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

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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 In response to the 1997-98 Asian financial crisis, and the view that the 1905 bankruptcy law was out of date and irrelevant to modern commercial needs, the Government on April 22, 1998, issued Government Regulation in Lieu of Law No. 1 of 1998 regarding Amendments to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 »

Indonesia Extends Cabotage Exemption

Shipping

By Dyah Soewito and Stephen Igor Warokka

The Indonesian Shipping Law and its implementing regulations contain Indonesia’s cabotage rules, requiring that domestic sea transportation be carried out by an Indonesian shipping company using an Indonesian-flagged vessel and an Indonesian crew. These provisions are broadly interpreted to cover most vessels, including different types of vessels operating in Indonesian waters that are not engaged in domestic sea transportation.

On August 31, 2016, Indonesia’s Minister of Transportation (“MOT”) issued a regulation on the procedures and requirements to obtain a permit to use a foreign-flagged vessel in Indonesian waters for activities other than the transportation of passengers and/or goods, MOT Regulation Number PM 100 Year 2016 (“PM 100″).

The regulation revoked MOT Regulation Number PM 10 Year 2014, which was amended three times, by MOT Regulation Number PM 79 Year 2014; MOT Regulation Number PM 10 Year 2015; and MOT Regulation PM 200 Year 2015.

Cabotage Exemptions

Under PM 100, specific types of foreign-flagged vessels operated in Indonesian waters for specific types of activities may be exempted from cabotage rules. Such foreign-flagged vessels may be operated in Indonesia by a holder of a Shipping Company Business License (Surat Izin Usaha Perusahaan Angkutan Laut or “SIUPAL”) after meeting the requirements provided in PM 100. The cabotage exemption is granted in the form of a permit to use foreign vessels (Izin Penggunaan Kapal Asing or “IPKA”), which can only be issued to SIUPAL holders. Read more »

SSEK Nominated for 6 Awards at 2017 ALB SE Asia Law Awards

ALB SE Asia Law Awards 2017

SSEK Indonesian Legal Consultants is a finalist in six categories at the Asian Legal Business SE Asia Law Awards, which recognize the leading law firms and lawyers in the region.

SSEK is nominated for:

  • Energy and Resources Law Firm of the Year
  • Technology, Media and Telecommunications Law Firm of the Year
  • M&A Deal of the Year (Alibaba’s Acquisition of Lazada)
  • Project Finance Deal of the Year (Well Harvest Alumina Refinery Project)
  • Woman Lawyer of the Year (Ira A. Eddymurthy)
  • Young Lawyer of the Year (Fahrul S. Yusuf)

The winners will be announced on May 18 in Singapore. Read more »

SSEK Features at AmCham Indonesia Discussion on Work Permits

SSEK

The American Chamber of Commerce in Indonesia (AmCham Indonesia) hosted a discussion on Tuesday, May 9, on work permits.

Coping with Work Permits: Finding the Way Forward was moderated by Darrell R. Johnson, the senior foreign legal adviser at SSEK Indonesian Legal Consultants, and featured SSEK senior associate Stephen Igor Warokka.

The session took participants through the process of obtaining and renewing work and residence permits, whether you require the permit yourself or you are hiring expats.

PwC and EY joined SSEK on the panel.