Company Registration at Paul Hype Page Indonesia
Legal Obligations of an Indonesian Company

Jun 205 mins

Setting up a company in Indonesia is easy – what comes next may not be that simple. As there are many regulations and legal obligations that an Indonesia should abide, understanding these could be time consuming and confusing, especially for new businessowners or foreigners.

No matter the types of legal business entities you have incorporated in Indonesia, from Persoroan Terbatas (PT) or Limited Liability Company (LLC), there are legal obligations to take note of. Local PTs account for the vast majority of businesses in Indonesia as the benefits include:

  • Carry out many business activities in various business fields

  • Lower paid-up capital 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) cannot be found to be at fault in causing a company to be declared bankrupt

  • Board of directors (BOD) or board of commissioners (BOC) cannot 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 directorships 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 company’s Liability According to Company Law

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

  • The subsidiary no longer fulfils the requirements to be a legal entity.

  • Parent companies used the subsidiary for their own interests in bad faith.

  • Parent company is directly involved in an unlawful act committed by the subsidiary.

Corporate Secretarial checker

Indonesia Consumer Protection Law Requirement

  • Companies and organizations must fulfill required standards

  • Conform to the information stated in their packaging

  • Not to 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)

What are the Requirements for Formation of an Indonesian Company?

The main registration requirements to establish a corporate business vehicle (PT PMA) are:

  • Executing a deed of establishment in the Indonesian language before a public notary

  • The PT PMA must comply with any shareholding limitation requirement set out in the Negative Investment List

  • Obtaining approval from the Ministry of Law and Human Rights (MOLHR) for the establishment of the PT PMA

  • Obtaining a certificate of domicile (Surat Keterangan Domisili Perusahaan) (SKDP) from the Sub-District Head (Lurah)

  • Obtaining a taxpayer registration number (Nomor Pokok Wajiba Pajak) (NPWP) from the tax office.

  • Opening a bank account in Indonesia

A PT PMA must normally submit the following reports:

  • Capital Investment Activity Report (Laporan Kegiatan Penanaman Modal) (LKPM) quarterly before it obtains a business licence, and every semester once it has obtained a business license

  • Audited Annual Financial Statement to the Ministry of Trade (MOT)

  • Mandatory Manpower Report to the local manpower office

  • Companies engaged in the financial services sector must submit a monthly report and audited annual financial statement

  • They will also need to produce an annual business plan and implementation of good corporate governance report, to the Indonesian Financial Services Authority (Otoritas Jasa Keuangan)

Need assistance in understanding the legal obligations for your company in Indonesia or looking to start your own company? Reach out to us for incorporation and corporate secretarial services today.

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FAQs

What does PT mean for Indonesian companies?2021-11-15T14:06:27+08:00

“PT” simply means a limited liability company. That’s why you almost always see Indonesian company names starting with a “PT.”. It’s simply referring to their limited liability status. 

What is a limited liability company in business?2021-11-15T14:06:08+08:00

A Limited Liability Company (LLC) is a business structure allowed by state statute. … Owners of an LLC are called members. Most states do not restrict ownership, so members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. 

What are Indonesia’s laws?2021-11-15T14:03:53+08:00

Indonesia implements a mixed legal system with the civil law system as the main legal system adopted from the Dutch colonial law. Indonesia also recognises the customary legal system (sistem hukum adat) and religious legal system (Islamic sharia law). 

What is company law what regulation does govern company law in Indonesia?2021-11-15T14:03:07+08:00

Indonesia’s Company Law (Law No. 40 of 2007 regarding Limited Liability Companies) regulates how companies operate their corporations in Indonesia. Since the Company Law was enacted in 2007, it has not been amended nor were there any new regulations issued in 2015 related to the Company Law. 

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