INDONESIA Law and Practice Contributed by: Yogi Sudrajat Marsono, Heru Pamungkas, Agnes Maria Wardhana and Andin Aditya Rahman, Assegaf Hamzah & Partners
5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity The most common type of entity used to invest in real estate in Indonesia is a limited liability compa - ny, including PMA Companies, the constitutional documents of which are the articles of associa - tion (AOA), covering the following key aspects. • Corporate details, including the company’s name, legal domicile, any branch offices and the duration of its establishment, whether limited or unlimited. • The business scope, delineating the areas of operation based on the classification of busi - ness activities. • Capital structure – companies allocate their capital into shares. The entire capital is known as authorised capital, while the portion contributed by shareholders is the issued and paid-up capital. • Corporate organs, which include: (a) the board of directors, comprising one or more directors responsible for day-to- day operations and authorised to act on behalf of the company; (b) the board of commissioners, consisting of one or more commissioners tasked with collective supervision and advisory roles over the board of directors; and (c) the general meeting of shareholders, comprising all shareholders, holding the highest authority in the company. The AOA typically govern the procedures for convening meetings of the directors, commissioners and shareholders, speci - fying quorums, meeting invitations and resolutions in lieu of physical meetings. The AOA may also impose restrictions on directors’ actions by requiring corporate approvals from the board of commission - ers or the general meeting of sharehold - ers.
seeing spatial utilisation, conducting inspections and ordering suspension of violations; and (c) public participation by reporting non- compliance in development and desig - nated use to the MOA or regional govern - ment via documents, website, email or social media. • Regional governments, including the Civil Service Police Unit, ensure public order by conducting patrols and security measures to address non-compliance with development and land use regulations, as per regional laws. Construction projects not aligning with spatial designations may face suspension or demolition. • Law enforcement officials investigate claims, reports or complaints regarding violations of designated land use, which are punishable under the Spatial Planning Law. If a criminal offence is proven, an investigation will be processed to prosecution level, up to in-court criminal proceeding. 5. Investment Vehicles 5.1 Types of Entities Available to Investors to Hold Real Estate Assets Investors typically hold properties by way of direct land title ownership. Local individual investors mostly prefer HM as it holds an unlim - ited term. PMA Companies typically holds HGB, whereas foreign investors are subject to owner - ship restrictions (see 2.1 Categories of Property Rights ). Due to such restrictions, foreign inves - tors usually prefer to establish a PMA Company to acquire land, or to subscribe for shares in an existing real estate company. Despite having foreign investment status, a PMA Company is considered an Indonesian entity, so is eligible to hold a HGB, HP, HGU and strata title.
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