There are basically 2 ways foreign businesses can establish their presence in Indonesia, and that is by either setting up a limited liability company with foreign ownership (referred to as PT. PMA), or by setting up a Representative Office.
Some business fields in Indonesia are closed to foreign investment, and some are open, and also some are open but subject to having local partnership. Therefore the first step in establishing a PT PMA is to check whether the intended business field is open to foreign investment and whether there is any local partnership requirement for such business field. The Negative Investment List which is contained in Presidential Regulation No. 39 of 2014 outlines the list of business fields that are closed and business fields that are open with requirements for investment.
Every PT PMA must be established by at least 2 shareholders, and as first step they must submit an application to the Capital Investment Coordinating Board (“BKPM”) to obtain a principle license. Once the principle license is issued by BKPM then the shareholders can proceed to execute the deed of establishment containing the PT PMA’s articles of association before a notary public, who will then file it to the Ministry of Law and Human Rights (“MOLHR”) for its approval. Once the MOLHR issues its approval letter then the PT PMA obtains the legal status of a limited liability company. Next the PT PMA shall need to apply for and obtain a Company Registry Certificate from the relevant local government office. All above applications and filings can be done through a proxy by virtue of powers of attorney.
Foreign companies can also establish a representative office in Indonesia, either by setting up a Foreign Company Representative Office (Kantor Perwakilan Perusahaan Asing – “KPPA”) for foreign companies in service business, or setting up a Foreign Trade Representative Office (Kantor Perwakilan Perusahaan Perdagangan Asing – “KP3A”) for foreign companies in trading business, by submitting an application to BKPM. The activities of a Representative Office are limited to acting as a liaison between their principal and potential customers (for example, marketing and promotional activities) and are prohibited from generating income in Indonesia. However, a Representative Office does not require any paid up capital to incorporate.
The contents of this article are intended to convey general information only and not to provide legal advice or opinions. If you require legal assistance, you may contact:
HADROMI & PARTNERS LAW FIRM
Setiabudi Atrium, 4th Floor, Suite 404 – 405
Jl. H.R. Rasuna Said Kav. 62, Jakarta 12920, Indonesia
Telephone : (62-21) 520 7040 (hunting)
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