INDONESIA Law and Practice Contributed by: Stephen Igor Warokka and Mutiara Kasih Ramadhani, SSEK Law Firm
stipulate identical criteria for vessels to be eligible for registration in Indonesia, as follows: • vessels with a gross tonnage of at least seven GT; • vessels owned by Indonesian citizens or legal enti - ties established under Indonesian law and domi - ciled in Indonesia; and • vessels owned by Indonesian legal entities that are joint ventures, where the majority of the shares are owned by Indonesian citizens. While Article 93 of GR 31/2021 consistently provides the same wording as above, the elucidation thereof specifies that such local majority shareholders in the context of a joint venture company must manifest in the form of: • a national sea transportation company wholly owned by Indonesian citizens for commercial activities; and/or • Indonesian legal entities wholly owned by Indone - sian citizens for non-commercial activities, includ - ing social activities, tourism and sports. While the above indicates that there is more of a restriction in place regarding the entity that can serve as the majority shareholder of a vessel-owning joint venture company, there is also a lack of clarity regard - ing which parties are expected to engage in com - mercial or non-commercial activities and what these activities respectively entail. Therefore, it is yet to be affirmatively determined whether “commercial activi - ties” or “non-commercial activities” refer to the activi - ties of the majority shareholder of a vessel-owning company or to those of the vessel-owning joint ven - ture company itself. Shareholding and Vessel Ownership Requirements for Shipping JV Companies The government of Indonesia recently enacted the Third Amendment to the Shipping Law, which intro - duces sweeping changes that reshape the regulatory landscape for Indonesian shipping joint ventures (ie, shipping companies established in Indonesia which have a foreign entity as a shareholder) (“Shipping JV”). A Shipping JV intending to own a vessel must now have a wholly Indonesian-owned shipping company as their majority shareholder. This new requirement
effectively excludes Indonesian individuals and wholly Indonesian-owned non-shipping entities from part - nering with foreign entities to form Shipping JVs and holding the majority of the shares therein. The Third Amendment to the Shipping Law imposes further restrictions on foreign participation by limit - ing shareholding in JVs to foreign shipping compa - nies. The term “foreign shipping company” remains undefined, leaving its interpretation uncertain until implementing regulations are issued. However, it can be inferred that foreign shareholding in a Shipping JV (which must hold the minority stake in any event) is required to be held by an entity actively engaged in shipping in order to qualify as a foreign shipping company. The Third Amendment to the Shipping Law also imposes a substantial increase in the vessel owner - ship requirement by a Shipping JV, which raises the minimum measurement for each vessel operated by a JV to 50,000 GT, a tenfold jump from the previous 5,000 GT threshold. This minimum measurement requirement is also applied to vessel-owning joint ven - ture companies engaging in the manufacturing and/ or mining sectors. While the Third Amendment to the Shipping Law pro - vides that existing Shipping JVs (and the joint venture companies engaging in the manufacturing and/or min - ing sectors, as applicable) benefit from a conditional exemption under a grandfathering clause therein, this privilege is forfeited if they amend their corpo - rate deeds, modify shareholding structures or acquire additional vessels. Notably, the statutory language refers to “corporate deeds” rather than specifically to amendments to a company’s articles of association. This has prompted questions from existing shipping companies as to whether this refers exclusively to amendments to their articles of association, or more broadly, to any notarial deed executed by a company for the purpose of reporting corporate changes to the Ministry of Law, including routine updates such as changes to the board of directors or commissioners. It therefore remains unclear whether changes limited to board composition, without any amendment to the articles of association of the relevant Shipping JV,
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