Foreign Investment Limited Liability Company
1. Limited Liability Company in General
A Limited Liability Company – in Bahasa Indonesia “Perseroan Terbatas or PT”, is a legal entity which take the form of a capital partnership established based upon an agreement, thus making it an artificial person. The PT has three corporate bodies: Shareholders’ meeting, Board of Directors and Board of Commissioners.
The Company Law number 40 of 2007 requires at least 2 (two) shareholders which can be natural person(s) and/or legal entity (ies).
- Liability of Shareholder
Shareholders 'are not personally liable for any obligation which are made on behalf of the company and are not responsible for the losses of the company in excess of the shares they owned.
Remarks: Single shareholder consequences: in the event that the PT have less than two shareholders, within a period of six months calculated from the aforementioned circumstances, the related shareholder is required to transfer a part of its shares to another person or the PT shall issue new share(s). Failing to do such will lead to the change of the company's responsibility into the personal responsibility of the single shareholder.
- Investment Status
A company of which the shares is owned by a foreigner or a foreign legal entity shall have a "PMA" (Penanaman Modal Asing or Foreign Investment) investment status to differentiate with the “PMDN” (Penanaman Modal Dalam Negeri or Domestic Investment) status.
- Business Activity
All PT shall determine its business activity based on the Indonesian Standard Industrial Classification (Klasifikasi Baku Lapangan Usaha Indonesia/ “KBLI”).
- PT Management
A PT shall have minimum 1 (one) director and 1 (one) commissioner.
A Director is authorized and fully responsible for the management of the Company for the interests of the Company, in accordance with the purposes and objectives of the Company, and represents the Company both in and out of the court.
A Commissioner is in charge of carrying out oversight in general and/or in particular pursuant to the articles of association, and providing advice to the Board of Directors.
For more information on Business License and Permits, please refer to “License” chapter: here.
2. Foreign Investment Limited Liability Company
For foreigners or foreign companies intending on investing in the Indonesian market or becoming involved with a foreign participation within an Indonesian company, the investment or participation will be due to the establishment of a PT PMA.
Legal protection against foreign investment in the Indonesian national law is regulated in Investment Law number 25 of 2007. This Investment law provides adequate protection for foreign investors against various risks, including non-commercial risks in foreign investment namely the Government to provide equal treatment for domestic investors and foreign investors and also to guarantee legal certainty, business certainty, and business security for investors from the licensing process to the end of investment activities.
- Business Activity
The first thing that must be considered is to determine the desired line of business in the KBLI. Furthermore, the line of business must be compared with the Negative Investment List. The Negative List is a regulation that governs business fields that are closed to foreign investment, open and open to conditions
- Investment Value and Capital Requirements
The Head of the National Investment Coordination Board (Badan Koordinasi Penanaman Modal/”BKPM”) regulates that PT PMA shall have investment value of more than IDR 10 billion. The relatively high threshold is set to protect local small businesses from foreign competitors. The value of the assets stated in the investment plan, in so far as it reaches the minimum capital threshold for the company to be eligible for incorporation under Indonesian Law, may also include assets such as financed equipment and machinery, but excludes land and buildings. The debt equity ratio is usually set at 1:3. Please bear in mind that investment value is not the same as authorized capital, issued capital & paid-up capital.
The same regulation also set the minimum paid-up capital of PT PMA in the nominal of IDR 10 billion, unless stipulated otherwise on the sectoral regulations, with minimum of IDR 10 million set per share. However, the Indonesian Company Law stipulates that a minimum of 25% of the authorized capital shall be made into paidup and issued capital. This can mean that the IDR 10 billion provision as stated above can be translated as the authorized capital and the IDR 2.5 billion as paid up and issued capital.
Higher amount of Investment value and Capital might require for certain business activity.
- PT Management
Generally, a PT shall have at least 1 (one) director and 1 (one) Commissioner. The Director can be either Indonesian citizen or foreigner, but at least 1 (one) director has to be resided in Indonesia.
Foreigner Director, or Foreigner in general, are not allowed to do the task related to Human Resources.
Shareholders with a minimum share value of 1 billion and who also hold director or commissioner positions can obtain investor KITAS facilities. For more information, please refer to chapter “Visa and Immigration”
Remarks: Certain business activity require an Indonesian citizen to hold director and commissioner positions, i.e., Direct trading/multi-level marketing.
- Nominee Arrangement
Investors are prohibited from entering into agreements and/or statements confirming the ownership of shares in a limited liability company for and on behalf of others, in accordance with the laws and regulations. Based on the Investment Law, these agreements will be considered null and void.