Forming a Private Company in Indonesia

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SSEK Indonesian Legal Consultants founding partner Ira A. Eddymurthy and partner Denny Rahmansyah have contributed the Indonesia chapter of the new Practical Law global guide to Establishing a Business in …

SSEK Legal Consultants is one of the leading corporate and commercial law firms in Indonesia. It works with leading international and domestic companies on all aspects of their business in Indonesia. SSEK is widely experienced in the establishment of businesses in Indonesia and their ongoing operation.

The following is an extract from Establishing a Business in Indonesia.

A limited liability company (Perseroan Terbatas (PT)) in Indonesia is governed by Law No. 40 of 2007 regarding limited liability companies (Company Law). The other applicable laws and regulations include Law No. 3 of 1982 regarding mandatory company registry. A limited liability company (Perseroan Terbatas (PT)) with foreign ownership (PT PMA) must also observe Law No. 25 of 2007 regarding capital investment.

The procedure for establishing a PT PMA is governed under Capital Investment Co­ordinating Board Regulation No. 5 of 2013 as amended by Regulation No. 12 of 2013 regarding the guidelines and procedures for investment licensing and non­licensing. The relevant authorities involved in establishing a business are the Ministry of Law and Human Rights and the Capital Investment Coordinating Board. The Capital Investment Coordinating Board is a regulatory body and the center for the administration of foreign investment.

The Capital Investment Coordinating Board, as the supervisory authority for a limited liability company with foreign ownership (PT PMA), will reject an application for a principle license if:

  • The company cannot substantiate that it will implement its investment.
  • The company only has a virtual office.

A PT PMA must also submit an activities report to the Capital Investment Coordinating Board, and if that PT PMA does not conduct any activities the Capital Investment Co­ordinating Board has the authority to revoke the PT PMA’s license.

Formation process

The step-­by-­step formation process of a limited liability company is as follows:

  • Reserve the PT’s name with the Ministry of Law and Human Rights. This reservation is usually handled by a notary. The PT’s name must be in the Indonesian language. Other statutory requirements for the company’s name are found in Government Regulation No. 43 of 2011 regarding the procedure for the submission and usage of name of a PT.
  • Execute and obtain approval for the PT’s articles of association. Filing is done by the notary public electronically. The notary completes the electronic form prescribed by the Ministry of Law and Human Rights with the required information and supporting documents and submits them to the ministry, at the latest, 60 days after the date the deed of establishment containing the articles of association is executed. The articles of association are prepared in notarial deed form in the Indonesian language. Within a maximum of 14 days after the complete application letter and supporting documents are received by the Ministry of Law and Human Rights, the ministry will electronically issue its signed decision to approve the company as a legal entity.
  • Obtain a certificate of domicile.
Obtain a taxpayer registration number and a taxable entrepreneur registration number.
  • Register the PT with the Ministry of Law and Human Rights. The application to register the PT with the Ministry of Law and Human Rights is submitted by a notary as the proxy for the founding shareholders.
  • Register the articles of association with the Ministry of Trade. Following the Ministry of Law and Human Rights’ approval of the PT’s articles of association, the PT must be registered in the company registry at the relevant regional office of the Ministry of Trade within three months of starting business. A company registration certificate will be issued on filing and is valid for five years. The first Ministry of Trade registration is handled by a notary.
  • Publish the articles of association in the state gazette. Following the Ministry of Law and Human Rights’ approval and Ministry of Trade registration, the articles of association must be submitted to the state printing office for publication in the supplement to the state gazette. This step is traditionally handled by a notary. Article 30 of Law No. 40 of 2007 regarding limited liability companies (Company Law) requires the Ministry of Law and Human Rights to announce the deed of establishment of the PT along with the ministry’s approval in the supplement to the state gazette within 14 days of that approval.

The average timeline to establish a PT is a month, while the establishment of a limited liability company with foreign ownership (PT PMA) may take six to eight weeks. The fee involved in the establishment of a PT is the notary fee, which varies from one notary to another.

Company constitution

A limited liability company must have articles of association as required by Law No. 40 of 2007 regarding limited liability companies (Company Law). While the Company Law does not provide model articles of association it enumerates the minimum contents that must be incorporated in the articles of association. These include:

  • The name and domicile of the company.
  • The purposes, objectives and business activities of the company.
  • The period of incorporation of the company.
  • The amount of authorised capital, issued capital and paid­up capital.
  • The number of shares, shares classification, if any, including the number of shares for each classification, the rights attached to each share and the nominal value of each share.
  • The name of the title or position and the number of members of the board of directors and board of commissioners.
  • The determination of the place and procedures for holding a general meeting of shareholders.
  • The procedures for the appointment, replacement and dismissal of members of the board of directors and board of commissioners.
  • The procedure for profit utilization and the distribution of dividends.

The articles of association of a limited liability company are available by request at the Ministry of Law and Human Rights. Shareholders’ agreements are commonly used in addition to the articles of association.

To read the full guide to Establishing a Business in Indonesia, click here.

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