Nominee (borrowed name) in everyday practice is the use of the name of an Indonesian citizen as a shareholder of a PT in Indonesia or as a Persero in a Limited Liability Company or, furthermore, the use of the name as one of the owners of the land with the right status property or Building Use Rights in Indonesia. So the practice of nominee is not only related to the use of the name as a shareholder in PT in Indonesia, but up to the use of the name in the ownership of a property in Indonesia which is currently very rampant happened especially in Bali.
In practice, the use of the name of the citizen of Indonesia is also often done by way of naming shares or land / property in Indonesia is actually belonged to a Foreign Citizen, on behalf of his wife who is an Indonesian citizen or on behalf of his beloved , and as a “safeguard” for the foreign national, the Indonesian Citizen whose name is used as the person who “owns” the shares or the land / property affirms the acknowledgment that the shares or land are not his property, and his name is simply “borrowed”.
Admittedly or not, many actually land in Bali owned by foreigners, although when checked at the local land office, registered on behalf of citizen. This occurs because of the principle of grads verponding verbood adopted in land law in Indonesia; which prohibits ownership of land with rights other than the right to use to be owned by a Foreign Citizen. On the basis of this, recently raised many legal issues arising from Nominee and our Law Office also also handles various legal issues related to the nominee.
Nominee can be legally explained as follows:
The Nominee Agreement is a treaty made between a person who by law can not be subject to a particular title (property), in this case a foreigner with an Indonesian citizen, with the intention that the foreigner may possess possession of de facto title , but legally (dejure) of the land of such property in the name of Indonesian citizen. In other words, WNI borrowed its name by foreigners to act as Nominee;
(Vide Maria SW. Sumardjono, 2006, Land Policy between Regulation and Implementation, Kompas, Jakarta, page 17)
The nominee agreement is clearly a form of legal smuggling to avoid the rules stipulating that a foreigner is not qualified as the subject holder of land rights in Indonesia in accordance with the provisions of Article 9 paragraph (1) jo. Article 21 Paragraph (1) of UU Pokok Agraria clearly states that only Indonesians can have full connection with the earth, water and space, and clearly stipulate that only citizens can own property.
This is then reaffirmed in Article 26 paragraph (2) of UU Pokok Agraria which states that any sale and purchase, exchange, grant, giving with testament and other deeds intended to directly or indirectly transfer the right of property to a foreigner, to a citizen in addition to Indonesian citizenship having foreign nationality is null and void because of the law.
Article 33 paragraph (1) of Law no. 25 of 2007 concerning Capital Investment reads, “Domestic investors and foreign investors investing in the form of a limited liability company are prohibited from entering into agreements and / or statements confirming the ownership of shares in limited liability companies for and on behalf of others.”
Article 33 above clearly states that the nominee is prohibited. Furthermore, in paragraph (2) of Article 33 states, “In the case that domestic investors and foreign investors enter into agreements and / or statements as referred to in paragraph (1), such agreements and / or statements shall be declared null and void.”
The above mentioned is reinforced in Article 48 of Law no. The Company’s shares are issued on behalf of its owner. “In other words, a company’s shares may not be issued in the name of” representative “of the shareholder, but on behalf of the owner directly.
Nominee is often coated with various agreements to “secure” the name of the WNA and the Indonesian citizen whose name is used as the person who “legally” owns the shares or the land / property to sign a statement acknowledging that the shares or the property not his, and his name is only “borrowed”. Thus the treaty is not legally valid in accordance with the declaration of article 1234 of the Civil Code which states “Each and every engagement is to provide something