LEGAL UPDATE IN 2026
Business owners who frequently establish corporations or other types of legal entities and then leave them unused or abandoned will face increasing risks in 2026 of being blocked within integrated legal and tax administration systems across government agencies. This article discusses the legal consequences, risks, preventive measures, and possible solutions related to this issue.

BACKGROUND
For years, many companies underestimated the importance of maintaining administrative data within the General Legal Administration System (“AHU”) because enforcement and supervision in practice were not yet particularly strict. As a result, many companies failed to fulfill their obligations to update administrative reports regarding information and changes related to their legal entities.

This issue is especially common among entrepreneurs who own multiple companies or other legal entities that are never actually used but are intentionally retained for possible future use, causing such entities to become effectively dormant or “inactive.”

Starting in 2026, the Indonesian Government has begun tightening supervision over companies and legal entities that fail to comply with administrative obligations or are simply abandoned, supported by increasingly integrated digital government systems. This means many companies will be subject to large-scale enforcement and administrative scrutiny by the government, particularly concerning stricter verification and reporting of Beneficial Ownership (“BO”).

This is because outdated corporate data that has not been updated for a long period is considered capable of creating inconsistencies in government records and hindering the effectiveness of state supervision and administration.

Under the latest regulations, when a corporation fails to report amendments or administrative data updates for a period of 5 (five) years, the corporation may automatically be designated as “NON-ACTIVE”. Companies in such conditions are commonly referred to as dormant companies or “dead” companies.

Currently, the Directorate General of General Legal Administration (“Ditjen AHU”) under the Ministry of Law has issued Circular Letter of the Director General of General Legal Administration Number AHU-AH.01-36 of 2026 concerning Corporate Determination (“Circular Letter”), which essentially requires all corporations to ensure that their administrative data is continuously updated and accurately reflects the corporation’s actual condition.

It is important to note that this regulation applies to all legal entities in the form of:
1. Limited Liability Companies (“PT”);
2. Foundations (“Yayasan”);
3. Associations.

At present, all such legal entities are required to report any changes concerning:
1. Name and domicile of the legal entity;
2. Purpose and objectives/business activities;
3. Board of Directors and Board of Commissioners data;
4. Foundation Supervisory Board, Management, and Trustees data;
5. Association management data;
6. Deed of establishment and amendments to legal entity status;
7. Corporate Tax Identification Number (NPWP);
8. Beneficial Ownership (“BO”) data;
9. Administrative updates/amendments of legal entity data.

One important type of administrative data that must be monitored is the term of corporate management, such as Directors and Commissioners in a Limited Liability Company/PT, or Management Boards in Foundations and Associations.

In practice, many legal entities fail to update management data for years because they assume the management’s tenure remains valid under the Articles of Association. In reality, management positions commonly have active terms ranging from five to ten years and therefore require renewal or replacement, resulting in changes to the corporation’s legal status.

ABOUT BENEFICIAL OWNERSHIP (“BO”)
Beneficial Ownership (“BO”) data within the AHU system is now being intensively regulated and enforced. In principle, a Beneficial Owner is the individual who ultimately controls or benefits from a corporation. A BO is not always formally registered as a director or shareholder.

For example, a BO may include:
– an individual using a nominee arrangement (borrowing another person’s name);
– ownership through another company;
– or the actual controlling party behind a corporate structure.

BO data must be reported to the Indonesian Government through the AHU system and the Ministry of Law and Human Rights (“Kemenkumham”) in order to:
– identify the actual controlling parties of corporations;
– increase corporate transparency;
– prevent money laundering risks;
– prevent terrorism financing;
– and prevent misuse of legal entities.

The obligation to identify Beneficial Owners has been expressly regulated under Presidential Regulation Number 13 of 2018 (“Perpres 13/2018”) concerning the Application of the Principle of Recognizing Beneficial Owners of Corporations, which requires corporations to:
1. Determine who qualifies as the Beneficial Owner of the corporation;
2. Submit Beneficial Ownership information to the relevant authorities;
3. Periodically update Beneficial Ownership information.
Therefore, the obligation to update BO data has existed since 2018 under Perpres 13/2018.

To achieve these objectives, the Indonesian Government has increasingly focused on BO transparency among legal entities in Indonesia, particularly corporations. The criteria for identifying someone as a Beneficial Owner include:
1. Owning a certain percentage of shares;
2. Possessing certain voting rights;
3. Receiving profits or benefits from the company;
4. Having authority to control the corporation;
5. Being the actual controlling party.

Furthermore, indicators commonly used to identify a Beneficial Owner include:
1. Owning more than 25% of shares;
2. Receiving more than 25% of corporate profits;
3. Having the ability to control the company.

LEGAL CONSEQUENCES FOR DORMANT / NON-ACTIVE COMPANIES
Ditjen AHU specifically emphasizes that if a legal entity fails to update or amend its administrative data within the past 5 (five) years, it may be categorized as NON-ACTIVE within the AHU system. These entities are commonly referred to as dormant companies or inactive corporations.

The “NON-ACTIVE” status in the AHU system is not merely a formal administrative label. It may create significant consequences for the corporation’s activities and operations, including:

1. Restriction or blocking of AHU administrative services
For example, shareholders may be unable to transfer company shares because amendments to the Articles of Association and AHU reporting are mandatory for any transfer of share ownership.
2. Obstacles in updating legal entity data
For instance, difficulties in replacing Directors or Commissioners after their terms had expired under the Shareholder General Meeting (“RUPS”) or under the Corporations Deed.
3. Problems in licensing and business administration processes
Especially within the Online Single Submission (“OSS”) system, which is now integrated with the AHU system.
4. Potential obstacles in business transactions and corporate compliance
For example, administrative processes for corporate actions such as share issuances or rights issues requiring General Meetings of Shareholders (GMS) and amendments to corporate deeds may be disrupted.
5. Inconsistencies with other government systems that are electronically integrated
Considering that Indonesia’s Coretax tax administration system and OSS system are increasingly integrated with AHU.
6. Limited access to banking systems
In practice, companies with problematic or blocked AHU status may encounter difficulties opening bank accounts or experience rejection of certain transactions due to enhanced due diligence procedures resulting from stricter Know Your Customer (“KYC”) and Beneficial Ownership (“BO”) verification standards within the banking system.

HOW TO REACTIVATE A DORMANT / NON-ACTIVE COMPANY
Under SE AHU 36/2026, companies that have been designated NON-ACTIVE may be reactivated by:
1. Updating corporate data;
2. Updating BO data;
3. Fulfilling the requirements for lifting administrative blocks if the company has been blocked.

In practice, this process usually requires the involvement of: notaries; legal consultants; tax consultants; OSS data updates; and synchronization of tax data through the Directorate General of Taxes (“DJP”) Coretax system.

If a company is left dormant and inactive for too long, the risks extend beyond restrictions on legal, tax, and licensing access. Such companies may become “time bombs” capable of triggering personal liability for both management and shareholders.

Therefore, one of the most effective ways to mitigate these risks is through formal Corporate Dissolution procedures, which we discuss further in a separate article.

CONCLUSION
It is essential for corporations to ensure that all administrative data is continuously updated and accurately reflects the actual condition of the legal entity. Legal entities are required to report administrative updates according to their current conditions and should, at minimum, conduct updates every five years to avoid being designated as NON-ACTIVE, which may hinder legal administration, licensing, taxation, and business transactions.

Author: Jose Tjahjono, S.H., LL.M., CPLA.