Draft Bill on Unincorporated Business Entities

OVERVIEW

Indonesia’s legal system acknowledges two legal forms for business entities, the incorporated business entity (Badan Hukum) and the unincorporated business entity (Bukan Badan Hukum). The main differences lie in the liability of owners against any third party legal actions. In principle, the liability of owners (shareholders) of an incorporated business entity is limited to their shares, whereas the liability of the members of unincorporated business entities extends to the owners’ personal assets.     

Incorporated business entities encompass two types of companies, the Limited Liability Company which is regulated under Law No. 40 of 2007 on the Limited Liability Company and the Cooperative as covered by Law No. 17 of 2012 on Cooperatives. Additionally a foundation, regardless of its nonprofit orientation, is also classified as an incorporated business entity and is regulated under Law No.16 of 2001 on Foundations, as amended by Law No. 28 of 2004.