License to Clear: The Dark Side of Permitting in West Papua
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Failure to monitor beneficial ownership
© Jurnasyanto Sukarno / Greenpeace
An aerial photo shows excavator clearance for plantations in primary forest at PT Megakarya Jaya Raya oil palm concession in Boven Digoel regency. Since this company was issued a location permit in 2007, there has been a lack of transparency about its beneficial owner(s). 19 Dec, 2017.
Registry profiles for all Indonesian limited companies are available for purchase online. While these documents name a company’s shareholders (the legal owner(s)), they do not always make it possible to discover who ultimately controls a company (its beneficial owner(s)). Some companies are owned by offshore companies in secrecy jurisdictions which do not require disclosure of shareholder information, making it impossible to identify the ultimate (beneficial) owners. In other cases, the legal owners named on the profiles are Indonesian citizens, but
there is reason to suspect that they are nominees, who have a contractual arrangement with the beneficial owner to act as owners of the company. Such contracts are declared to be legally invalid (i.e. unenforceable) under the 2007 Investment Law, but there are no sanctions imposed for companies who choose to use nominees anyway. The 2007 Company Law which defines what company information must be made public does not address nominee arrangements, and there is therefore no requirement on disclosure.522
522 The use of nominee agreements to conceal beneficial owners is actually declared legally invalid by the Investment Law (Article 33 of Law 25/2007 on Capital Investment / Undang-Undang no. 25 tahun 2007 tentang Penanaman Modal, available at https://peraturan.bpk.go.id/Home/ Details/39903/uu-no-25-tahun-2007); however, the issue is not addressed in the Law on Limited Companies (Undang-Undang no. 40 tahun 2007 tentang Perseroan Terbatas, available at https://peraturan.bpk.go.id/Home/Details/39965/uu-no-40-tahun-2007).
