LEGAL LIABILITY OF THE MANAGEMENT OF MERAH PUTIH VILLAGE/SUBDISTRICT COOPERATIVES IN MANAGING PUBLIC FUNDS: AN INTEGRATED LAYERED LIABILITY MODEL

Maisyarah (University of August 17, 1945, Samarinda, Indonesia)
Fatimah Asyari (University of August 17, 1945, Samarinda, Indonesia)

Awang Long Law Review
Vol. 9 No. 1 (2026): Awang Long Law Review

The establishment of Koperasi Desa/Kelurahan Merah Putih (KDMP), or Merah Putih Village/Subdistrict Cooperatives, as an instrument for strengthening village- and subdistrict-based economies raises a distinct legal issue when cooperative management intersects with public financing and public interests. The central issue concerns the legal boundaries between legitimate business risk, the institutional liability of the cooperative as a legal entity, the personal liability of its management, and public accountability when losses arise from fund management. This study aims to construct a legal liability framework for KDMP management in managing public funds. It employs normative legal research using statutory and conceptual approaches, supplemented by a limited case approach. Legal materials are qualitatively analyzed through legal interpretation, systematization, argumentation, and prescriptive analysis. The findings demonstrate that neither financial losses nor government involvement in KDMP financing automatically gives rise to the personal liability of management or public accountability. The attribution of liability must instead be determined by the legal status of the funds, the scope of management authority, compliance with fiduciary duties and prudential principles, attributable fault, causation, and the nature of the resulting loss. This study proposes an Integrated Layered Liability Model, consisting of six sequential tests: the Source and Status of Fund Test, Authority Test, Fiduciary Duty Test, Prudential and Compliance Test, Fault Test, and Causation and Loss Test. These tests distinguish four possible legal outcomes: legitimate business risk, institutional liability, personal liability, and public accountability. The study further introduces the concept of a liability transition point, referring to the juridical threshold at which a consequence initially falling within legitimate business risk or institutional liability shifts into the personal liability of management and/or public accountability.