INDONESIA Law and Practice Contributed by: Agus Ahadi Deradjat, Gustaaf Reerink and Adri Dharma, ABNR Counsellors at Law
ABNR Counsellors at Law Graha CIMB Niaga 24th Floor Jl Jenderal Sudirman Kav 58 Jakarta 12190 Indonesia Tel: +62 21 250 5125; +62 21 250 5136 Fax: +62 21 250 5001 Email: aderadjat@abnrlaw.com greerink@abnrlaw.com Web: www.abnrlaw.com
1. Legal System and Regulatory Framework 1.1 Legal System
regulates the types and requirements of business licences (“GR 28/2025”); and • various other laws and regulations, depending on the industry. 1.2 Regulatory Framework for FDI FDI Authority and Licensing In general, FDI in Indonesia is overseen by the Ministry of Investment and the Downstream Industries/Indone - sia Investment Coordinating Board ( Badan Koordinasi Penanaman Modal (BKPM)). The BKPM stipulates the requirements for FDI, operates an online integrated licensing portal, the Online Single Submission Risk- Based Approach system (the “OSS system”), and monitors investments by business undertakings. To operate in Indonesia, business undertakings are required to register with the OSS system and apply for a business licence. The OSS system simplifies the licensing process by allowing businesses to apply for and manage their licences online. The OSS system will issue a licence based on the authorisation grant - ed by other governmental ministries/agencies for the sector concerned. The OSS system applies a risk-based approach to determine the type of business licence that must be obtained by businesses to conduct their business activities. The risk levels are determined based on assessments of various factors, including health, safety, environmental impact and resource utilisation. Businesses are classified into the following main risk categories.
The Indonesian legal system adheres to a civil law system that is primarily based on statutory law. This mandates that judges in Indonesian courts adjudicate cases by interpreting and applying the prevailing law and regulations in Indonesia. Unlike common law jurisdictions, where judicial decisions are often guided by precedent, Indonesian judges are not obligated to follow case law. However, in practice, some judges may consider previous rulings in rendering their deci - sions. Business operations are governed by a variety of laws and regulations, including: • the “Company Law” (Law No 40 of 2007 on Lim - ited Liability Companies, as amended), which sets out requirements for the lawful establishment and operation of an Indonesian entity; • the “Investment Law” (Law No 25 of 2007 on Investment, as amended), which regulates foreign direct investment (FDI) in Indonesia; • the “Capital Markets Law” (Law No 8 of 1995 on Capital Markets, as lastly amended by Law No 4 of 2023 on the Development and Strengthening of the Financial Sector); • the “Job Creation Law” (Law No 6 of 2023 on the Ratification of Presidential Regulation in lieu of Law No 2 of 2022 on Job Creation), which streamlines various laws across many sectors; • Government Regulation No 28 of 2025 on Imple - mentation Risk-Based Business Licensing, which
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