LIPPO-MAPLETREE - Lippo Malls Indonesia Retail Trust - Investor ...

Overview of relevant laws and regulations in IndonesiaAfter the issuance of the strata titles certificates, the underlying common land title certificate is retainedand deposited in the local land office with a record that the strata title certificates have been issued. Thestrata title can only be transferred to other third party once the strata title certificate is issued.The transfer of strata title certificate for the first time is carried out between the developer and purchaser byentering into a sale and purchase deed before the land deed official. The land official deed must beregistered at the local land office, together with, among others, the strata title certificate registered underthe name of the developer and the rules and regulations of the residents’ association. Having examined allthe required supporting documents, the local land office will record the transfer of title and annotate thename of the developer into the name of the purchaser in the strata title certificate as the new owner of thestrata title.Build, Operate and Transfer or BOT. BOT is a form of right to utilise a piece of land, wherein a privateentity receives certain rights from the land owner to finance, design, construct and operate a facility on theland for a specified period, after which the ownership of the building is transferred with the land back to theland owner.A BOT Scheme is a common structure in Indonesia for construction of commercial buildings where theland owner owns the relevant BOT Land. Under the BOT Scheme, the BOT Grantor agrees to grant certainrights over the BOT Land based on the BOT Agreement to the BOT Grantee. The BOT Grantee candevelop the site subject to the relevant approvals and then operate the buildings constructed on the landfor the certain use, such as retail shopping centre developments, for a particular period of time asstipulated in the BOT Agreement. For the right to utilise the BOT Land, the BOT Grantee is obliged to pay acertain compensation to the BOT Grantor as stipulated in the BOT Agreement. The period of BOTAgreements is subject to the parties’ agreement but commonly ranges from 20 to 30 years and may beextended upon agreement of both parties. Upon the expiry of the term of the BOT Agreement, the BOTGrantee must return the BOT Land together with the improvements without either party paying any form ofcompensation to the other.The BOT Scheme and cooperation arrangement is essentially a contractual arrangement and governed byIndonesian Civil Code Contract Law. Pursuant to Article 1338 of the Indonesian Civil Code the contractingparties are free to arrange their relationship in the BOT Agreement or Cooperation Agreement (freedom ofcontract) subject to, among others, the prevailing laws and regulations, the good faith of the contractingparties and public policy principles.During the term of the BOT Agreement, the BOT Grantee has full rights to use the BOT Land and buildingsas agreed between the parties, including to operate the buildings as shopping mall, to receive rent fromtenants occupying the building and to appoint parties to conduct activities on or to the BOT land andpremises such as building managers in the case of retail shopping centre developments.Lease Agreement. The right to use land and buildings, as is similar in many other jurisdictions can alsobe granted through lease-hold arrangements. In general, no limitation on citizenship should apply underthis arrangement pursuant to the principle of freedom of contract as set out above.Share Ownership. A foreign indirect ownership of land and building through a PMA Company schememay also provide the rights of a foreign shareholder, such as LMIR Trust, in the Property Companies toenjoy the beneficial benefits from the Property Companies owning the Property. Indonesian law deems aPMA Company as an Indonesian legal person and as such, a PMA Company has all the rights granted toIndonesian legal persons including to own, manage and operate property developments. The rights ofsuch foreign shareholders are protected by Law No. 25 Year 2007, regarding Investment and Law No. 1Year 1995 regarding Company Law. Such relevant protections include the repatriation guarantee on profitsobtained by the Property Companies and acknowledgement as a shareholder of the Property Companieswith the rights and obligation to be represented on the Board of Directors and Board of Commissioners.The licence of a PMA Company is issued by the Capital Investment Board (BKPM).REGULATION ON THE DEVELOPMENT AND USE OF LANDBefore a parcel of land can be used for certain purposes, such as housing and its related facilities orshopping complex, an environmental impact analysis must be carried out for the proposed project.Thereafter, such person, or the contractor who is responsible for the construction as instructed and244