A 101 Guideline on the Establishment of a Foundation in Indonesia
A foundation (yayasan) is a non-profit entity established for non-profit activities. Foundation is a type of legal entity for conducting social welfare activities and giving back to the communities.
The legal framework on foundation is promulgated on the Law of the Republic of Indonesia Number 16 of 2001 on Foundation, as amended by Law No. 28 of 2004 (“Foundation Law”). Under the law, a foundation is defined as a legal entity having separated assets and intended to achieve certain social, religious, or humanitarian goals. A foundation has no members.
Under Article 9 paragraph (1) of Foundation Law, a foundation is established by one or more persons who have separated their personal assets as the initial capital for the establishment of the foundation. Government Regulation No. 63 of 2008 on Implementing Regulation of Foundation Law (“GR 63/2008”) further regulates that foundations are differentiated depending on the origin of the founders. There are (a) local foundations, which are founded by Indonesian entities or nationals, and (b) foreign foundations, which are founded by foreign entities or nationals.
In this article, we provide a general guideline on the establishment of both local and foreign foundations in Indonesia.
Procedure for the Establishment of Foundation
Generally, the procedure for establishing a foundation is as follows:
|1||Composing a Deed of Establishment ("DoE”) and reserving the Foundation’s name||The finalization of DoE does not implicate “duly establishment” of the foundation (see below)|
|2||Obtaining the Ratification of the Minister of Law and Human Rights ("MoLHR”)||A Foundation is deemed legally established upon the obtainment of MoLHR Ratification.|
|3||Announcing the establishment of the Foundation in the Supplemental State Gazette of the Republic of Indonesia ("State Gazette”)||As required by Foundation Law, the announcement in the State Gazette should be published no later than 14 days after the signing of DoE. This is similar to the process of establishing a Limited Liability Company.|
Local and Foreign Foundations
As mentioned before, foundations are based on the origins of the founders. Please refer to the section below on our further elaboration:
- The Founder(s): A local foundation is incorporated in Indonesia; has, at least, one founder; and has separated personal assets set as the initial capital of the foundation. All founders must be Indonesian citizens.
- Capital Requirement: Based on Article 6 paragraph (1) of GR 63/2008, a Local Foundation is subject to a minimum initial capital of IDR 10 million.
The two forms of foreign foundation are (a) Foreign Individual Foundation and, (b) Foreign Entity Foundation. Each form has different requirements prior to their establishment. Please refer to the points below on the differences:
- The Founder(s): A Foreign Individual Foundation is established by a foreign individual, while a Foreign Entity Foundation is founded by a foreign legal entity. It could be a limited liability company or cooperative, established in a foreign country. Founders of a Foreign Individual Foundation are required to provide a Statement Letter stipulating that the establishment of the foundation in Indonesia will not be detrimental to the Indonesian people.
- Capital Requirement: Under Article 11 points (1) and (2) of GR 63/2008, every Foreign Individual or Foreign Entity Foundation is subject to a minimum initial capital of over IDR 100 million. Moreover, the company management of a Foreign Entity Foundation must submit a Statement Letter stating the validity of the assets, which would become the initial capital of the foundation.
Differences between a Local and a Foreign Foundation
For your ease of reference, please see the table below:
|Local Foundation||Foreign Individual Foundation||Foreign Entity Foundation|
|Founder||Local individual||Foreign Individual (or jointly with Local Individual)||Foreign Legal Entity|
|Capital Requirement||IDR 10 million||IDR 100 million||IDR 100 million|
b. MoLHR Ratification
a. Statement letter of the founder(s)
c. MoLHR Ratification
a. Statement letter of the founder(s) regarding the assets
c. MoLHR Ratification
In addition to these requirements, a Foreign Foundation has several obligations in respect of the organization structure. They have to:
- appoint a local individual to become the chairperson, secretary, or treasurer within the Board of Executives.
- hold a business license to operate the Foreign Entity Foundation and KITAS for the foreigner(s) appointed as a manager(s) of the foundation. In conducting their activities, a foreign foundation must collaborate with a local foundation that has similar purposes (i.e., social, religious, or humanitarian goals/objectives).
(together, “Obligations of a Foreign Foundation”)
It is important to note that the obligations are not applicable to diplomatic officials and their families residing in Indonesia. (Article 12 to 14 of GR 63/2008)
Generally, a foundation established in Indonesia has to fulfil the community's needs in respect of social, religious, or humanitarian purposes. In other words, a foundation has the necessary role in terms of social welfare in Indonesia.
Please note that a foreign foundation should have clear objectives and purposes. In some cases, a foreign foundation will need to cooperate with certain ministries for conducting its activities in Indonesia. It is also important to ensure that foreign foundations will not have programs and/or activities that are against the norms and state values in Indonesia as stipulated in the 1945 Constitution.
The article above was prepared by Marshall S. Situmorang (Partner) and Audria Putri (Senior Associate).