INDONESIA Law and Practice Contributed by: Jufrian Murzal and Enos Martryn Budiman, Murzal and Partners
sized enterprises, location requirements or specific licensing obligations; and • business fields that are reserved for the govern - ment or for co-operatives and micro, small and medium-sized enterprises – which are therefore closed to foreign investment. These restrictions are subject to the Standard Busi - ness Classification ( Klasifikasi Baku Lapangan Usaha Indonesia , or KBLI) number that corresponds to the proposed business activity, and investors must review the relevant KBLI classification to determine the per - mitted level of foreign participation. 2.4 Antitrust Regulations Business combinations in Indonesia are primarily gov - erned by Law No. 5 of 1999 regarding the Prohibi - tion of Monopolistic Practices and Unfair Business Competition; Government Regulation (GR) No. 57 of 2010 regarding Merger or Consolidation of Business Entities and Acquisition of Company Shares that May Result in Monopolistic Practices and Unfair Business Competition; and KPPU Regulation No. 3 of 2023 regarding the Assessment of Mergers, Consolida - tions, or Acquisitions of Shares and/or Assets that May Result in Monopolistic Practices and/or Unfair Business Competition (“KPPUR 3/2023”). • Mandatory notification requirement: Indonesia applies a post-closing merger notification regime. Pursuant to KPPUR 3/2023, mergers, consolida - tions, and acquisitions of shares or assets that meet certain thresholds,either (i) combined assets exceeding IDR2.5 trillion, or (ii) combined annual sales exceeding IDR5 trillion, are required to be notified to the KPPU within 30 working days after the transaction becomes legally effective. For transactions involving banks, a higher asset threshold of IDR20 trillion applies. Failure to submit the notification within the required timeframe may result in administrative sanctions, including mon - etary fines imposed by the KPPU. • Change of control requirement: A notification obligation arises if the transaction results in a change of control. A change of control generally exists where a party acquires more than 50% of the shares or voting rights in a company. However, a change of control may also arise where a party
holds 50% or less of the shares but obtains the ability to exercise decisive influence over manage - ment or strategic decisions, for example through governance or veto rights. • Scope of notifiable transactions: This notifica - tion requirement generally applies to transactions involving non-affiliated parties where the parties have assets in Indonesia or generate sales in Indo - nesia. 2.5 Labour Law Regulations In the context of M&A, employment matters in Indo - nesia are primarily governed by the following: • Law No. 13 of 2003 regarding Manpower, as amended most recently by Law No. 6 of 2023 regarding Enactment of Government Regulation in Lieu of Law No. 2 of 2022 regarding Job Creation into Law; • Law No. 40 of 2007 regarding Limited Liability Companies, as amended from time to time (“Com - pany Law”); and • GR No. 35 of 2021 regarding Fixed-Term Employ - ment Agreements, Outsourcing, Working Hours, and Rest Periods, and Termination of Employment (“GR 35/2021”). Key Labour Considerations in M&A Transactions • Mandatory announcement: An employer that is going to carry out an M&A transaction is required to notify its employees and creditors, in writing, at least 30 days before the general meeting of shareholders (GMS) that will approve the proposed corporate action is set to occur, of the proposed transaction as required under Article 127 (2) of the Company Law. • Statutory compensation: Employer and employee each hold the right to not continue their employ - ment relationship due to an M&A as stipulated under Article 154A(1)(a) of the Company Law. In this regard, employees are entitled to statutory compensation under GR 35/2021, which may include severance pay, long-service pay and com - pensation of rights. 2.6 National Security Review At present, Indonesia does not have a standalone national security review regime generally applica -
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