Nominee Agreement in Indonesia

Nominee Agreement in Indonesia

Nominee agreement is a very common practice in Indonesia,

where a foreign citizen borrows the name of an Indonesian citizen to buy land in Indonesia,

then we will discuss the explanation and legal rules of the nominee agreement.

Nominee Agreement

In the online Oxford dictionary, the word Nominee means "a person or company whose name is used to purchase an object such as shares, land and buildings, and others but is not actually the original owner of that object". If someone wants to borrow someone's name in order to own one object, then this can be said to be an example of a nominee agreement.

A nominee agreement or name loan agreement is usually drawn up in the form of an original deed by a notary. One type of nominee agreement is the nominee agreement on the ownership of land rights by Foreign Citizens (WNA). Foreign nationals who wish to own land and/or buildings with ownership rights in Indonesia will enter into a nominee agreement.

Rules of Law Nominee Agreement

A Nominee Agreement is an agreement made between a person who according to law cannot be the subject of certain land rights (property rights), in this case a foreigner and an Indonesian citizen, with the intention that the foreigner can control (own) de facto owned land. , but legally-formally (de jure) the ownership of the land is in the name of Indonesian citizens. In other words, Indonesian citizens borrow their names by foreigners to act as nominees

The nominee agreement itself clearly regulates the provisions that are regulated in order to avoid foreigners without conditions as the subject of the holder of land rights in Indonesia in accordance with applicable provisions that do not conflict with Article 1320 in conjunction with Article 1338 of the Civil Code concerning the legal terms of the agreement and the resulting consequences of the encounter of will (agreement).

Articles 9 and 21 of the UUPA

The first nominee agreement legal rules are contained in Article 9 paragraph (1) jo. Article 21 paragraph (1) of the UUPA clearly states that only Indonesian citizens can have complete ties with the earth, water and space, and clearly stipulates that only Indonesian citizens can have property rights.

Apart from that, this article has also been clarified again in Article 26 paragraph (2) of the UUPA which states that every sale, exchange, gift, inheritance and other actions are aimed at directly or indirectly transferring property rights to foreigners. , to a citizen of a country other than Indonesian citizenship having foreign citizenship is null and void.

Based on UUPM

Article 33 paragraph (1) of Law no. 25 of 2007 concerning Investment reads, "Domestic investors and foreign investors who invest in the form of a limited liability company are prohibited from making agreements and/or acknowledgments that clarify if the ownership of shares in a limited liability company is for and on behalf of a person."

Article 33 above clearly states that the nominee agreement legal rules are one of the prohibited practices. Furthermore, in paragraph (2) Article 33 says, "In the matter of domestic investors and foreign investors making an agreement and/or acknowledgment as defined in paragraph (1), the agreement and/or acknowledgment is confirmed to be null and void."

Based on UUPT

The previous nominee agreement legal rules are also strengthened in this one article. The reason is in Article 48 of Law no. 40 of 2007 concerning Limited Liability Companies which issue a sound, "Company shares are issued in the name of the owner." In other words, it is not permissible for the shares of a company to be issued on behalf of the "representative" of the shareholder, but on behalf of the owner directly.

Nominees are often layered with various agreements to "safeguard" the name of the foreigner and the Indonesian citizen whose name is used as a person who legally "owns" shares or land/property signs a statement of acknowledgment. The statement later stated that some of the shares or land/property did not belong to him, and his name was simply "borrowed".

Reasons Why Nominee Agreement Practices are Not Allowed in Indonesia

The reasons for the prohibition of holding nominee agreements include avoiding the occurrence of a company legally owned by an Indonesian citizen, but materially or substantially the owner of the company is owned by a foreigner.

Apart from that, the prohibition on nominee agreements is also to prevent the parties from circumventing the provisions in the law which limit the existence of business fields that are closed to foreigners and open to foreign parties with conditions in accordance with applicable laws.

The Risks of Using the Nominee Agreement

If there are still parties who force and continue to carry out the nominee agreement, then there will be several risks including:

• If there is a dispute at a later date between the parties, the court will reject it because it does not recognize the existence of a nominee agreement; And
• The nominee agreement can of course be sued by a third party on the basis of fraud.