Foreign entrepreneurs can set up a company of their own in Indonesia. Foreign-owned companies in Indonesia are known as Penanaman Modal Asing (PMA) companies. PMAs are limited liability companies. They may either be completely foreign-owned or established through a joint venture with Indonesian partners in accordance with the Negative Investment List. The Negative Investment List stipulates which sectors are open to foreign investment in Indonesia as well as the percentage of foreign ownership permitted.
An initial paid-up capital payment of 10 billion rupiah is required for the setup of a PMA. To prove that such an amount exists, the PMA can deposit all of it as paid-up capital or send a financial balance sheet of the total amount to any relevant authorities. The amount of capital will be stated in the Deed of Establishment and confirmed by a notary. The paid-up capital can be used to pay for employees’ salaries, operational fees, product costs, or any other necessary business expenses.
The owner of a PMA is to deposit the sum of paid-up capital into the company’s bank account. However, the bank account may only be opened after completion of all incorporation documents. Therefore, before the company bank account is opened, the shareholders are to sign a capital statement letter to confirm that the investors have sufficient funds to transfer the capital once the company has been incorporated and has a bank account in its name. The capital statement letter will be prepared by a notary who will submit it to the Ministry of Law and Human Rights.
Shareholders and Directors of a PMA
Every PMA in Indonesia is required to have at least two shareholders. At least one shareholder of a PMA must be a foreigner. A shareholder of a PMA may either be an individual or a company. Foreign shareholders may own as many of the shares of the PMA as is allowed according to the stipulations mentioned in the Negative Investment List.
It is possible for a foreigner to serve as the director of a PMA. However, before doing so, the director of the PMA must first have obtained a work permit which is valid in Indonesia.
Negative Investment List
The Negative Investment List is compiled by the Indonesia Investment Coordinating Board (BKPM). It stipulates which sectors are open to foreign investment in Indonesia as well as the percentage of ownership permitted. Sectors which bar foreign investment in Indonesia are not open to the entry of PMAs.
Therefore, if you intend to set up a business in Indonesia which is part of a sector in which foreign investment is not allowed, we at Paul Hype Page & Co can assist you in the setup of a local company, also known as a Perseroan Terbatas (PT). PTs must be completely owned by one or more Indonesian citizens. Therefore, if you are not an Indonesian citizen, you will need a local nominee director who comes with a notarized nominee agreement. We will attend to such arrangements by managing the notarized nominee agreement between you and the local nominee.