Recent Developments Related to M&A in Indonesia

There have been at least three significant developments in Indonesia in the past three years related to M&A transactions.

Foreign Direct Investment

In May 2021, Indonesia made significant changes to its foreign investment policies through Presidential Regulation (PR) No. 10 of 2021, later amended by PR No 49 of 2021 (PR 10/2021 as amended).

This regulation opened up several sectors to foreign investment, making it easier for international investors to own businesses in Indonesia and likely boosting M&A activity in the country. Key sectors that saw restrictions eased for foreign investment include the following:

• Construction: now fully open to 100% foreign ownership.
• Logistics and distribution: also open to 100% foreign ownership, with the exception of specific freight and courier services.
• Pharmaceutical and medical devices: foreign investors can now fully own companies in this sector, although certain raw materials and pharmaceutical products remain restricted.
• Technology, media and telecommunications (TMT): this sector is open for full foreign ownership, excluding private television broadcasting and programming.
• Energy and mining: specific services related to construction, surveying, and power generation within this sector are now open to 100% foreign ownership.

These changes signify a more lenient approach to foreign investment in Indonesia, potentially attracting more international investors and enhancing the country’s economic growth through increased M&A activity.

Notarization Requirements for Share Acquisition Documentation

Under Law No. 40 of 2007 regarding Limited Liability Companies, as last amended by the Job Creation Law (the Company Law)., share acquisition documentation (i.e., share transfer agreement) may be executed in private and it is not mandatory for the documentation to be made in notarial deed form as long as the share acquisition does not result in a change of control.

However, recent practices indicate a shift in legal norms. A significant legal development is the now-established requirement for share acquisition documentation to be executed in notarial deed form regardless of whether the share acquisition results in a change of control. Failure to do this will cause the MOLHR not to issue its approval and/or acknowledgement in respect of the share acquisition.

Personal Data Notification Requirement

Indonesia introduced its first comprehensive personal data protection law, i.e., Law No. 27 of 2022 regarding Personal Data Protection, on 17 October 2022. A key rule in this law requires any legal entity going through a merger, acquisition, separation, consolidation, or dissolution to inform the people whose personal data it handles. This means the company must notify these individuals about the transfer of their personal data both before and after these corporate actions take place. The law allows for this notification to be made directly to the individuals affected or through a public announcement in the digital or print media. The specifics on how to conduct this notification will be detailed in future regulations that have not yet been enacted.

Excerpted from the Corporate M&A 2024 Chambers Global Practice Guide, published by Chambers and Partners.

Find Corporate M&A: Indonesia here.

Further reading:

Corporate M&A and Antitrust Regulations – Indonesia Legal Update

Navigating Cross-Border M&A: Insights Into Indonesia’s Legal Landscape

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