Since its enactment in August 2001, the public has sought for the revision of the Law on Foundations No. 16 of 2001 (the “Law”). NGO activists consider that due to past experiences of misuse against foundations, the current Law relies heavily on state control, thereby limiting the public’s initiatives in performing noble activities through the foundation. Several restrictions embodied within the Law are: 1) the inability of Foundation managers from drawing appropriate salaries for their efforts, 2) the prohibition against foundations from participating in business activities 3) and the excessive governmental interference in the internal affairs of NGOs.

The Department of Justice themselves in 2002 admitted that the Foundations Law ‘should and would’ be revised. Fortunately, amendments to the Law have finally been submitted to the Plenary Session of the DPR for debate.

The other major issue of contention in the Foundations Law and the Amendments is that there are no provisions that would allow the Audit Board of the Republic of Indonesia (the “BPK”) to audit foundations that are established by the military or Government and subsequently receive State funds. Although Article 1(1) can reasonably be inferred to include all foundations Article 9(1) would imply that one or more legal individuals establish foundations and not necessarily Governments or other apparatus associated with the Government, in this case the military.

Under article 5 of the Law, foundation’s managers are prohibited to receive any part of the foundation’s wealth, thereby restricting them from drawing salaries for their work. The proposed amendment suggest that whilst as a general rule supervisors, advisors and managers are prohibited from receiving the foundation’s wealth in any form, an exception may stand for managers. This exception must be stated under the foundation’s article of association and is subject to two conditions, namely 1) when the manager is directly and fully employed by the foundation but in no way related to the foundations founders, advisors, or supervisors and that 2) the salary, wage, or honorarium paid must be determined by the advisors within the financial ability of the relevant foundation to do so.

Article 11 is proposed to be amended to clarify the procedure and applicable time frames for the legalization by the Minister of Justice and Human Rights (the “MoJ”) or other relevant Government institutions. This article clarifies that the legal personality status of foundation is obtained after its deed of establishment is acknowledged by the MoJ. For the purpose of such acknowledgement the founders or their proxy shall submit a request to the MoJ through the Notary who drafted the foundation’s deed of establishment (“DoE”). The Notary must submit the request within 10 days after the foundation’s DoE is signed. Burden of costs for this process will be further regulated by a Government Regulation (“GR”).

Article 12 further enumerates these time frames that once a written application has been received by the MoJ, the MoJ has 30 days in which to legalize or reject the legalization application from the relevant foundation.

An additional Article has been added to the Law as an amendment; namely, Article 13A. This Article states that any legal action or act performed by a manager of a foundation prior to the foundation being legally recognized is the legal responsibility of the relevant manager.

Articles 32 and 44 remove the appointment restrictions on managers and supervisors of foundations. The Law states that an appointment can only be made and renewed once. The amendments remove the restriction on the number of times a person maybe appointed in the relevant capacity. However, the number of times an individual maybe appointed will be stipulated in the Articles of Association of the relevant foundation.

Article 38 has been amended to state that a foundation is prohibited from executing any agreement with any organization that is affiliated with the foundation, its founders, managers, supervisors, or any employee of the foundation with an exclusion that such agreement may take place if performed for the benefit of the foundation.

Any foundation that has received assistance of more than IDR 500 million from either domestic or international sources must publish an audited financial report in an Indonesian language newspaper. The same auditing and publishing provisions apply for foundations that have assets, excluding religious donations or buildings, in excess of IDR 20 billion.

Amendments to Articles 58 and 60 have been drafted to clarify the procedures and obligations on foundations that intend to affect a merger. Importantly, the intention to merge must be contained in a notarized deed and must also have the agreement of both the relevant parties.

Article 71 has been amended to state that a registered foundation has 3 years to ensure that its Articles of Association comply with the provisions stated in these amendments and the law. However, an unregistered foundation has 1 year to amend its Articles of Association to comply with the provisions of these amendments and the law.

These amendments once passed by the DPR and enacted will come into force 1 year after the date of enactment.

The amendments are expected to clarify the issues of prohibited business activities for foundations, the payment of salary, wages, or honorariums to foundation managers, and the role of government in the internal affairs of foundations.

However, in order to be fully enforced, the Law would still require several implementing regulations in the form of GR, namely (i) GR on the costs of notarial deed/Art 9(4),  (ii) GR on the terms and procedures of establishing a foundation/Art 9 (5), (iii) GR on the separation of wealth between founders and minimum amount of foundation’s wealth/Art 14(4), (iv) GR on the use of foundation’s name/Art 15(4), (v) GR on the cost for announcement of foundation/Art 24(3), (vi) GR on the conditions and procedures of state’s assistance to foundation/Art 27(2), (vii) GR on merger process of foundations/Art 61, (viii) GR on the conditions of foreign foundations/Art 69(2) --mma