There are legal obligations which must be followed by every company in Indonesia. Indonesia's strict corporate laws dictate what each company in the country is required to do. These legal obligations carry grave consequences for errant companies who fail to adhere to them.

Legal Obligations of an Indonesian Company

Perseroan Terbatas (PT) or Limited Liability Company is a legal entity to run a business that consists of capital shares, which is a part owner of shares owned. A majority of the companies in Indonesia are Local PT.

  • They can carry out many business activities in various business fields
  • The paid up capital is lower than a foreign owned company (PT PMA)
  • Clear Separation between Personal Asset and Company Asset

A PT PMA (Perseroan Terbatas Penanaman Modal Asing) is a legal entity which foreigner can use to conduct commercial activities in Indonesia established under the Indonesia law. In a PT PMA, foreigner both individual and legal entities can be registered as shareholder.

  • Shares of PMA can be owned up to 100% by the foreign investors, but subject to the Negative Investment List
  • On-site tax or import duties are lower
  • Has same rights and responsibilities as local companies

Under the Indonesian Company Law,

  • All directors cannot be declared bankrupt in the past five years prior to the appointment
  • Members of a board of directors (BOD) or board of commissioners (BOC) can’t be found to be at fault in causing a company to be declared bankrupt
  • Board of directors (BOD) or board of commissioners (BOC) can’t be sentenced for a crime that caused losses to the state and/or a crime related to the finance sector
  • Foreign nationals are prohibited from serving as human resources directors and there are a number of other directorship positions that foreign nationals are prohibited from holding under the employment laws and regulations.
  • The Minister of Manpower Decree No. 40 of 2012 regarding Certain Positions Should Not be Taken by Foreign Manpower (MOM Dec 40/2012) sets out various company positions related to personnel and industrial relations that cannot be taken by foreign nationals.
  • The BOD and its members are not liable for the acts taken for and on behalf of the company, but the member(s) of the BOD and BOC can be personally liable for the losses of the company, if it can be proven that the loss resulted from the fault or negligence of the BOD or BOC.

Parent companies Liability According to Company Law

The parent company can be liable if one of the following applies:

  • Subsidiary no longer fulfils the requirements to be a legal entity.
  • Parent company used the subsidiary for its own interests in bad faith.
  • Parent company is directly involved in an unlawful act committed by the subsidiary.

Indonesia Consumer Protection Law Requirement

  • Companies and organizations must fulfill required standard
  • Conform to the information stated in their packaging
  • Not be falsely marketed or advertised

Several products, such as foods and drugs, are subject to additional regulatory requirements as regulated by, among other things:

  • Law No. 36 of 2009 regarding Health.
  • Law No. 18 of 2012 regarding Food.
  • Various regulations enacted by relevant authorities, such as the Food and Drug Supervisory Agency (Badan Pengawas Obat dan Makanan) (BPOM))
Want to Start business in Singapore
Want to Start business in Singapore