Business Structure

A. Companies

(Limited Liability Company or Perusahaan Terbatas (“PT”))

Limited Liability under Indonesian Law is a legal person with a fixed capital divided into shares and with the liability of each shareholder limited to the extent of the par value of the shares held. The Indonesia Commercial Code provides only basic regulations with respect to the most important aspects, from incorporation up to dissolution. As a legal basis, the law is fairly accommodative to various deregulatory policies and measures to date, and those that will be taken by the government in the foreseeable future.

A. 1. GOVERNING DOCUMENTS

Companies must have a constituent document which is the memorandum and article of association. This document governs company operations. It must indicate the name of company, its shareholdings, the liability of its members, and the amount of share capital authorised.

A public company must have at least three organs. The three organs are general meeting of shareholders (RUPS), board of directors (Dewan Direksi), and board of supervisors (Dewan Komisaris). Except for approved Foreign Investment (PMA) companies, all shareholders, Dewan Direksi and Dewan Komisaris must be Indonesian nationals or wholly Indonesian-owned entities. Members of the Dewan Direksi and Dewan Komisaris are prohibited from acting on behalf of the shareholders at the shareholders meetings. The corporate law requires that an annual General Meeting of Shareholders must be held at the latest six months after the end the company’s fiscal year. The day-to-day management of the P.T. is in the hands of the Board of Directors. However, the corporate law states that a PT has a Board of Supervisors, which means that a PT must have this Board.

A.2. DIRECTORS

Foreign shareholders should take particular note of the prohibition on members of the Boards of Directors or Supervisors representing shareholders at shareholders meetings. Also, an expatriate resident in Indonesia may not be a director of a PMA company unless he has a work permit sponsored by that company.

A.3. AUDIT REQUIREMENTS AND PRACTICES

Audit is required for companies listed on the stock exchange, banks, underwriters, stock brokers and leasing companies, including those established under the Foreign Capital Investment Law. While for filing the corporate tax return the availability of statutory accounts may become necessary requirement, however, audited accounts may only be option.
Foreign accountants are not allowed to practice in Indonesia, accordingly audit opinions must be issued by an Indonesian registered public accountant.

A.4. SHAREHOLDINGS BY NON-RESIDENTS

Foreign individuals and corporations may buy shares up to 100% of the foreign investment company operating in Indonesia.

A.5. FORMING A COMPANY

BKPM is an investment service agency of the Indonesian Government created with the purpose to effectively implement the enactment of law on foreign as well as domestic investment. At the time, BKPM, chaired by Head of BKPM, is a non-departmental government agency serving under and directly responsible to the President of the Republic of Indonesia.

An approval in investment stage can be categorized in two main types: approval for domestic investment and approval for foreign investment. Below is the flow chart of approval in investment stage.

A.6. REGISTRATION REQUIREMENTS AND FILING PROCEDURES FOR PUBLIC SECURITIES (SHARES)

The General requirements for stocks issuer to be listed in Indonesia Stock Exchange:

1.Registration Statement has been stated effective by Bapepam.

2.The issuer is not in lawsuit that could influence the existence of the company. 3.Its business field is directly or indirectly not prohibited by the prevailing law of Indonesia. 4.Particularly for issuers in manufacturing field, they are not in pollution problem (this is

proved by the AMDAL certificate) and for issuers in forestry field must have ecolabelling certificate.

5.Especially for issuer in mining field, it must have a managing license that is still valid at least for 15 years; have at least 1 Mining Authority Contract or Regional Mining License; one director with technical skill and experience in mining field; and have had a proven deposit or equivalent.

6.Especially for business that needs managing license (like highway construction, forestry), it must own the license at least 15 years.

7.Subsidiary and/or holding company of a listed company in Indonesia Stock Exchange that contribute 50% of its consolidation income to the listed company cannot be listed in the Exchange.

8.Financially related requirements of the Initial listing must be base on the last audited annual financial report.

B. Foreign Companies and Branches

The investment law requires that a foreign owned enterprise operating wholly or mostly in Indonesia as a separate business unit must be organized under Indonesian law and domiciled in Indonesia. Branches are not normally permitted, except for foreign banks and oil and gas companies.

C. Partnerships

Companies operating in Indonesia need to be aware of the legal status of partnership as they are a common operating structure. There is a collection of recognized legal entities for setting up a business in Indonesia :

a.Persekutuan Perdata (PP) is a partnership between two or more people in one agreement to make a profit.

b.Firma (Fa) is an open partnership established to continuously hold a business name which is generally used by commercial partnerships such as trading and service enterprises.Each partner has the right to act in the name of the Firma within the scope of its activities and bind the partnership to third person unless he has been expressly denied that right.

c.Persekutuan Komanditer ( Commanditaire Vennootschap – CV ) is a limited partnership governed by the provisions of the Commercial Code. One partner is allowed to invest money into the partnership without having to manage the company.

However, the above business types apply only to local citizens.

D. TYPES OF BUSINESS ORGANISATIONS IN INDONESIA

Perseroan Terbatas (PT)

Limited Liability Companies (PT) can include, and are classified as private and public companies. They are governed by the 1996 Corporation Law. PTs are managed by a Board of Directors. Non-Indonesian citizens may not be directors or foreign investment commissioners in a PT.

Representative Offices Foreign representative offices are typically formed to facilitate transactions between local and foreign buyers and suppliers. A Representative Office facilitates making such transactions easier but a Representative Office cannot perform operating activities characterized by a PT.

Joint Ventures Foreign direct investment companies may be in the form of Joint Ventures between foreign and domestic capital owned by Indonesian citizens or organisations, or through straight investment.

Badan Usaha Milik Negara (BUMN) These are companies owned by the government.

Perusahaan Dagang (PD) These entities are known as private trading companies, most of which are sole proprietorships.

Limited Liability Partnerships (CV) This legal designation only applies to the silent partners in a given partnership.

Firma These are unlimited liability partnerships, more commonly known as disclosed partnerships.

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