Indonesia Company Establishment

Simple Guide and Reference for Company Establishment in Indonesia (Foreign Investment)

1. Basic.

    • Foreign Investment means activities of capital investment for conduct of business in the territory of the Republic of Indonesia, which are implemented by FOREIGN CAPITAL INVESTOR, whether use the foreign capital entirely or use in form of a Joint Venture with Domestic Capital Investors.
    • Foreign Capital Investor means an individual foreign state citizen, foreign business entity, and/or foreign government which conduct capital investment in the territory of the Republic of Indonesia.
    • Capital means assets in form of money or other form other than money which are owned by a capital investor for conduct of business in the territory of the Republic of Indonesia.

Form of Business Entity:

    • For Foreign Capital Investment (Foreign Investment) the form of business entity must in form of Limited Liability Companies (in Indonesia known as “PT”or Perseroan Terbatas).
    • The Limited Liability Companies are to be conducted with:
      • Subscription to a part of shares at the time of the LLC establishment;
      • Purchase of shares; and
      • Implementation of other methods in accordance with the current regulations of law. (Please note that the percentage of the capital share that owned by the Foreign Investor are basically different from one business sectors to another. Some business sectors may only contain about 50% Max of Capital Share from foreign investor. For more information please read about Opened and Closed Business Sectors below or Read the Presidential Decree No. 96/2000 concerning Opened and Closed Business Sectors with certain Conditions for Investment.)

Opened and Closed Business Sectors:

    • Basically, all business sectors are open for any capital investment activities, but however there are some business sectors which are declared to be closed or open subject to certain conditions.
    • The business sectors, which are closed and open subject to certain conditions, are stipulated by Presidential Regulation composed in a list based on the Classification Standards, that is classifications on basis of Indonesian Standard Classifications on basis of Indonesian Standards for Classification of Business Sectors and/or International Standards for Industrial Classification.

Rights and Obligations of Capital Investors:

    • Every Capital Investor is entitled to obtain:
      • Certainty of rights, law and protection;
      • Open information concerning business sectors within which they engage;
      • Right to services; and
      • Various forms of facilities in accordance with the regulation of law.
    • Every Capital Investors is required to:
      • Adhere to principles of good corporate governance;
      • Implement the company social responsibilities;
      • Make reports concerning capital investment capacities and submit them to the Indonesia Capital Investment Coordinating Board;
      • Respect the cultural traditions of society in locality of the business activities; and
      • Fulfill all provisions of the regulation of law.

2. Regulations.

    • Law No. 25 of 2007 Concerning Capital Investment;
    • Law No. 40 of 2007 Concerning Limited Liability Companies;
    • Government Regulation No. 17/1992 concerning Terms and Conditions of Capital Ownership in a Foreign Investment Company;
    • Government Regulation No. 20/1994 concerning Capital Ownership in a Company Regarding Foreign Investment;
    • Government Regulation No. 20/1994 concerning The Change of Presidential Decree No. 97/1993 concerning the Investment Procedure;
    • Presidential Decree No. 96/2000 concerning Opened and Closed Business Sectors with certain Conditions for Investment;
    • The Investment Minister / Head of Indonesia Investment Coordinating Board Decree No.57/SK/2004 concerning the Manual and Procedure for Investment Application which is established In case of Domestic Investment and Foreign Investment.

3. Requirements.

  • For Requirements:
    • Fill the Model I/PMA form (in two copies) and submit it to the Indonesia Capital Investment Coordinating Board, with:
      • If Foreign Participant:
        • Articles of Association of the Company in English or Indonesian Language; or
        • Copy of Valid passport for foreign individual.
      • If Foreign Investment Company:
        • Articles of Association of the Company andany amandement(s);
        • Tax Registration Code Number.
      • By Indonesian Participants:
        • Articles of Association of the Company and amandement(s) or Identity Card for Individual;
        • Tax Registration Code Number;
        • Flowchart of the production process and raw materials requirement for processing industries;
        • Description explanation of business activities for services sector.Power of Attorney to sign the application if the participant(s) are represented by another party;
      • Other requirements from the sectoral minister concerne, if any, as stated among others in the “Technical Guidance’s Book on Investment Implementation”;
      • Certain sector namely mining sector which has extracting activity, energy sector, palm oil plantation, and fishery, must obtain Letter of Recommendation by related technical ministries.
      • For the Palm Oil Processing Industry which does not have raw material supplied by its own plantations, the raw material guarantee document supplied by the plantation must be completed, and recognized by the plantation Department of Regency/City Government.
    • In the Business Sector for Partnership Cooperation:
      • Agreement between Small Scale Enterprise and Medium/Large Scale Enterprise outlining among others name and address of each party, pattern of partnership, right and obligation of each party as well as guidance provided for Small Scale Enterprises.
      • Letter of Statement from the Small Scale Enterprise concerning that the enterprise fulfills the criteria of Small Scale Enterprise based on Law No. 9 of 1995.

For further information, or company establishment assistances, please do not hesitate to contact us by filling the contact form provided.