INDONESIA Trends and Developments Contributed by: Emir Nurmansyah, Ulyarta Naibaho, Muhammad Muslim and Adithya Lesmana, ABNR Counsellors at Law
companies that began operations before the enact - ment of the Third Amendment may not benefit from the grandfathering provision if they undertake any of the following corporate actions after the new vessel ownership requirement becomes effective: • amend their articles of association; and/or • change their shareholding composition or struc - ture; and/or • acquire a new vessel. As a result, the exemption will be revoked if these companies alter their shareholding structure or acquire new vessels. However, the legislation does not clearly specify whether JV companies undertaking any of these actions would be prohibited from operat - ing their existing fleet or whether their existing busi - ness licence would be suspended or revoked, creating further confusion. Hurdles of Implementation of Stricter Requirements Due to the Third Amendment, the cabotage principle under the Shipping Law now introduces more com - plex requirements for shareholding composition and vessel specifications for a JV National Shipping Com - pany that includes foreign individuals or entities as direct shareholders through the following. • Vessel specifications – the Shipping Law mandates that all vessels owned by a JV National Shipping Company must have a minimum size of 50,000 GT as explained above. • Shareholding composition – the Shipping Law now requires that a minimum of 51% of the shares in a JV National Shipping Company must be owned by another National Shipping Company wholly owned by Indonesian individuals. Meanwhile, foreign shareholders may hold a maximum of 49% of the shares. In addition, the Shipping Law stipulates that such foreign shareholder must be a foreign shipping company. Vessel specifications Regarding the vessel specifications, it is important to note that many vessels do not exceed 50,000 GT in size. These specifications and/or requirements entail significant operating expenses and substantial invest -
ment, thereby increasing the financial and logistical burden for potential foreign investors intending to carry out vessel registrations. In addition, the requirements outlined above are not limited to traditional shipping operations, they also extend to joint ventures in other sectors, such as mining, offshore oil and gas, and construction, where vessels are utilised and/or operated under a Special Sea Transportation Operation Licence (known as Surat Izin Operasi Perusahaan Angkutan Laut Khu- sus or SIOPSUS). These industries usually employ smaller, more specialised hi-tech vessels, which are mostly procured through a foreign direct investment (FDI) scheme. Moreover, other similar hurdles con - front foreign investors intending to carry out business activities such as cargo handling, floating storage, and bunkering, which also typically involve smaller ves - sels. This creates additional complexity, as compli - ance with vessel specifications is a prerequisite for shipping operations. Shareholding composition requirements Further specifications regarding shareholding com - position under the Third Amendment are included in Circular Letter No SE-DJPL 31 of 2024 on the Super - vision of the Implementation of Vessel Registration Activities and Sea Transportation Business Licens - ing (“Circular Letter 31/2024”). Under Circular Letter 31/2024, it is required that a minimum of 51% of the shares in a shipping company be held by domes - tic investors, either by a single entity or collectively, based on their respective shareholding proportions. These domestic investors may consist of: • a National Shipping Company wholly owned by Indonesian citizens; or • a National Shipping Company wholly owned by Indonesian citizens, together with Indonesian legal entities, non-legal entities, and/or individual com - panies, that holds a valid shipping business licence, namely Surat Izin Usaha Perusahaan Angkutan Laut (SIUPAL). Therefore, in respect of the shareholding composition requirement, foreign investors may only hold minor - ity shares in a JV National Shipping Company if they qualify as shipping companies under their respective
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