INDONESIA Law and Practice Contributed by: Agus Ahadi Deradjat (Agung), Gustaaf Reerink, Adri Dharma, Karina Widyaputri and Ilma Sulistyani, ABNR Counsellors at Law
Furthermore, to obtain the relevant business licences, investors may be required to fulfil additional business- specific requirements depending on the nature of their activities. 2.4 Right to Appeal Generally, investments that meet all stipulated require - ments should not be withheld by the authorities. Con - sequently, there is no dedicated investment-specific mechanism for investors to challenge the authorities’ refusal to authorise an investment. However, unlawful refusals by the authorities may be challenged through the State Administrative Court. Additionally, in accordance with the Investment Law, any disputes between the Indonesian government and foreign investors regarding investment activities must first be resolved through amicable means. If an ami - cable settlement cannot be achieved, the parties may seek resolution through international arbitration as mutually agreed by both parties. This process applies to investments that have been realised and are based on specific agreements between the investors and the government. 3. Corporate Vehicles 3.1 Most Common Forms of Legal Entity The most common corporate vehicle for investment in Indonesia – particularly for profit-oriented ventures – is the limited liability company ( Perseroan Terbatas or PT). The Investment Law explicitly requires that for - eign direct investment be carried out through a PT. General Overview of a Limited Liability Company Law No 40 of 2007 on Limited Liability Companies, as amended (“Company Law”) defines a PT as a legal entity that constitutes a capital partnership, estab - lished based on an agreement, and conducts busi - ness activities with authorised capital that is entirely divided into shares. The definition also extends to individual legal entities that meet the criteria for Micro and Small Enterprises under applicable laws and regulations. However, this category is not further discussed herein, as the focus is on PMA.
A PT that is partly or wholly owned by foreign inves - tors is classified as a PMA. Minimum Number of Shareholders Company Law requires that a PT have at least two shareholders, who may be individuals, legal entities, or a combination of both. If a PT becomes owned by a single shareholder, the law mandates that within six months either: (i) the sole shareholder must transfer part of their shares to another party, or (ii) the com - pany must issue new shares to one or more additional parties. Minimum Share Capital A PT’s capital structure consists of: authorised capital, issued capital, and paid-up capital. The authorised capital refers to the total capital (or portfolio capital) of a company. The Company Law requires that at least 25% of the authorised capital be issued and fully paid-up, meaning the authorised capital may be up to four times the issued capital. For PMA companies, the minimum issued and paid-up capital requirement is IDR2.5 billion. Previously, there was no specific rule on whether the issued and paid- up capital could be transferred, spent, and/or repatri - ated. BKPM Reg. 5/2025 explicitly regulates that the IDR2.5 billion minimum capital cannot be removed/ transferred out of the PMA company’s bank account in Indonesia for 12 months, unless for specific pur - poses, namely asset purchase, construction of build - ing, and/or the operational costs of the investment. 3.2 Incorporation Process The incorporation of a PT in Indonesia involves the following key steps. • Preparation and execution of the Deed of Estab - lishment (DOE) – the founders must prepare a draft DOE, which includes the company’s Articles of Association (AOA). The DOE must be executed physically by the founders or their authorised prox - ies before an Indonesian Notary. • Preparation and execution of ancillary docu - ments – in addition to the DOE, the notary typically requires all founders, directors, and commissioners to execute various supporting documents. These
470 CHAMBERS.COM
Powered by FlippingBook