I. Introduction
Ultimate Beneficial Owner (UBO) is an individual who ultimately controls or obtains benefits from a company or legal entity. The laws and regulations in Indonesia use the term “Pemilik Manfaat” for Beneficial Owner (BO). Basically, the terms “UBO”, “BO”, and “Pemilik Manfaat”1 have the same nature, but each country has a different use of the term. According to the Black’s Law Dictionary, BO means “The actual owner of securities and the rightful recipient of the benefits accorded; the beneficial owner is often different from the title holder (generally a financial institution holding the securities on behalf of clients)”2.
According to Regulation of the Minister of Law of the Republic of Indonesia Number 2 of 2025 on Verification and Supervision of Corporate Beneficial Owners, a Beneficial Owner is an individual who can appoint or dismiss board of directors, board of commissioners, management, patron, or supervisor of a Corporation, has the ability to control the Corporation, is entitled to and/or receives benefits from the Corporation either directly or indirectly, is the actual owner of the Corporation’s funds or shares and/or meets the criteria as referred to in the provisions of laws and regulations. A Beneficial Owner clearly has the meaning of a person who has the ultimate ownership or ultimately control.
In Indonesia, the mechanism of Beneficial Owner often uses in a limited liability company (PT) under a nominee. Nominee arrangement is an agreement between two parties which appoints one party to act on behalf of the other party. This practice can be done in the form of a nominee agreement of land ownership or a nominee shareholder agreement. In some contexts, this practice is prohibited because it opens up an opportunity for law violation by disguising the identity or source of funding of the Beneficial Owner. The following is a brief discussion of the nominee practice and its perspective based on the laws and regulations in the Republic of Indonesia, particularly limited liability companies and investment.
II. Analysis
A. Nominee Arrangement for Beneficial Owner’s Interests in a Limited Liability Company under the Law on Limited Liability Companies (Company Law)
In the framework of a limited liability company, ownership of a limited liability company refers to its shareholders. The company’s shareholders are given proof of ownership of the shares they own (please see Article 51 of the Company Law), and it is recorded in the shareholder register compiled and managed by the company’s board of directors (please see Article 50 paragraph (1) of the Company Law). Moreover, Article 52 paragraph (2) of the Company Law stipulates that the shareholders’ rights can only be granted and exercised if their names have been recorded in the shareholder register. In addition, Article 48 paragraph (1) of the Company Law regulates that when a limited liability company issues shares, the legal owner of the shares is the party whose name is listed on the shares.
Based on the provisions above, the Company Law only regulates share ownership based on the name listed on the shares (title holder), and in fact it prohibits the issuance of bearer shares (please see Elucidation of Article 48 paragraph (1) of the Company Law). Therefore, only shareholders listed in the shareholder register have the right to act legally regarding the shares and can be referred to as the shareholders in a limited liability company.
In a nominee arrangement, the rights to shares are transferred by the party whose name is listed in the share certificate or shareholder register to a Beneficial Owner under an agreement or a contract. Under this agreement or contract, the beneficial owner is the ‘actual owner’ of the shares or rights to the shares.
In the context of share ownership through a nominee mechanism, the shareholder is registered in a company as the legal owner of an asset (de jure) because they are formally listed in the company’s shareholder register, acting only as a representative of the actual beneficial owner who substantially controls or obtains economic benefits from the shares, hence it is deemed to be a pseudo owner3. The nominee arrangement as referred to above is not prohibited. This is in accordance with the principle of freedom of contract under Article 1338 of the Indonesian Civil Code, in which the contracting parties are free to regulate any matters relating to their respective rights and obligations to the extent that they are within the limits permitted by the laws and regulations.
B. Nominee Arrangement for Beneficial Owner’s Interests in a Limited Liability Company under the Law on Investments (Investment Law).
Although a nominee arrangement in the context of limited liability companies in general (lex generalis) is not prohibited, this is not the case for limited liability companies in the context of investment (lex specialis). Capital investment in Indonesia is regulated by Law Number 25 of 2007 on Investments as amended by Law Number 6 of 2023 on the Stipulation of Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation to Become Law (“Investment Law”).
As a lex specialis doctrine, the Investment Law specifically regulates the mechanism of an agreement or a contract stating that share ownership for and in the name of another person is prohibited. This provision aims to prevent the disguise of share ownership, particularly by foreign parties, in the form of a nominee agreement that violates the provisions of certain business sectors that are closed or restricted to foreign capital. This prohibition is stated in Article 33 Paragraphs (1) and (2) of the Investment Law which reads:
“(1) A domestic investor and a foreign investor who invest in the form of a limited liability company are prohibited from making an agreement and/or arrangement that confirms that the share ownership in the limited liability company is for and in the name of another person.
Under Article 33 paragraph (1) above it can be stated that in other words an agreement and/or arrangement that allows a beneficial owner is prohibited. If carefully observed, this prohibition is specifically intended for domestic investors and foreign investors.
This provision is primarily intended to prevent an evasion of law which can be used by foreign investors, acting as beneficial owners, to circumvent the limits of foreign ownership in certain industrial sectors. This relates to the Positive List of Investment as stipulated in Presidential Regulation Number 49 of 2021 on Amendments to Presidential Regulation Number 10 of 2021 on Investment Business Sectors, which regulates certain industrial sectors that are closed to foreign investment in Indonesia. If a nominee arrangement is not prohibited, the consequence is that foreign investors can use it and become beneficial owners, hence they have control over a foreign investment company for an industry that is expressly prohibited for foreign investors.
C. Legal Consequences for Beneficial Owners in the Prohibition of Nominee Arrangement According to the Indonesian Laws and Regulations
Based on the explanation of the previous point, the prohibition of nominee arrangement applies to the context of investment by a domestic investor and a foreign investor. If the nominee arrangement is still conducted, legal consequences will arise as regulated in Article 33 Paragraph (2) of Law Number 25 of 2007 on Investments which reads:
“In the event that a domestic investor and a foreign investor make an agreement and/or arrangement as referred to in paragraph (1), the agreement and/or arrangement is declared null and void by law.”
The legal consequence is that the nominee agreement or arrangement will be declared null and void by law. Void by law means the agreement is deemed to have never existed from the beginning and the share ownership by the beneficial owner is considered invalid.
The legal consequence is based on the Indonesian Civil Code in which one of the requirements for an agreement to be valid under Article 1320 of the Indonesian Civil Code is a ‘lawful cause’. Meanwhile, Article 1337 of the Indonesian Civil Code states that “a cause is prohibited if the cause, among other things, is prohibited by law”. Given this basis, the prohibition in Article 33 paragraph (1) of the Investment Law and Article 48 paragraph (1) of the Company Law is sufficient to render the nominee agreement and the concept of Beneficial Owner in the context of foreign investment to be null and void. Thus, if the practice is brought to court by the beneficial owner, the nominee agreement is potentially declared null and void by the panel of judges and the agreement is deemed invalid from the beginning4.
III. Conclusion
From the discussion above, it can be concluded that under Article 33 Paragraphs (1) and (2) of Law Number 25 of 2007 on Investments, a nominee arrangement in the context of investment by both domestic and foreign investors is prohibited. The prohibition on nominee is a prohibition on making an agreement and/or arrangement that confirms that the share ownership in a limited company is for and in the name of another person. If the nominee arrangement is still conducted and in fact is conducted by the Beneficial Owner, there will be a legal consequence arising from this practice. With reference to Article 33 Paragraph (2) of Law Number 25 of 2007, the nominee agreement will be declared null and void and be deemed to have never existed.
References
Government Regulation of the Republic of Indonesia Number 2 of 2025 on Verification and Supervision of Corporate Beneficial Owners.
Presidential Regulation of the Republic of Indonesia Number 13 of 2018 on the Implementation of the Principle of Recognising Corporate Beneficial Owners to Prevent and Eradicate Money Laundering and Terrorism Financing
Regulation Number 25 of 2007 on Limited Liability Companies and Investment
Law Number 40 of 2007 on Limited Liability Companies
Mutia Ramadina, Pieter E. Latumeten. (2023). Nominee Practices in the Legal Institution of Limited Liability Companies in Indonesia (Analysis of Synchronisation of the Company Law, the Investment Law, and the Law on Money Laundering). Vol.6
- Attachment I to Regulation of the Minister of Law of the Republic of Indonesia Number 2 of 2025 on Verification and Supervision of Corporate Beneficial Owners ↩︎
- Black’s Law Dictionary, 2nd Ed. ↩︎
- Ni Made Gina Anggreni. Legal Consequences of a Nominee Comparative Holder on a Beneficial Owner of Shares in a Limited Liability Company. (Jurnal Magister Hukum Udayana), Vol. 11 No. 4 December 2022, 817-842 ↩︎
- Pratiwi, Ni Made Ayu, et.al., 2021, Legal Consequences of a Loan Agreement for Money Declared Void by Law, Jurnal Konstruksi Hukum, vol. 2 No. 2, DOI:https://doi.org/10.22225/jkh.2.2.3257.367-372 ↩︎
