DOING BUSINESS IN INDONESIA

Doing business successfully in Indonesia requires some understanding of Indonesian legal and regulatory environments. Many promising changes are underway in Indonesian business environment which will help Indonesia emerge as an attractive destination of doing business and profitable market for Malaysian companies.

SETTING UP BUSINESS ACTIVITIES AND A COMPANY IN INDONESIA

To establish a business in Indonesia, if you do not require a local legal entity for the investment proposed, you could choose to appoint an Agent or Distributor, or set up a Representative Office. Many foreign investors at the early stage of entering the Indonesia market choose to set up an Agency Agreement or Representative Office, then later after the business starts to grow they will apply for a Foreign Direct Investment Company (FDI) status.

REPRSENTATIVE OFFICE

A Representative Office can be established depending upon the line of business and the necessary licenses issued by the related government department. The limitation of a Representative Office is that they are not allowed to conduct direct sales and cannot issue Bills of Lading.

Representative offices are set up primarily for marketing, market research, or as buying or selling agents. The related government ministries are:

•Representative Office from Ministry of Trade – for bilateral trade
•Representative Office from Ministry of Public Work – for consultant or contractor
•Representative Office from Ministry of Energy and Mineral Resources-for mining activities
•Representative Office from Ministry of Finance – for banking
•Representative Office from Investment Board – regional representative

REGISTRATION OF AN AGENT. DISTRIBUTOR OR SOLE DISTRIBUTOR

1. Requirements:

Any national trading company appointed as an agent, distributor, or sole distributor originating from home country and abroad shall be granted a Certificate of Registration issued by Director of Company Registration, Directorate General of Domestic Trade, Ministry of Trade of the Republic of Indonesia.

The Certificate of Registration shall be granted upon request for registration application form to be an agent, distributor or sole distributor provided free of charge. The application form of registration to be an agent, distributor or sole distributor shall be enclosed by:

a. Letter of Appointment (2 original & 2 Certified True Copies) from the principal manufacturer or principal supplier (in this case, Malaysian company) which is ratified by Notary Public and Ministry of Foreign Affairs Malaysia.
b. Distributorship agreement (2 original & 2 Certified True Copies ) between the principal manufacturer or principal supplier (in this case, Malaysian company) and an agent, distributor or sole distributor (in this case, Indonesian company) which is ratified by Notary Public, Ministry of Foreign Affairs Malaysia.
c. Copy of Memorandum and Article of Association (MNA) (2 full sets) of principal manufacturer or principal supplier (in this case, Malaysia company) which is ratified by Company Commission of Malaysia (CCM).
d. Letter of acceptance to be an agent, distributor or sole distributor in Indonesia.
e. Copy of Trading Operation License (Surat Izin Usaha Perdagangan/SIUP) of Indonesian company.
f. Covering Letter attention to:
Commercial Attache
Embassy of the Republic of Indonesia
233 Jalan Tun Razak, 50400 Kuala Lumpur

2. The Certificate of Registration can only be granted to one agent, distributor or sole distributor appointed for the same type of goods from certain brand within a certain marketing region. If there is more than one agent, distributor or sole distributor appointed by the manufacturer or supplier, the Certificate of Registration shall be granted to the first applicant.

The Letter of Appointment as referred to in ad. 1a to the above shall at least contains:

a. Name and address of the Principal Manufacturer or Principal Supplier
b. Name and address of the agent, Distributor or Sole Distributor
c. Type or kinds and brand of goods
d. Marketing region
e. Period of appointment
f. Full name and title of the signatory of the appointment

The Distributorship Agreement shall at least contains:

a. Name and address of the Principal Manufacturer or Principal Supplier
b. Name and address of the agent, Distributor or Sole Distributor
c. Type or kinds and brand of goods
d. Marketing region
e. Rights and obligations of respective parties
f. Terms of agreement termination and settlement of dispute
g. Period of agreement
h. Full name and title the signatory of the Distributorship Agreement of respective parties

3. If the appointment of an agent, Distributor or Sole Distributor in Indonesia made by Principal Supplier (not Principal Manufacturer), it is necessary to have an Approval Letter or Letter of Authorization from the Principal Manufacturer stating that the Principal Supplier may appoint any agent, distributor or sole distributor for the said products in Indonesia.

The letter of appointment and/or Distributorship Agreement shall be signed by the competent person in the company for that purpose.

The letter of appointment of an agent, Distributor or Sole Distributor by Principal Manufacturer or Principal Supplier shall minimally be valid for 2 years and the Certificate of Agency, Distributorship or Sole Distributorship shall be valid for 3 years.

The valid period of the Certificate of Registration shall be adjusted to the period of appointment of an agent, Distributor or Sole Distributor, minimally for 2 years and the extension thereof shall be based on the agency, distributorship or sole distributorship agreement.

The termination between a Manufacturer or Supplier and an Agent, Distributor or Sole Distributor prior to the expiry of the Certificate of Registration can only be made upon the agreement of both parties in writing by due observance to the clean breaks.

The Agent, Distributor or Sole Distributor registration shall be conducted by the Director of Company Registration, Directorate General for Domestic Trade, Ministry of Trade of the Republic of Indonesia.

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