INDONESIA Law and Practice Contributed by: Alvin Suryohadiprojo and Dimas Nandaraditya, KARNA
7.2 Restrictions A few years ago, the government regulated for - eign direct investment (FDI) by implementing something called the “Negative Investment List” a list consisting of businesses that are either closed or partially open for foreign investment. Since 2021, the government has reformed FDI policies by implementing something called the “Positive Investment List” . In the latest list, more businesses are 100% open for foreign invest - ment, except investment in those classified as closed or partially closed can only be conducted by the government or can only be conducted by micro, small or medium-sized enterprises. The foreign shareholding restrictions may differ depending on the industry – for instance, a local venture capital company is subject to a maxi - mum foreign shareholding of 85%. Companies will also need to adhere to foreign investment and foreign exchange reporting requirements, which may differ depending on investment size and transaction structure. With this FDI policy, foreign venture capitalists have more opportunity to invest in Indonesian- based tech start-up companies. However, beyond the foreign ownership provisions, a common obstacle is the requirement of IDR10 billion (approximately USD700,000) minimum capital for companies with foreign shareholders (see 3.3 Investment Structure ).
than one voting right based on certain tiering thresholds. This new voting share class system evolved from the traditional voting share sys - tem, where each share typically holds one voting right or none, and has been adopted by vari - ous developed stock exchanges (eg, NYSE, the Stock Exchange of Hong Kong, and Nasdaq). The primary motive behind implementing MVS is to strike a balance between the develop - ment of tech start-ups, which still heavily rely on the vision of their founders, and the interests of shareholders (including public shareholders). With the presence of MVS, founders can main - tain their control over the company. 6.3 Pre-IPO Liquidity There is definitely demand for secondary market trading prior to an IPO but it is unclear whether there is a tangible market need. The main con - cerns would be existing lock-up and how sec - ondary sales close to an IPO may impact pricing for other non-selling shareholders. Anti-dilution provisions would discourage found - ers from issuing too much equity to employees. Parties will need to structure the ESOP or any securities offering carefully to avoid triggering any public offering requirement. This is usually done by way of grant in Indonesia where no investment decision is available on the part of the employee. Companies also need to bear in mind the number of recipients, so as to avoid being considered a public company. 7. Regulation 7.1 Securities Offerings
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