Foreign Investors Face Stricter Ownership Disclosure in Indonesia

Indonesia has significantly tightened its corporate ownership disclosure regime with the issuance of Minister of Law and Human Rights Regulation No. 2 of 2025. The regulation requires legal entities to maintain accurate records of ultimate ownership, reinforcing Indonesia’s broader shift toward transparency and stronger compliance oversight.

For foreign investors, this marks a key development in the country’s regulatory framework, with implications for governance, reporting, and operational risk.

Broader scope of entities now covered

The regulation widens the range of business entities that must comply with ownership disclosure requirements. Previously, the rules focused on limited liability companies and a handful of organizational forms.

Under the new framework, civil partnerships, individual companies, and other non-corporate structures are now included. This means that foreign investors who operate through smaller, alternative entities or joint ventures in Indonesia may now fall under regulatory scrutiny.

What makes the update particularly relevant is its inclusion of non-traditional business arrangements often used by foreign enterprises. Structures such as nominee shareholding agreements, layered holding companies, and investment vehicles, especially those designed to protect privacy or manage risk, now require greater transparency.

Deeper compliance and reporting obligations

Under the 2025 regulation, legal entities must conduct regular reviews and file updated information at least annually, or whenever ownership changes occur. The reporting process includes a detailed questionnaire and supporting documentation that must identify individuals with direct or indirect control. 

New verification and monitoring mechanisms

One of the most significant changes is the introduction of a risk-based verification process. Responsibility for ensuring accuracy now lies not only with the legal entities themselves but also with notaries, the Ministry of Law and Human Rights, and other relevant authorities. The ministry has implemented a digital validation system that analyzes information submitted by companies and cross-references it with the answers provided in the required beneficial ownership questionnaire.

This shift from passive reporting to active verification introduces a higher bar for due diligence. Businesses will need to ensure consistency between their corporate records and regulatory disclosures to avoid triggering red flags during electronic validation.

Clear penalties for non-compliance

The regulation introduces administrative sanctions for failing to report or for submitting inaccurate ownership information. These include official reprimands, blacklisting from government platforms, and being blocked from using the Ministry’s online systems for company registration and maintenance.

Such sanctions may significantly disrupt business continuity for companies that rely on timely licensing, renewals, or corporate actions in Indonesia. For foreign investors, the reputational impact of being flagged as non-compliant may also pose broader regional or international risks, especially for entities subject to group-level reporting or ESG audits.

Strategic implications for foreign investors

Foreign investors with operations in Indonesia — whether through subsidiaries, joint ventures, or local partners — should reassess their ownership and control structures under the new regulation. This is particularly important for companies that have layered offshore ownership or use fiduciary arrangements that may now fall under scrutiny.

Companies must ensure internal compliance systems are equipped to track ownership changes and trigger timely updates under the new regime. Industries with heightened exposure, such as extractive industries, finance, e-commerce, and digital platforms, should take a proactive approach given the government’s focus on sectors with high regulatory and AML risk profiles.

How Indonesia’s rules align with global transparency standards

Indonesia’s updated regulation brings it closer to global expectations, including the Financial Action Task Force (FATF) recommendations and broader G20 transparency standards. The country has committed to strengthening its business environment through greater accountability, and the beneficial ownership reforms are a key step in that direction.

Regionally, Indonesia joins peers such as Singapore, Vietnam, and Malaysia in expanding transparency regimes. These shifts signal a regional trend for foreign investors operating across ASEAN: ownership opacity is becoming less acceptable, and regulatory scrutiny is intensifying.

Acting early to mitigate compliance risk

Investors should not treat this as a routine legal update. The regulation reflects a structural change in how Indonesia views corporate integrity and investor accountability. Legal entities must build in the capacity to track control structures, respond quickly to regulatory requests, and integrate disclosure obligations into broader corporate compliance programs.

Those that act early by engaging legal counsel, updating internal governance procedures, and centralizing ownership records will be best placed to operate smoothly in Indonesia’s maturing regulatory environment.

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