of the corporations’ access to the Online General Law Administration (Administrasi Hukum Umum Online or the “Online AHU”); and/or (ii) the Minister’s recommendation to suspend, revoke, or cancel a corporations’ business license to the authorized agency (i.e., an agency, whether at the central or local level, that has the authority to register, authorize, approve, notify, issue business licenses to, or dissolve a corporation, or an agency that is vested with supervisory and regulatory powers in respect of a corporation’s business).

The Regulation defines Beneficial Owner as an individual who (i) may appoint or dismiss any of a corporation’s board of directors, board of commissioners, administrators, or supervisors of such corporation, (ii) possesses the authority to take control of such corporation, (iii) is entitled to receive, and/or does actually receive, benefits from such corporation, directly or indirectly, (iv) is the true owner of such corporation’s funds or shares, and/or (v) meets certain criteria of a beneficial owner under the laws and regulations.

More elaborated specifications of Beneficial Owners are stipulated in PR 13/2018. For example, one of the criteria for the Beneficial Owner of a limited liability company is any individual who owns at least 25% of corporations’ funds or shares. PR 13/2018 targets an individual as the Beneficial Owner of a corporation. However, in practice non-individuals, e.g., another corporation or a legal entity may be reported as a Beneficial Owner as well. On the other hand, a corporation is defined as an organized group of people or assets, whether or not established as a legal entity, which includes:

  1. limited liability companies;
  2. foundations;
  3. associations;
  4. cooperatives;
  5. limited partnerships;
  6. firms; and
  7. other forms of corporations.

♦  Supervisory Implementation

The Director General can supervise the application of the know-Your-Beneficial-Owner by:

  1. enacting any regulation or any guideline as the implementation of laws and regulations concerning the application of the Know-Your-Beneficial Owner principle;
  2. conducting an audit on a corporation; and
  3. carrying out other administrative actions within its duties and responsibilities.

The supervision is implemented in four steps, as follows:

  1. corporations shall complete a questionnaire electronically through the Online AHU every December;
  2. a risk assessment of money laundering and terrorism financings on corporations;
  3. the implementation of supervision based on the result of the risk levels; and
  4. the implementation of the Minister’s recommendation by corporations as the result of the supervision.

Steps a and b are conducted only electronically through the Online AHU while steps c and d are conducted electronically and non-electronically through the Online AHU. The Regulation describes that this supervision procedure will be carried out through a process as specified in the Annex of the Regulation. However, to date, the Minister has not issued the Annex of the Regulation. We understand that the questionnaire mentioned in step a will be available in a soft copy form.

Corporations are first obligated to complete a questionnaire concerning information related to its Beneficiary Owner including the most updated data. This questionnaire shall then be submitted through the Online AHU every December each year. Even though the Regulation is silent about the procedure for this Online AHU submission, we understand that the submission will be conducted by a notary.

November 11, 2019

Copyright © 2019 AKSET. All rights reserved.

by Bonar

Law on Legislative Drafting Amended

On October 2, 2019, Law No. 15 of 2019 (“Law 15”) was issued to amend several provisions of Law No. 12 of 2011 dated August 12, 2011 on Legislative Drafting (“Law 12”). Law 15 addresses several issues for the betterment of the legislative drafting mechanism starting from the planning up to the monitoring and review levels.

 The amendments incorporated in Law 15 consist of the following aspects:

  1. the inclusion of the Regional Representative Council (Dewan Perwakilan Daerah or “DPD”) in carrying out the drafting of National Legislation Program (Program Legislasi Nasional or “Prolegnas”);
  2. the formation of a ministry or a government institution specifically for Legislative Drafting;
  3. the carrying forward of unfinished Draft Legislation to the People’s Representative Council (Dewan Perwakilan Rakyat or “DPR”) members of the following term; and
  4. the introduction of monitoring and review of legislatio

♦  DPD to Carry Out Drafting of Prolegnas

Pursuant to Article 20(1) of Law 12 (as amended by Law 15), the drafting of Prolegnas shall be carried out by DPR, DPD, and the Government. Previously, the drafting of Prolegnas was only carried out by DPR and the Government. With this amendment, the DPD is included as the regional representative in the drafting of laws.

♦  New Institution to be Formed for Legislation Drafting

Previously, Law 12 stipulated that the Government function in the drafting of Prolegnas shall be carried out by the minister who carries out government affairs in law. Under Law 15, this function will be carried out by the minister or the head of the government institution that carries out the government affairs in legislative drafting.

In this regard, Law 15 provides that until such ministry or institution is established, legislative drafting duties and functions shall be carried out by the minister who carries out government affairs in law of the Minister of Law and Human Rights.

♦  Unfinished Draft Legislation to be Carried Forward

Law 15 adds an article in Law 12 that regulates that when a discussion of a Draft Legislation is not yet finished in a period of DPR membership but it has reached the stage of the Problem Inventory List (Daftar Inventarisasi Masalah), the result of the discussion shall be delivered to the following period of DPR membership. Following such delivery, by the approval of DPR, the President, and/or DPD, the Draft Legislation may be included in the medium-term Prolegnas and/or yearly priority Prolegnas.

♦  Monitoring and Review of Laws

Specifically for laws (undang-undang), Law 15 provides that laws that are in effect shall be monitored and reviewed by DPR, DPD, and the Government. The result of the monitoring and review may be used as a proposal for the drafting of Prolegnas in the future. Further provisions on monitoring and review of laws shall be further regulated under a DPR Regulation, DPD Regulation, and Presidential Regulation.

November 11, 2019

Copyright © 2019 AKSET. All rights reserved.


by Bonar

Amendments to KPK Law Are Now Formally Effective

On September 17, 2019, the House of Representatives along with the Government passed the Corruption Eradication Commission (“KPK”) bill (the “KPK Bill”), which is a second revision to Law No. 30 of 2002 dated December 27, 2000 on KPK as amended by Government Regulation in lieu of Law (Peraturan Pemerintah Pengganti Undang-Undang or “Perppu”) No. 1 of 2015 dated February 18, 2015. Thirty days later, the KPK Bill officially takes effect starting October 17, 2019. The Ministry of Law and Human Rights also confirmed that the KPK Bill is published in the State Gazette as Law No. 19 of 2019 dated October 17, 2019 on the Second Amendment to Law No. 30 of 2002 on the Corruption Eradication Commission (the “KPK Law”). This heavily debated KPK Bill finally became effective even without a signature from the President.

According to Article 73 paragraph (1) of Law No. 12 of 2011 dated August 12, 2011 on the Establishment of Laws and Regulations as amended by Law No. 15 of 2019 dated October 4, 2019 (“Law No. 12 of 2011”), after the House of Representatives and the Government passed a Bill, the President has thirty days to sign such Bill. Paragraph (2) of that article specifies that despite the absence of the President’s signature a Bill is effective by default thirty days after such Bill is being passed.

Ee outline below the summary of major changes in the KPK Law:

November 11, 2019

Copyright © 2019 AKSET. All rights reserved.

by Bonar

Asialaw Leading Lawyer 2020

AKSET Partner, Johannes C. Sahetapy-Engel, recognized by Asialaw as Distinguished Practitioner 2020 for Labour & Employment.

by Bonar