In recent years, Indonesia has had one of the world’s best-performing economies. Today, Indonesia has the largest economy in Southeast Asia with a 2019 GDP per capita of US$3,846.86.
Those planning to invest in Indonesia should first examine the Indonesia Stock Exchange (IDX). This stock exchange includes many companies which are among the country’s best-known and most reputed. Thus, they are ripe for investment. This naturally leads many investors to consider investing in an Indonesian company.
It must first be understood that there are several types of business entities which investors may choose from. Any of these business entities may be opened by a person who intends to invest in Indonesia. Of these business entities, the most common in Indonesia are the Local PT Company (PT) and the Foreign Owned Company (PT PMA).
Local PT Company (PT)
A Local PT company is also known as a Perseroan Terbatas or PT. A majority of the companies in Indonesia are PTs. A PT is a limited liability company which is fully owned by one or more citizens of Indonesia. Only Indonesian individuals or legal entities can be shareholders of a PT. However, foreigners who intend to acquire control over PT can do so by purchasing an Indonesian shareholder’s shares. The foreigner may choose to either purchase part or all of the Indonesian shareholder’s shares in the PT. Foreigners who do so will affect a change in the legal entity of the company; the company which was once a PT would have now become a foreign-owned company (PT PMA).
PTs are valid and viable options for foreign investors who have planned to expand their business in Indonesia but are constrained by ownership limits in certain business areas.
Things you Should know about Local Company:
Directors, Commissioners and Shareholders
Every PT in Indonesia is required to have at least one director, one commissioner, and two shareholders. PTs differ from PT PMAs in this regard in one important way: a PT only allows Indonesian citizens and Indonesian legal entities to hold shares as registered shareholders of the PT. The director of the PT has the duty of representing the company in the performance of all transactions and activities. The director’s actions are supervised by the commissioner. If there is more than one director or commissioner of the PT, the directors or commissioners will form a Board of Directors or Board of Commissioners. One director or commissioner will serve as the President Director or President Commissioner.
There are four types of trading licenses which exist in Indonesia. Every PT is required to own one of these licenses. The license which is to be selected will depend on the net value of the PT. These trading licenses are as follows:
A Micro SUIP is a license for micro-sized businesses with a net worth of less than 50 million rupiah, excluding land and buildings. It must also be a sole proprietorship or partnership and have its business activities managed and maintained by its owners or family members or close relatives.
A Small SUIP is a license for small businesses with a net worth of more than 50 million rupiah but not more than 500 million rupiah, excluding land and buildings.
A Medium SUIP is a license for medium-sized businesses with a net worth of more than 500 million rupiah but not more than 10 billion rupiah, excluding buildings and land.
A Large SUIP is a license for large businesses with a net worth of more than 10 billion rupiah, excluding land and buildings.
These licenses are relevant with regard to the hiring of foreigners to work in a PT. Only PTs with a Medium or Large SUIP and a net worth of at least 1.1 billion rupiah may hire foreigners.
Foreign-Owned Company (PT PMA)
In Indonesia, a foreign-owned company is known as a Perseroan Terbatas Penanaman Modal Asing (PT PMA). A PT PMA is a legal entity which can be used by foreigners to conduct commercial activities in Indonesia as long as the PT PMA has been established under the laws of Indonesia.
In a PMA, foreigners can be registered as shareholders, whether they be individuals or legal entities. Shares of a PT PMA can be completely owned by foreign investors who have complied with the Negative Investment List. This list contains information about which sectors are open to foreign investment. The Indonesia Investment Coordinating Board (BKPM) compiles and updates the Negative Investment List.
The proportion of foreign ownership of PMA will vary from company to company. This is because certain business activities require Indonesian citizens or local legal entities to hold shares alongside the foreign investors. According to the Negative Investment List, certain sectors only permit partial foreign ownership. The list also states the allowed portion of foreign ownership in each sector to which this fact applies.
Facts About PT PMAs
Directors, Commissioners, and Shareholders
According to Indonesia’s company laws, every PT PMA ought to have at least one director, one commissioner, and two shareholders. The shareholders may either be individuals or legal entities; they may also be either local or foreign. At least one of the shareholders must be a foreign individual or foreign legal entity.
The director and the commissioner are both allowed to be shareholders of the PMA. Commissioners, however, are not part of the daily company management. PMAs which have more than one commissioner must select one of them to serve as the president commissioner. The president commissioner has the responsibility of being in charge of the board of commissioners. The primary task of the board of commissioners is the supervision of the board of directors, who form the company’s executive management.
The director of a PMA is in charge of company management in accordance with any policy which may have been specified by Indonesian company laws or the company’s Articles of Association (AoA). Directors of a PMA have the right to legally represent the company. Directors are also authorized to sign any contracts between the company and third parties such as vendors, suppliers, and clients. Directors are also to manage all of the company’s taxation documents. However, a non-resident director cannot sign documents on behalf of the company. Therefore, the director has to first process the work and stay permit immediately after appointment to the position.
Shares of a PMA can be fully owned by foreign investors. The Negative Investment List provides further information on this matter by determining how much foreign ownership of the PMA’s shares is permitted. The proportion of shares of a PMA which may be held by a foreigner depends on the business field of which the PMA is a part.
Minimum Investment and Paid-up Capital Value
In Indonesia, the minimum investment value to start a PMA is 10 billion rupiah or its equivalent in any foreign currency, while the minimum amount of paid-up capital is 25% of this amount. This applies to all business sectors. The value of the minimum investment and paid-up capital do not include the value of the land and buildings owned by the company.
Paul Hype Page & Co – OSS service provider and Asean Chartered Accountant.
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