Nominee Shareholder: A Strategic Corporate Ownership Arrangement

Nominee ShareholderA Nominee Shareholder is a person or entity registered as the holder of shares in a company, acting on behalf of the actual owner. Often shrouded in anonymity, this arrangement is a legal method to manage corporate ownership.

 

Purpose and Two Main Reasons for Use in Indonesia

Nominee Shareholders are employed for various reasons, but in Indonesia, two primary motives stand out:

Foreign Ownership Restrictions (Negative Investment List)

Indonesia imposes foreign ownership restrictions depending on a business’s classification, as governed by the Negative Investment List (DNI). This list ranges from 100% openness to complete foreign ownership closure. To navigate these limitations, investors often opt for Nominee Shareholders to establish businesses with their desired degree of control.

Minimum Capital Requirements

Starting a foreign company in Indonesia necessitates a minimum capital investment, typically around Rp. 10 billion (~US$ 750,000), with a significant portion immediately paid. However, the capital requirements are substantially lower when all shareholders are local nominees.

Unsafe Nominee Arrangements

Not all Nominee Shareholder arrangements are secure. Using an unreliable nominee, especially without proper legal agreements, poses risks, including losing control over assets. However, professionally drafted agreements, like those provided by companies such as Emerhub, can protect assets and ensure security.

 

Investment Law on Nominee Arrangements in Indonesia

Indonesian Investment Law does not recognise the concept of “trust” or “trustee.” The shareholder listed in the Articles of Association is both the legal and beneficial owner. Recent regulations by the BKPM (Article 12, No.13 of 2017) reinforce this, prohibiting agreements that deny ownership.

Safe Use of Nominee Shareholders in Indonesia

Nominee Company services, utilising corporate shareholders, offer a secure method. This approach allows businesses to meet local requirements and retain control through legally binding agreements. Share purchases via a loan agreement provide control while complying with Indonesian laws.

Alternatives to Nominee Shareholders in Indonesia

  • Representative Office: Offers an option without capital or ownership requirements but cannot generate revenue in Indonesia.
  • Outsourced Operations Model: Ideal for market testing, this approach allows businesses to provide services, conduct sales, and earn revenue without establishing a legal entity in Indonesia.

Understanding the intricacies of Nominee Shareholders is crucial for investors navigating Indonesia’s corporate landscape, as it can help them make informed decisions about their ownership structures.