A Structure That Was Already Fragile, and Is Now Far Harder to Defend
Nominee arrangements in Indonesian property monetisation are sometimes framed as though they have become risky only because the regulatory environment has tightened in recent years. That framing is too soft. The better thesis is this: nominee structures did not begin to fail because 2025 and 2026 suddenly made them unlawful. They failed historically because Indonesian land and investment law already treated them as unstable or void. What the newer environment changes is the speed and the range of the consequences. More integrated licensing, beneficial-owner disclosure, and closer alignment between land, company, and revenue records leave less room for different files to tell different stories for long periods.
Proposition one: nominee arrangements failed historically because land and investment law already treated them as unstable or void
The legal weakness begins with land law. Under the Basic Agrarian Law, Hak Milik is reserved to Indonesian citizens. Article 26(2) then goes further by treating any act intended, directly or indirectly, to transfer Hak Milik to a foreigner as void by law, with the land reverting to the State and prior payments remaining unrecoverable. In property monetisation terms, that means the classic borrowed-name arrangement was never a reliable ownership solution. It was a structure built against the statute from the beginning.
The same logic appears in investment law. Article 33 of the Investment Law prohibits agreements or statements that shares are owned for and on behalf of another person, and treats those arrangements as void by law. This point matters well beyond the share register. It shows a wider policy direction running through Indonesian law: concealed beneficial control sits uneasily with a public record that presents a different owner.
The company framework reinforces that direction. The Company Law provides that shares are issued in the name of their owner, and it places management responsibility on directors, including personal responsibility where they are at fault or negligent in carrying out their duties. That makes nominee logic a governance risk as well as a title risk. It is not merely a problem for the land certificate. It can infect the company vehicle used to acquire, operate, or monetise the asset.
That is why the historical use of nominee arrangements in Bali and wider Indonesia always carried a built-in fracture line. The side letters may have looked commercially persuasive to the funder. The land certificate, the company documents, and the governing statutes pointed somewhere else.
Proposition two: the court trend has become increasingly unsympathetic
The clearest judicial statement comes from the Supreme Court’s 2020 civil chamber formulation applied through SEMA 10/2020. The rule is blunt: the owner of a parcel of land is the party whose name appears on the certificate, even where the land was purchased using the money, assets, or funds of a foreign national or another party. For borrowed-name disputes, that shifts the centre of gravity decisively. Private funding stories become secondary to the certificate.
The Denpasar line of cases pushes the same point further. In the indexed reasoning visible through the official Mahkamah Agung directory for PT Denpasar No. 144/PDT/2021/PT DPS, the court treated nominee practice as legal evasion colliding with Articles 9, 21, and 26 of the Basic Agrarian Law and also failing the Civil Code requirements for a lawful agreement. The indexed material also notes a practical issue that is often ignored in commercial conversations: the Indonesian name-lender can be left carrying tax and maintenance exposure over the land.
PT Denpasar No. 157/PDT/2021/PT DPS is sharper still. The official directory index describes nominee practice as a simulated arrangement and a form of legal evasion. It records reasoning that the borrowed-name structure cannot bypass the Basic Agrarian Law and that a foreign citizen borrowing an Indonesian citizen’s name is not entitled to legal protection. Even the procedural outcome is instructive. The case ended with the claim being declared inadmissible, which shows how often nominee disputes fail on two fronts at once: the structure is weak on the merits, and the litigation strategy is frequently poor.
PT Denpasar No. 101/PDT/2020/PT DPS is especially useful because it bridges land nominee logic and company nominee logic. The indexed text describes a deed in which the certificate name was used only for registration purposes while the real beneficiary sat elsewhere. The court treated that deed as a nominee agreement, regarded such arrangements as legal evasion designed to obscure foreign control over land, found an unlawful causa under Article 1320 of the Civil Code, and linked the reasoning to Article 33 of the Investment Law. That is the bridge many investors miss. Once the court identifies the borrowed-name pattern, the issue is often larger than land title. It becomes a question of concealed beneficial control across the whole structure.
The same theme appears in the share-ownership setting. In PT Jakarta No. 375/PDT/2018/PT DKI, the indexed material in the official Mahkamah Agung directory records reasoning that the nominee arrangement conflicted with Article 33 of the Investment Law and Article 48 of the Company Law. That is a useful reminder that nominee risk is not confined to villas, land certificates, or informal side letters around property. It can also sit in the company vehicle itself.
The criminal spillover is also real. In PN Mataram No. 173/Pid.B/2021/PN Mtr, the official directory page records a criminal matter in which nominee agreements and transfer evidence formed part of the evidentiary record. The indexed material describes the accused as a borrowed-name party for land purchased with a foreigner’s funds. For article purposes, the lesson is simple. Once the relationship breaks down, a nominee arrangement can move from civil weakness into criminal process, evidentiary seizure, and a fight over who is entitled to the land file and the surrounding funds.
The wider court pattern is therefore increasingly unsympathetic. Indonesian judges are showing little appetite for treating nominee structures as harmless private ordering. The certificate, the public record, and the statutory prohibitions are receiving greater weight than the side arrangement.
Proposition three: the 2025 to 2026 environment makes concealment harder
The first reason is beneficial-owner disclosure. Presidential Regulation No. 13 of 2018 introduced the obligation to identify the beneficial owner of a corporation for anti-money-laundering and counter-terrorism-financing purposes. The implementing regulation in 2019 then required corporations to submit beneficial-owner information electronically through AHU Online. In 2025, Permenkum No. 2 added a verification and supervision layer to that framework. In practical terms, that narrows the room for a structure that presents one owner to the State while a different controller enjoys the economic benefit behind the file.
The second reason is that the land-transfer process itself now asks harder questions. Permen ATR/BPN No. 21 of 2022 on anti-money-laundering controls for PPAT work states that PPATs must maintain risk-management systems to determine whether the user of services or the beneficial owner is a politically exposed person, and the regulation places beneficial-owner identification much closer to the transaction process. That does not mean every problematic structure will be detected immediately, but it does mean the old assumption that the visible purchaser and the real principal can remain comfortably separated has become less realistic.
The third reason is integrated licensing. PP No. 28 of 2025 is now the governing regulation for risk-based business licensing, and the official BPK status page records that it revoked PP No. 5 of 2021. For property monetisation, especially where land use, building use, accommodation activity, and revenue generation intersect, that matters because the environment now invites a more integrated reading of the land file, the building file, the business file, and the operating facts. A structure that relied on fragmented paperwork is therefore living in a less forgiving system than before.
The fourth reason is the stronger criminal-law setting. Law No. 1 of 2023 on the new Criminal Code took effect on 2 January 2026. The official Mahkamah Agung analysis on the implications of the new Code for criminal responsibility notes, at minimum, that Article 46 treats a corporate offence as an offence committed by management occupying a functional position within the corporate structure. That is part of a broader reshaping of corporate criminal responsibility under the new Code. For nominee-driven property monetisation, the practical point is that the criminal framework now sits more visibly beside the civil, land, and licensing framework than many market participants assume.
This part of the market also needs a more direct conversation. A PT PMDN is not a neutral wrapper that can lawfully absorb foreign participation simply because it presents an Indonesian face on the register. The Investment Law distinguishes between domestic investment using domestic capital and foreign investment undertaken by foreign investors using foreign capital, whether entirely foreign or in combination with domestic capital. The same law prohibits agreements or statements that shares are held for and on behalf of another person. Seen together, those rules make it difficult to defend the use of a PT PMDN as a veil for foreign economic participation that is intentionally kept off the public record. OSS practice points in the same direction: the system maintains a formal pathway for changing company status from PMDN to PMA, which only makes sense because those two positions are legally distinct.
That is why the market should be cautious about consultants and agents who recommend a PT PMDN structure as though it is a practical workaround for foreign entry into the short-term accommodation market. In many cases, that advice is simply a substitute for a lawful solution. It asks the public record to describe a domestic investment story while the economics, funding, control, or operational benefit point elsewhere. That is exactly the type of fragmentation this article is warning about.
This is the practical shift. The old borrowed-name structure depended on fragmentation. One file said “Indonesian owner”. Another said “foreign funder”. Another showed a management vehicle. Another sent the revenue trail elsewhere. The 2025 to 2026 environment compresses those gaps.
Proposition four: directors and controlling persons now need to treat property monetisation as a governance and evidence problem
For directors, commissioners, beneficial owners, and visible Indonesian stakeholders, the real question is no longer whether the market has used nominee structures for years. The question is whether the structure can survive review when the land certificate, the company register, the beneficial-owner filing, the business licence, and the revenue trail are examined together. Once those records are read side by side, a side-letter strategy becomes much weaker.
This is also where TraceWorthy’s position should be stated plainly. There are lawful pathways for foreign participation in the short-term accommodation market that do not depend on borrowed names, concealed beneficial control, or nominee-style PT PMDN arrangements. That point matters because it removes one of the most common excuses for unlawful structuring. The issue is not that the market has been left without compliant options. The issue is that some participants have preferred arrangements that look faster, cheaper, or easier at the front end, even though they create far greater legal and commercial risk later.
That changes the decision-making standard. Property monetisation becomes a governance and evidence problem. Who controls pricing. Who receives income. Who signs with guests, tenants, or operators. Who appears in the company record. Who appears in the land record. Who appears in the beneficial-owner filing. Who carries building and licensing responsibility. A lawful structure needs those answers to align. Where they do not, the issue is larger than incorporation or paperwork. It is a structural defect.
The Company Law gives this issue teeth for directors. The official text records that directors are responsible for the management of the company, and that each director can be personally responsible where he or she is at fault or negligent in carrying out that function. In a modern property monetisation structure, that means directors cannot rely comfortably on the familiar defence that a borrowed-name arrangement was “market practice”. If the operating reality, the beneficial-owner record, and the public documentation point in different directions, management risk becomes personal as well as corporate.
The same warning applies to advisers, brokers, local signatories, and Indonesian counterparties who may once have regarded nominee involvement as an administrative convenience. In the present environment, that is a dangerous assumption. The public record increasingly expects one coherent commercial story. Where the visible documents and the underlying economics diverge, more people in the file carry exposure.
What this means for property monetisation now
The practical warning for investors is simple. A nominee structure was never made safe by popularity. Its apparent durability often depended on time, distance, and fragmented files. Those conditions are receding. The practical message is equally simple: where a lawful structure exists, using a PT PMDN as a disguise for foreign participation is not prudent planning. It is evidence of a deeper governance failure, and often of advice that has been built around convenience rather than legality.
For property monetisation, the safer route begins with governance and evidence. The land file, the company file, the licensing file, the beneficial-owner record, and the revenue trail need to point in the same direction. Where they do not, the problem is larger than paperwork. It is a structural defect that can lead to civil defeat, licensing disruption, and, in the wrong facts, criminal exposure.
That is the core conclusion. Nominee arrangements did not suddenly become unlawful in 2025 and 2026. They were already unstable under Indonesian land and investment law. The newer environment changes the tempo. It reduces the room for concealment and increases the range of consequences. For TraceWorthy’s audience, that means property monetisation decisions now need to be made with the discipline usually reserved for governance reviews and dispute preparation. It also means investors should be wary of advisers who recommend PT PMDN structures as a domestic veil for foreign participation simply because they do not have a lawful alternative. TraceWorthy does. The market no longer has much patience for paperwork that tells one story while the underlying economics tell another.
There is a related market issue that deserves direct attention. Some consultants and agents still recommend a PT PMDN structure as though it can safely accommodate foreign participation in the short-term accommodation market while keeping the public record domestically aligned. That advice should be treated with caution. A PT PMDN is a domestic investment vehicle, and using a PT PMDN as a façade for foreign participation in the short-term accommodation market creates the same evidentiary tension discussed throughout this article. Where the funding, control, revenue benefit, or decision-making point to foreign participation, a PT PMDN wrapper does not solve the underlying problem.
The better question is whether there are lawful participation models available. There are. TraceWorthy advises on lawful participation models for foreign participation in the short-term accommodation market and for foreign participation in other markets connected to Indonesian property. Those lawful participation models do not depend on nominee arrangements, borrowed-name PT PMDN structures, or concealed beneficial control. They are designed so that the land file, company file, licensing file, tax position, and revenue model move in the same direction. That is the difference between a lawful participation model and a PT PMDN structure used to disguise foreign participation in the short-term accommodation market.
How to participate in the market lawfully
Foreign investors considering accommodation, villa operations, hospitality-linked assets, or other property-related opportunities in Indonesia should take advice before committing capital to any structure that depends on borrowed names, concealed control, or a domestic façade that does not match the underlying economics. TraceWorthy advises investors on lawful models for market participation, including structures for the accommodation sector and other regulated business activities, so that the land file, company file, licensing position, tax position, and revenue model are aligned from the outset. Where the objective is long-term participation rather than short-term improvisation, a lawful structure is the better commercial decision. Consult with TraceWorthy before signing, paying, or proceeding on any model presented as a shortcut.
Legal References
¹ Law Number 5 of 1960 concerning Basic Agrarian Principles
(Undang-Undang Nomor 5 Tahun 1960 tentang Peraturan Dasar Pokok-Pokok Agraria)
² Law Number 25 of 2007 concerning Investment
(Undang-Undang Nomor 25 Tahun 2007 tentang Penanaman Modal)
Official link: JDIH BPK
³ Law Number 40 of 2007 concerning Limited Liability Companies
(Undang-Undang Nomor 40 Tahun 2007 tentang Perseroan Terbatas)
⁵ Indonesian Civil Code
(Kitab Undang-Undang Hukum Perdata)
Judicial References
¹⁷ High Court of Denpasar Decision Number 157/PDT/2021/PT DPS
(Putusan Pengadilan Tinggi Denpasar Nomor 157/PDT/2021/PT DPS)
Official link: Mahkamah Agung Decision Directory
¹⁸ High Court of Denpasar Decision Number 101/PDT/2020/PT DPS
(Putusan Pengadilan Tinggi Denpasar Nomor 101/PDT/2020/PT DPS)