Introduction
When you hear “trust,” you may think about confidence between business partners. In this post, I use “trust” in a legal and commercial sense. A commercial trust manages assets for identified beneficiaries.
Indonesia follows a civil law tradition. Historically, Indonesian law did not recognize the common-law separation between legal ownership and beneficial ownership. Law No. 4 of 2023 introduced a framework for trust-like arrangements within the financial sector.
This development matters for companies, investors, and financial institutions. Commercial trusts can support asset management, securitization, project finance, and investment structures. However, a trust must operate within Indonesian corporate and regulatory rules.
Let me walk you through!
The Legal Recognition of Commercial Trust
Law No. 4 of 2023 concerns the Development and Strengthening of the Financial Sector. It is commonly called the P2SK Law. The law supports stronger financial markets, better supervision, and improved investor protection.
The P2SK Law recognizes structures similar to commercial trusts. It also recognizes special purpose vehicles for securitization. These arrangements allow assets to be managed for specific commercial purposes.
A typical trust arrangement involves three (3) parties. The settlor transfers assets into the arrangement. The trustee manages those assets. The beneficiary receives the economic benefits.
The trustee must follow the written trust agreement. The trustee cannot treat trust assets as personal property. The trustee must also keep trust assets separate from personal or corporate assets.
This separation creates important protection. If the trustee becomes insolvent, trust assets should not automatically become part of the trustee’s bankruptcy estate. This result can protect beneficiaries and improve investor confidence (Indonesia, 2023a).
The Role and Duties of the Trustee
The trustee is the central actor in a commercial trust. The trustee receives authority to manage assets. That authority comes from the trust agreement and applicable regulations.
A trustee should manage assets carefully and honestly. The trustee should follow the trust purpose. The trustee should also protect beneficiary rights.
The trust agreement should identify the assets and beneficiaries. It should explain management powers and investment limits. It should also explain fees, reporting duties, and distribution procedures.
A complete agreement should address conflicts of interest. It should also explain liability and indemnity provisions. These terms help parties understand responsibility when problems occur.
The agreement should include a replacement process. A trustee might lose its license or become insolvent. A trustee might also develop a serious conflict of interest. The parties need a clear method for appointing a replacement.
Trustees may also face reporting and compliance duties. They may need to verify the source of assets. They may need to identify the parties behind the arrangement. They may also need to follow anti-money-laundering requirements.
The Company Law and Corporate Governance
Law No. 40 of 2007 governs limited liability companies in Indonesia. The law establishes the company as a separate legal entity. A company can own assets, sign contracts, and assume liabilities separately from its shareholders.
The Company Law remains important for commercial trust arrangements. A company may act as a settlor, trustee, beneficiary, or shareholder. Each role creates different legal and governance responsibilities.
Law No. 6 of 2023 confirmed the Job Creation framework. It also maintained amendments affecting Indonesian company law. Companies should therefore read the 2007 Company Law together with its later amendments.
Corporate authority must be clear before a company enters a trust arrangement. The board of directors generally manages the company. The board also represents the company in legal relationships.
The board of commissioners supervises management. Shareholders exercise powers reserved for the general meeting. These bodies must follow the company’s articles of association and applicable law.
A company should not transfer valuable assets without proper approval. It should first review its articles of association. It should also examine shareholder approvals and material transaction requirements.
A trust agreement should match the company’s corporate documents. It should not conflict with existing shareholder agreements. It should also respect sector-specific restrictions.
Trusts Holding Corporate Shares
A commercial trust may hold shares in an Indonesian company. In that situation, the trustee may exercise shareholder rights. Those rights may include voting and receiving dividends.
The trustee must still follow the Company Law. The trustee must also comply with sector-specific rules. These rules may affect ownership, voting rights, and corporate control.
The parties should examine whether the arrangement changes control. A change in control can create disclosure or licensing consequences. These consequences may apply in regulated industries.
Banking, insurance, mining, and telecommunications businesses require special attention. Each industry has separate ownership and licensing restrictions. A trust cannot avoid those restrictions merely through its structure.
The trustee should also document its decisions. Corporate resolutions should explain the trustee’s authority. This documentation can reduce disputes among shareholders and beneficiaries.
Beneficial Ownership and Transparency
Minister of Law Regulation No. 2 of 2025 strengthens corporate beneficial ownership rules. The regulation concerns the verification and supervision of corporate beneficial owners.
The regulation requires corporations to identify and report their beneficial owners. Companies must provide complete and accurate information. They must also update that information when changes occur.
This regulation is important for commercial trust arrangements. A trust should not hide the person who ultimately controls or benefits from a company. The parties should identify the settlor, trustee, beneficiaries, and controlling individuals.
The regulation supports a risk-based verification process. Authorities may compare reported information with official records and supporting documents. They may also request clarification when information appears inconsistent.
Noncompliance can create serious business problems. Administrative consequences may include written warnings, blacklisting, and restricted access to the legal administration system. These measures can delay corporate filings and other transactions (Indonesia, 2025).
Beneficial ownership reporting also supports investor confidence. Investors want to know who controls an entity. Banks need reliable ownership information. Regulators need information to detect money laundering and terrorism financing.
Establishing a Commercial Trust
A company should begin by identifying the commercial purpose. It should ask why the trust is necessary. It should also identify the assets and intended beneficiaries.
The company should then determine whether OJK approval applies. It should confirm that the trustee meets applicable requirements. The company should also review licensing and reporting obligations.
Legal due diligence should follow. The company should review asset ownership and transfer restrictions. It should also check existing contracts and financing arrangements.
Tax advice is equally important. Tax treatment may depend on the asset type and transaction structure. It may also depend on the residence of the parties.
The trust agreement should contain detailed operating rules. It should address distributions, investments, reporting, fees, conflicts, and termination. It should also explain dispute resolution and governing law.
The company should maintain accurate records. It should preserve approvals, contracts, asset schedules, and beneficial ownership information. Strong records support compliance and reduce future disputes.
Benefits and Risks for Companies
Commercial trusts may offer several benefits. They can support structured finance and asset management. They can also improve segregation between managed assets and trustee assets.
A trust may help investors understand how assets will be used. It may also create clear distribution rules. These features can improve confidence in financial transactions.
However, commercial trusts also create risks. Poor drafting can produce uncertainty. Weak reporting can cause regulatory penalties. Conflicts may arise between trustees, beneficiaries, and corporate managers.
A trust should not be treated as a secret ownership device. It should not be used to avoid corporate law. It should not be used to conceal assets or beneficial owners.
For me, the strongest trust structure combines flexibility and transparency. The trustee needs enough authority to manage assets. The beneficiary also needs meaningful protection and information.
Conclusion
Commercial trust is an important development in Indonesia’s financial system. The P2SK Law provides a legal foundation for trust-like commercial arrangements. The Company Law provides corporate structure and governance requirements.
Minister of Law Regulation No. 2 of 2025 adds stronger beneficial ownership transparency. Together, these rules create a more accountable environment for commercial trusts.
A commercial trust is not an informal promise. It is a regulated arrangement involving assets, duties, and legal responsibilities. Companies must establish a legitimate purpose and prepare careful documentation.
I believe commercial trust can support investment and corporate finance in Indonesia. Its success will depend on clear regulations and responsible governance. Companies that prioritize transparency can use this structure more confidently.
My name is Wijaya, writing for Wijaya & Co. We orchestrate to assist you navigate. Thank you for reading my posts.