INDONESIA Law and Practice Contributed by: Alvin Suryohadiprojo and Dimas Nandaraditya, KARNA
IDR50 billion (approximately USD3.3 million) to establish a venture capital fund. When applying for the venture capital licence, the applicant must also have a minimum paid-up capital of IDR50 billion (approximately USD3.3 million), which means that the shareholders of such applicant must have injected such amount before starting to operate. 2.3 Fund Regulation As discussed above, venture capital funds are regulated by the OJK. The OJK has also recently enacted new regulation, POJK 25/2023, specifi - cally governing the operation of venture capital funds. This regulation replaced prior regulations and introduced, among other things, two venture models – namely, venture capital corporation (VCC) and venture debt corporation (VDC) and more detailed requirements for venture capital funds. The OJK may also potentially require offshore venture capitalists to set up a representative office in Indonesia in a new draft regulation for greater oversight. It remains to be seen how this new regulation will be implemented. 2.4 Particularities An abundance of Indonesian-focused funds or Indonesian-based companies are establishing venture capital funds in foreign jurisdictions, such as Singapore, where tax regulations might be more favourable than in Indonesia. Apart from being established by Indonesian companies, these venture capitalists also heavily invest in Indonesia. One of the main reasons for choosing foreign jurisdictions is the capital gain tax regu - lations on the sale of shares that is applicable under Indonesian taxation regulations. Domestically, based on publicly released data by the OJK, several state-owned banks have
established venture capital companies within Indonesia’s jurisdiction (as per OJK regulations) such as Mandiri Capital (Bank Mandiri), BRI Ven - tures (BRI) and BNI Ventures (BNI). Like other corporate-backed venture capital companies, the establishment of these venture capital com - panies is aimed at seeking portfolios that align with their core businesses. The establishment of Danantara, a new sover - eign wealth fund and investment management institution, established by the new government of Indonesia (inaugurated in October 2024) may also affect the investment landscape in Indone - sia. The establishment and implementation of Danantara are manifested through major revision of the state-owned enterprises (SOEs) law under Law No 1 of 2025 (the “SOEs Law” ). Pursuant to the new SOEs Law, Danantara has been granted the authority to directly enhance and optimise SOEs’ investments and operations. With the establishment of Danantara, dividends derived from SOEs, which were previously deposited into the state treasury, will now be managed by Danantara to ensure optimal utilisation, including as a driving force in VC transactions as is com - monly done by other sovereign wealth funds (eg, GIC, PIF or QIA). 3. Investments in Venture Capital Portfolio Companies 3.1 Due Diligence This would depend on the risk appetite of the investors, industry of the target company and the funding stage of the target company. Ear - lier rounds would typically mean less diligence compared with later rounds. Highly regulated areas (eg, energy and financial services) would typically require a more comprehensive due dili - gence process. Very minimal diligence has been
267 CHAMBERS.COM
Powered by FlippingBook