Legal Alert May 2017

Legal Alert

Please find the SSEK Legal Alert for May 2017. The SSEK Legal Alert is a monthly survey designed to keep you up to date with the latest legal developments in Indonesia.

Click here: Legal Alert May 2017

Bauxite Mining and Alumina Refinery Investment Environment in Indonesia

Michael Carl

Michael S. Carl, an international legal adviser at SSEK Indonesian Legal Consultants, was invited to give a presentation at the 3rd Global Bauxite Conference 2017 held June 14-15 in Jakarta.

Michael discussed the Bauxite Mining and Alumina Refinery Investment Environment in Indonesia.

You can find his presentation materials here.

Michael Carl is the supervising adviser for SSEK’s mining practice. He works with multinationals and large domestic companies on all aspects of their operations in Indonesia’s mining sector, including advising on smelting and other possible investments in mining assets in Indonesia. Michael is recognized for his broad knowledge and experience with Indonesian law and his ability to help companies navigate the country’s regulatory environment. Read more »

Insurance Companies in Indonesia Must Appoint Controller

Jakarta

By Ira A. Eddymurthy and Maria Yudhitama

Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) has issued a regulation that requires insurance companies in Indonesia to appoint a controller by June 2017 at the latest.

OJK Regulation No. 67/POJK.05/2016 regarding Business Licensing and the Organization of Insurance Companies, Sharia Insurance Companies, Reinsurance Companies and Sharia Reinsurance Companies, dated December 23, 2016 (“POJK 67″), requires insurance companies to report the appointment of a controller to the OJK, as required by the Insurance Law (Law No. 40 of 2014 regarding Insurance).

POJK 67 defines a controller as a party who has the ability, either directly or indirectly, to appoint the directors and commissioners of an insurance company, and can control the decisions or actions taken by directors or commissioners. The controller can be a shareholder, most likely the majority shareholder, or another party who fulfills the above criteria, and will be held responsible for the business continuity of the insurance company under its control. This means the controller must support the insurance company’s business development and fulfillment of financial soundness criteria, and fulfillment of the insurance company’s obligations to its insured or policyholders. Read more »

Insurance Companies in Indonesia Must Follow Requirement on Ultimate Shareholders

Jakarta

By Ira A. Eddymurthy and Maria Yudhitama

The Indonesian Insurance Law (Law No. 40 of 2014 regarding Insurance) introduced a significant change regarding the shareholding composition of insurance companies. Breaking from previous policy, the Insurance Law specifically mandates that the local shareholders in an insurance company must be ultimately owned by Indonesian individuals.

After the enactment of the Insurance Law, the dual-layer PMA structure that foreign entities had utilized to ultimately own 100% of an Indonesian insurance company is no longer allowed.

Existing insurance companies whose local shareholders are not ultimately owned by Indonesians are not grandfathered; they must comply with this requirement under the Insurance Law by either (i) transferring the foreign-owned shares to Indonesian(s), or (ii) going public (if the first option is unsuccessful).

Insurance companies that find themselves in the position of having to make changes in order to comply with this local shareholders requirement must prepare an action plan containing planned steps to achieve compliance and the schedule for such steps. This action plan must be approved by a general meeting of shareholders and then submitted to the Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) at the latest by June this year. The OJK will approve the action plan or ask that is be revised and re-submitted. Read more »

Recent Developments in Bankruptcy Law and Suspension of Debt Payments in Indonesia

SSEK Logo

By Dewi Savitri Reni and Dimas Indartono

Indonesia has had a bankruptcy law since 1905, when Staatsblad 1905 No. 217 juncto Staatsblad 1906 No. 348 Concerning Bankruptcy was enacted. In response to the 1997-98 Asian financial crisis, and the view that the 1905 bankruptcy law was out of date and irrelevant to modern commercial needs, the Government on April 22, 1998, issued Government Regulation in Lieu of Law No. 1 of 1998 regarding Amendments to the Bankruptcy Law. GR 1/1998 was adopted as Law No. 4 of 1998 on September 9, 1998. Law No. 4 of 1998 was eventually revoked by Law No. 37 of 2004 regarding Bankruptcy and Suspension of Debt Payment Obligations dated October 18, 2004 (the “Bankruptcy Law”).

Bankruptcy is a situation where, among other things, (i) a court declares a person or entity unable to pay its creditors, and (ii) the court appoints a receiver. The job of a court-appointed receiver, supervised by a supervisory judge, is to sell or manage a debtor’s assets to satisfy the debtor’s obligations to its creditors.

The Bankruptcy Law also introduces the concept of a court-supervised debt restructuring process, known as Suspension of Debt Payment Obligations (Penundaan Kewajiban Pembayaran Utang or “PKPU”). PKPU proceedings give a debtor the chance to avoid bankruptcy proceedings by preparing, negotiating and submitting a composition plan to its creditors for their approval. The composition plan details how outstanding debts are to be restructured and typically provides, among other things, for rescheduled and extended payment terms, perhaps with a grace period, reduced interest rates and a waiver of penalties and overdue interest.

Notable Recent Developments in Bankruptcy Law Read more »

Restrictions on Contractors in the Indonesian Oil and Gas Sector

Oil & Gas Regulation 2017

By Fitriana Mahiddin and Syahdan Z. Aziz

There are a number of rules for Production Sharing Contract (“PSC”) Contractors in Indonesia’s oil and gas sector, including those on the export of production, currency exchange and the transfer or disposal of development rights.

Subject to obtaining requisite export approvals, a Contractor is entitled to export its production entitlement, subject to its domestic market obligation (“DMO”), by which at least 25% of the Contractor’s entitlement must be allocated for the domestic market.

Currency Exchange Restrictions

The Indonesian Currency Law and Bank Indonesia (“BI”) Regulation No. 17/3/PBI/2015 regarding the Mandatory Use of Rupiah restrict most transactions within Indonesian territory from being carried out using foreign currency. Core upstream activities in Indonesia are exempted from this requirement for a certain period of time, such as expenditures in relation to firm commitment, over/under lifting and domestic oil and gas sales transactions by upstream players, which are exempted for 10 years.

Bank Indonesia also requires all oil and gas export proceeds be deposited in a foreign exchange bank in Indonesia before being remitted overseas. This is contained in BI Regulation No. 16/10/PBI/2014 as amended by BI Regulation No. 17/23/PBI/2015 regarding Receipt of Export Proceeds in Foreign Exchange and Withdrawal of Offshore Loan Foreign Exchange. Read more »

Salaries of Foreign Workers Seconded to Indonesia

Labor & Employment

By Wynne Prasetyo

Bank Indonesia has refined its position regarding the exemption of a cross-border supply of services from the currency requirement, particularly in the case of a foreigner who is employed by a foreign company and seconded to an Indonesian company (Article 8.(1).b.1 of Bank Indonesia Regulation No. 17/3/PBI/2015 and Article C.3.b.1 of Bank Indonesia Circular Letter No. 17/11/DKSP).

Previously, Bank Indonesia took the position that if the salary of such foreigner was paid by the Indonesian company, it had to be paid in Rupiah.

Presently, Bank Indonesia views that the salary of a seconded foreigner may be paid in foreign currency even if the payer of the salary is the Indonesian company, provided that the seconded foreigner receives an assignment letter (surat tugas) from the home employer for his or her secondment to the Indonesian company.

Update on Free Employment Law Webinar on the Implications of Brexit for Businesses in UK and EU

Employment Law Alliance

The Employment Law Alliance is offering a free 75-minute webinar on “The Implications of Brexit: What Does It Mean for Businesses in the UK and Across the EU?” This free webinar is now scheduled for Wednesday, June 14 (the date has been changed from May 24).

Webinar Description

It has been nearly a year since the UK voted to leave the EU, and in March 2017 the UK formally triggered a two-year exit negotiation under Article 50 of the EU Lisbon Treaty. The negotiations will no doubt be difficult and we do not yet know what (if any) “deal” will be done. However, we can expect substantial changes to the UK’s relationship with the EU and the employment landscape; in particular, the UK has said there will be changes to the rights of EU citizens to live and work in the UK (and the rights of UK citizens to live and work across the EU), and the UK will have the freedom to determine its own laws (including employment laws) without answering to the European Court of Justice.  These changes will have a direct impact on businesses operating both in the UK and the wider EU.

Experienced legal counsel from the UK, France, Switzerland, Ireland and Belgium will provide practical insight on what Brexit may mean and how companies can prepare for the changes: Read more »

Michael Carl of SSEK Features at Asia Bancassurance Conference

Michael S. Carl

Michael S. Carl, an international legal adviser at SSEK Indonesian Legal Consultants, was a featured speaker at the 18th Asia Conference on Bancassurance and Alternative Distribution Channels, organized by Asia Insurance Review. The conference was held May 15-16 at Hotel Mulia Senayan in Jakarta.

Michael discussed foreign ownership of insurance companies in Indonesia, and looked at the development of the bancassurance market in Indonesia and the regulatory framework.

You can find his presentation here.

Michael Carl joined SSEK in 2004 and has more than 20 years of experience practicing law in Southeast Asia, principally in Indonesia. He is recognized by Chambers & Partners as a leading lawyer for Indonesian banking and finance, corporate/M&A, projects and energy, and real estate, and by IFLR1000 for banking, project finance, and restructuring and insolvency. Read more »

SSEK Wins Deal of Year for Alibaba Acquisition of Lazada

AMC DOTY_2013

SSEK Indonesian Legal Consultants has been recognized in Asian-MENA Counsel’s Deals of the Year 2016 for our involvement in Alibaba’s US$1 billion purchase of a controlling stake in Southeast Asian online retailer Lazada Group.

SSEK acted as Indonesian counsel to Alibaba as part of the acquisition. The SSEK team was led by founding partner Ira A. Eddymurthy and partner Fahrul S. Yusuf. Read more »