KH Friend, there are many ways taken by business people in responding to business competition, one of which is by borrowing or buying the name of a limited liability company (PT) owned by someone else who has long been established and experienced in their field. Yes, moreover, almost all tender processes and projects within the government also require participants to be in the form of a PT, not just individual companies. In addition, the track record and portfolio of the PT is also often a requirement. If not, then business actors can lose tenders or projects that seem attractive and profitable. Here, sometimes new entrepreneurs start to feel in control, so they choose shortcuts by borrowing the name of a PT. Actually, this is not uncommon. However, KH Friend needs to be careful because this action is illegal and can bring its own problems. So, what are the provisions and consequences of borrowing the name of this PT? Here is the full explanation.
What does it mean to borrow the name of a PT?
The term “borrowing a PT” is an act where one company borrows another company’s flag for a project or tender with the consequence of a certain amount of reward for the company whose flag is borrowed. The practice of borrowing a PT name or company flag is common in a tender process. Here is an illustration: Company A wants to participate in a tender process for food procurement at an agency with the condition that the company participating in the tender must be engaged in the food sector. Because it is engaged in the non-food sector, Company A borrows the name of Company B, which is engaged in the food sector, in order to fulfill the tender requirements that have been set. As compensation for the borrowed name, company B receives a number of rewards from company A according to the agreement between them. From the illustration above, the one who actually participates in the tender process is company B, but the technical implementation of the tendered project (if company B wins) is in the hands of company A.
What are the legal provisions related to borrowing the name of a PT?
Running a business using the PT name means that it has its own legal consequences. If your actions are caught, then this practically contains the potential for legal violations that can harm many parties. Companies that provide flag loans can be subject to article 39 of the Criminal Procedure Code. This means that the company’s assets can be confiscated if proven to have jointly committed a criminal act of corruption or money laundering through company loans. Public procurement expert Setya Budi Arijanta explained that this PT loan violates three provisions, including:
- Violating procurement principles and ethics as stipulated in Articles 6-7 of Presidential Regulation No. 16/2018 on Government Procurement of Goods/Services.
Article 7 requires all parties involved in Public Procurement (PBJ) to comply with ethics, including preventing waste and leakage of state finances.
- Violating the prohibition of making and giving false statements, or providing false information in accordance with LKPP Regulation No. 9 of 2019.
- Bumping into the prohibition of transferring all or part of the work to other parties, as stipulated in LKPP Regulation No. 9/2018 on Planning Guidelines for Government Procurement of Goods/Services.
Of course, a number of court decisions are waiting to punish state administrators or companies that commit irregularities in public procurement, including borrowing the flag of another company. Even worse, even though the state losses have been returned, it does not erase the guilt of the convict so that whoever is involved will still be tried in accordance with the applicable laws and regulations. This is corroborated by Article 4 of Law No. 31 of 1999 concerning the Eradication of Corruption, as amended by Law No. 20 of 2001, which emphasizes that the return of losses to state finances or the state economy does not eliminate the criminalization of the perpetrators of criminal acts as referred to in Article 2 and Article 3.
Considerations to Consider in PT Lending
It must be recognized that lending your PT to someone else, where you are a shareholder or director, is very high risk. Even though you know the borrower well, if there is a juridical problem, then you will be held accountable as stated in the deed of establishment that your name is listed there. However, if you do decide to lend your PT to another party, then you must pay attention to the following points:
PT borrowers must be authorized by the Board of Directors
As stated in Law No. 40/2007 on Limited Liability Companies (UUPT), the Board of Directors is the one authorized to manage and run the company. Article 97 (paragraphs 1 and 2) of the Company Law states that the board of directors must manage the company in good faith and with responsibility. Article 103 of the Company Law states that the board of directors may grant written authorization to employees or other persons for and on behalf of the company to perform certain legal acts.
PT loan must be approved by shareholders
For this reason, before lending PT, the board of directors must seek the blessing of the shareholders. As written in Article 102 of the Company Law, the board of directors requires approval or makes the debt collateral of the company’s assets. After the formalities are fulfilled, if the borrower turns out to be problematic and the PT borrower disappears leaving debts, the tax obligations and debts will be borne by the company. In this case, UUPT has regulated that any negligence or error of the directors in managing the company results in liability up to personal assets. So that if there is a loss due to the PT loan, then the correction is fully responsible for the losses created by using personal property.
Directors Can Be Relieved of Liability Under Certain Conditions
In certain cases, the directors can be released from liability as long as they can prove matters as stipulated in Article 97 paragraph 5 of the Company Law. In principle, the PT loan scheme is carried out through an agreement regarding the scope of the loan as intended, including the rights and obligations of each party.
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In the agreement, the board of directors can authorize the borrower of the PT with a specific and limited scope, so that if anything happens, the borrower of the PT (the recipient of the power of attorney from the board of directors) must be responsible for all matters related to the loan.
Businesses Don’t Need to Borrow from PT!
As a business actor, if you intend to participate in tenders or projects, you don’t actually need to borrow someone else’s PT. Especially at this time, the process of establishing a PT until the time of the issuance of the certificate of validation only takes approximately 20 working days. PT management can also currently be done through an online system, which of course shortens the management and saves and energy. Moreover, for MSEs who do not have a lot of capital and want to establish a PT, there is no need to worry anymore. Because the establishment process is currently easier with the basic capital requirements and the scale of business activities. Based on Article 109 number 3 of Law No. 11/2020 on Job Creation (Job Creation Law), the amount of authorized capital is determined based on the decision of the founders of the PT, where the authorized capital consists of issued capital and paid-up capital with a minimum amount of 25 percent as evidenced by a valid deposit.
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Establishing a small-scale business PT also does not require a notarial deed. The Job Creation Law and its implementing regulations have made it easy for micro and small entrepreneurs to establish a PT as long as your business is categorized as a micro and small business.
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This is the explanation about the provisions for borrowing the name of another PT. From this explanation, it can be concluded that the status of a PT legal entity is indeed one of the important factors in running a business, one of which is to participate in tenders. In fact, many business actors do not hesitate to borrow the name of other people’s PTs even though if the tender organizing agency finds out, they can take criminal legal proceedings by reporting to the police. And from the lending company’s side, don’t just think about the rewards either. Remember, once you lend your company’s flag to another party to participate in a tender process and then win, it is your PT that will be bound in an agreement with the tender organizing agency. So, if the borrowing party escapes responsibility, it is your PT that will be sued because it is listed as participating in the tender and as the project executor. Therefore, it would be better if as business actors we can avoid this. Moreover, the establishment of a PT as a requirement to participate in tenders is now also easier with Kontrak Hukum. As a digital legal platform, we provide PT establishment services including the required legality documents such as deed, SK, NIB, OSS, NPWP, PKP, and business address in just a matter of hours! Let’s make sure your business legality is safe and easy with us by visiting the KH Services – PT Establishment page. If you have questions about other types of business entities, don’t hesitate to consult with us for free at Ask KH or via direct message (DM) to Instagram @kontrakhukum.
