Establishing a Business in Indonesia: Minimum Capital Requirements

SSEK 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 is one of the top 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 excerpt from Establishing a Business in Indonesia.

When establishing a limited liability company (Perseroan Terbatas (PT)) with shares fully held by Indonesian persons and/or legal entities, the minimum authorized capital is IDR50 million and the minimum issued capital is IDR12.5 million. To establish a limited liability company (Perseroan Terbatas (PT)) with foreign ownership (PT PMA) the minimum investment is IDR10 billion for each business field, comprising equity capital and indicative loans.

The ratio of equity capital to indicative loans can vary from 1:3 to 1:6 depending on the line of business of the company, but the actual ratio for any given PT PMA's project must be negotiated with the Capital Investment Coordinating Board.

The Capital Investment Coordinating Board requires that the total investment made by the foreign investor is sufficient so the intended business can achieve commercial production. It is helpful to consult with the Capital Investment Coordinating Board on whether the company requires a larger investment amount taking into account the number of business fields that the foreign investment company engages in. Certain business sectors (sea transportation and insurance, among others) may have a higher minimum share capital requirement.

Transfer of shares in private companies

Under Law No. 40 of 2007 regarding limited liability companies (Company Law), each shareholder has a pre-­emptive right to subscribe to the newly issued shares in proportion to his shareholding in each class of shares. The articles of association of a company can also give shareholders the right of first refusal to purchase the shares of shareholders of a certain class of shares or other shareholders, and/or provide that a shareholder intending to sell his shares first obtain prior approval before selling.

Additionally, the articles of association can detail provisions concerning the requirements for the transfer of rights in shares, namely the obligation to obtain prior approval from the company's organs and/or the obligation to obtain prior approval from the competent authorities in accordance with the applicable laws and regulations.

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