What is the main source of law authorising this entity form?

Law No. 40 Year 2007 regarding Limited Liability Company (Perseroan Terbatas) which has been amended by Law No. 11 Year 2020 regarding Job Creation (“Company Law”).

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

A PT has a separate legal personality from its founders/shareholders. It obtains status as a legal entity upon being registered to the Minister of Law and Human Rights ( “MOLHR”) and obtaining proof of registration.

(Maximum) period of existence

There is no maximum period of existence.

Governing document(s)

A PT is governed by its Article of Association, which can be found in its Deed of Establishment and subsequent notarial Deed of Amendment.

Liability of incorporators / shareholders

Founders/shareholders are not personally liable for contracts made on behalf of the PT and are not liable for the PT’s losses exceeding the value of the shares they have subscribed to, unless:

• The PT has not met the requirements to be a legal entity;
• The founders/shareholders, either directly or indirectly, have misused the PT for their personal interest in bad faith;
• The founders/shareholders are involved in unlawful acts committed by the PT; or
• The founders/shareholders, directly or indirectly, have unlawfully used the PT’s assets, causing the PT’s assets to become insufficient to meet its liabilities.

(Governing) bodies

A PT is governed by the General Meeting of Shareholders (“GMS”), Board of Directors (“BOD”), and Board of Commissioners (“BOC”).

A PT must (subject to the comment below) be established by 2 (two) or more persons by way of a notarial deed drawn up in Bahasa Indonesia. Each founder of the PT must subscribe to the shares at the time the PT is established. The PT must have objectives and purposes and business activities that are not in contravention with the laws and regulations, public order, and/or decency.

Other particularities

The provision requiring a PT be established by 2 (two) or more persons does not apply to:

• Persero (State-Owned Enterprises), where all shares are owned by the state;
• Badan Usaha Milik Daerah (Regional Owned Enterprises);
• Badan Usaha Milik Desa (Village-Owned Enterprises);
• A PT which manages stock exchanges, clearing and underwriting institutions, depository and settlement institutions, and other institutions in accordance with the Indonesia laws on capital market; or
• A PT which meets the criteria for Usaha Mikro dan Kecil (Micro and Small Enterprises) (“UMK”) as stipulated in the Indonesian laws and regulations on UMK.

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

A PT can only merge and consolidate with other PT's. A PT can acquire assets from, or equity of, a foreign legal entity.

Can this type of entity be publicly listed or held?

Yes, a PT can be listed or publicly held by submitting a registration statement to the Financial Service Authority - Otoritas Jasa Keuangan (OJK) and listing application to the Indonesia Stock Exchange – Bursa Efek Indonesia (BEI).

Can this type of entity be used for a non-profit or charitable organization?

No, a Yayasan (Foundation) is the go-to entity for non-profit or charitable organizations.

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

• Deed of Establishment, namely the incorporation notarial deed drawn up in Bahasa Indonesia
• Documents for the registration of shareholders:

If the shareholder is a local PT:

• All its Article of Association, the amendments, along with the approval from the MOLHR;
• Notarial deed reflecting current capital structure, shareholding composition, and incumbent members of BOD and BOC;
• Nomor Pokok Wajib Pajak (NPWP) - Taxpayer Number;
• Nomor Induk Berusaha (NIB) – Single Business Number.

If the shareholder is a foreign company:

• Article of Association or Business Profile;
• Copy of identity of its BOD and BOC.

If the shareholder is an individual:

• (i) full name, (ii) identification number, (iii) place and date of birth, (iv) nationality, (v) address as set out in the personal identity document / in origin country (for foreigners only), and (vi) taxpayer identification number.

Documents (copy of identity, i.e. Kartu Tanda Penduduk – Identity Card, or passport) for the registration of the PT’s BOD and BOC.

Involvement of notary, company register, governmental authorities

A notary is to draw up the Deed of Establishment. Any amendments to the Article of Association and the Deed of Establishment must be done by notarial deed.

In addition to the documents stated above, a PT must submit information about its beneficial owners to the MOLHR, through the notary/legal counsel/its authorized third party. The information about beneficial owners must at a minimum cover the following: (i) full name, (ii) personal identification number, (iii) place and date of birth, (iv) nationality, (v) address as set out in the personal identity document / in origin country (for foreigners only), (vii) taxpayer identification number, and (viii) relationship between the PT and the beneficial owner.

Timing (estimate)

The incorporation is not subject to any waiting periods, governmental filings, etc. The PT is incorporated once the Deed of Establishment is drawn. However, to obtain its status as a legal entity, the PT must be legalised by the MOLHR and obtain proof of such legalisation.

Main costs, including registration and similar fees (excluding legal fees)

The main costs are the notary fees. In respect of registration of a PT, founders will have to pay the following non-tax state revenues to the MOLHR:

1. Approval on using company’s name: IDR100,000/application;
2. Legalization of PT establishment:
1. If the authorized capital is not more than IDR25,000,000, the fee is IDR200,000/application;
2. If the authorized capital is between IDR25,000,000 and IDR1,000,000,000, the fee is IDR500,000/application;
3. If the authorized capital is more than IDR1,000,000,000, the fee is IDR1,000,000/application.

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

The description of the objectives and purposes, as well as business activities, must be written in the Article of Association within the Deed of Establishment.

Minimum number of incorporators / shareholders and residency requirements

A PT has to be established by at least 2 (two) persons or entities as shareholders, unless it is a form of PT which falls into the Company Law exceptions (outlined above).

There is no residency requirement for incorporators. However, certain business sectors are limited or prohibited for foreigners based on applicable laws and regulations.

Minimum number of directors (or other applicable officers) and residency requirements

A PT must have at least one Director and one Commissioner, except for specific business sectors which require more, for example, the financial industry.

Generally, there is no residency requirement for Commissioners (unless required otherwise in sectoral regulations) but Directors must be resident in Indonesia or hold a temporary working permit (foreigners). For the avoidance of doubt, commissioners must also hold a temporary working permit (foreigners). The obligation to obtain a temporary working permit for foreign commissioners and directors does not apply if such commissioners and directors also own shares in the relevant PT with the minimum value of IDR 1,000,000,000 or the equivalent USD amount as stated in the Articles of Association.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

A PT must have authorized capital. Law No. 11 Year 2020 regarding Job Creation (commonly known as the Omnibus Law) revoked the requirement of minimum authorized capital of IDR 50,000,000 (US$ 3,449 in 2021) and minimum paid-up capital of IDR 12,500,000 (US$ 826.25 in 2021).

However, in practice, the MOLHR system up to the date of this publication still requires a minimum authorized and paid-up capital amount in the amounts set out above.

A foreign-owned PT, must have a minimum total investment value of at least IDR 10,000,000,000 (US$689,655) (excluding land and buildings) for each line of business and a minimum paid-up/issued share capital of IDR 2,500,000,000 (US$ 172,413).

Certain business sectors may have higher minimum capital requirements in accordance with the prevailing laws and regulations.

Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

No. Execution of the notarial Deed of Establishment may be carried out by proxy if there is a power of attorney in place.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

A PT must obtain a Nomor Pokok Wajib Pajak (NPWP) (Taxpayer Number) once it is established.

What is the title of the applicable company registry?

Company Registry of the MOLHR. The registry is available online at https://ahu.go.id/pencarian/profil-pt however currently it is only available in Bahasa Indonesia.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.:

As the system is now online, the notary will input the information into the system. The following information must be in the Company Registry and will be publicly available:

• Name and domicile;
• Objectives, purposes, and business activity;
• Period of establishment;
• Total amount of capital;
• Full address of the PT;
• Number and date of Deed of Establishment and Ministerial Decree on the legalization of PT’s legal entity;
• Number and date of the deed of amendment of the Article of Association and date of acceptance on the announcement by the MOLHR;
• Number and date of amendment of the Article of Association and approval from the MOLHR;
• Name and domicile of the notary that prepared the Deed of Establishment and the deed of amendment which amends the Article of Association;
• Full name and address of shareholders, BOD and BOC;
• Number and date of the deed of dissolution or number and date of the court order on the dissolution of the PT, which must be provided to the MOLHR;
• The PT’s status: whether it is a public/private company.

 

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

BOD’s responsibility includes:

• Create and update the shareholders’ register;
• Create and update the special register is a list containing information regarding the shares held in the PT by members of the Board of Directors and the Board of Commissioners, together with their families, in the PT, as well as the date the acquisition of such shares;
• Prepare minutes for the GMS;
• Prepare minutes for BOD’s meetings;
• Prepare the PT’s annual report and financial statements;
• Maintain all the PT’s lists, minutes, and financial documents;
• Arrange the annual GMS.

BOC (Board of Commissioners)

The BOC supervises management policy, implementation of the management in general, with respect to both the PT and the business of the PT, and advises the BOD. Such supervision and advice shall be made in the interest of PT and within the objectives and purposes of the PT. Hence, the BOC’s main responsibility is to supervise the PT.The BOC is appointed, removed, and replaced in the same way as the Directors by the GMS.

How are the members of the executive body appointed, dismissed and replaced?

The incorporators/shareholders initially appoint the BOD in the Deed of Establishment.

The subsequent appointment, dismissal, or replacement of the BOD takes place at the GMS by the majority approval. Further procedure and process for appointment, dismissal, or replacement of BOD will be set out in the Article of Association. Any appointment, dismissal, or replacement of a Director must be notified to the MOLHR within 30 days from the decision of the GMS.

Is it possible to appoint corporate directors or must all directors be natural persons?

No. Only an individual can be appointed as a Directors of a PT. In addition, a commissioner of a PT also must be an individual.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

In principle, Indonesia does not recognize the concept of non-executive directors. Indonesia adopts a two-tier structure, BOD and BOC.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The GMS controls the PT by making decisions that substantially affect the PT, including:

• Deciding on actions such as merger, acquisition, consolidation, dissolution, separation;
• Deciding on any amendments to the Article of Association;
• Deciding on the appointment of Directors and Commissioners;
• Attending the Annual GMS.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

GMS decisions are made by consensus. If the GMS cannot reach a consensus, resolutions require the approval of more than 50%of the shares with valid voting rights in attendance or represented, or the greater percentage required by the Company Law and the Articles of Association.

The Company Law determines that for a decision/resolution with regards to:

• Merger, acquisition, consolidation, dissolution, separation of the PT, submission of an application for bankruptcy, an extension of the PT’s term of establishment = 75% of the total number of shareholders with valid voting rights must be present (the quorum) AND 75% of those present (or represented) in the GMS must vote in favour.
• However, if this is the second GMS called, the GMS quorum is 2/3 (two-thirds) of the total shares with valid voting rights (either present or represented) and 75% of the votes must be in favour.
• Amend the Article of Association: 2/3 (two-thirds) of the total shareholders with valid voting rights must be present (or represented) in the GMSand 2/3 of those present must vote in favour. However, if this is the second GMS called , the quorum for a valid GMS is 3/5 (three-fifths) of the total shares with valid voting rights (either present or represented) and 2/3 (two-thirds) of the votes must be in favour.
• Other matters: more than 50% of the entire shares with voting rights that are present (or represented) must be present and 50% of votes must be in favour. However, if this is the second GMS called, the quorum is 1/3 (one third) of the total shares with valid voting rights (either present or represented) and at least 50% of the votes must be in favour.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

No, there is no special governance regime in the Company Law but there may be special governance regulations for specific business sectors (e.g., bank, insurance, public company).

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

The entity must prepare financial statements consisting of at least the previous fiscal year balance compared with current balance, profit and loss statement of the current fiscal year, cash flow report and equity modification report and notes to the financial statements, which must be included in the annual report. The financial statement must be prepared in accordance with financial accounting standards. The directors must submit the annual report to the GMS after the BOC has reviewed it. The balance statement and loss and profit statement must be audited and submitted to the MOLHR.

Is the entity permitted to determine its own financial year?

Yes.

Is the entity subject to any statutory (external) auditor obligations?

Yes, the BOD have the PT’s financial statement audited by a public accountant if:

• The PT’s business activity involves collecting and/or managing public funds;
• The PT issues bonds to public;
• The PT is a public company;
• The PT is a state-owned company;
• The PT has assets and/or total business distribution over IDR 50,000,000,000.00; or
• It is required by law and regulation.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

A PT which conducts ‘sharia’ business must appoint a Sharia Supervisory Board.

A public/listed PT requires at least two (2) members on its BOC. In the event that there are more than two (2) commissioners, 30% of those commissioners must be independent commissioners. Thus, in a PT with two (2) members on its BOC, one of them must be an independent commissioner; and

A public PT must also have (i) Audit Committee: (ii) Internal Audit Unit; and (iii) Corporate Secretary.

 

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

Shares.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

Different classes of shares are possible, and the common share shall be determined in the Article of Association. Classes of shares include:

• Shares with voting right or without voting right.
• Shares with special right to nominate members of the BOD and/or the BOC.
• Shares, which after a certain period will be withdrawn or replaced with other class of shares.
• Shares that carry dividend rights ahead of other class of shares against cumulative and non-cumulative dividend sharing.
• Preferential shares that carry the right to receive the PT’s remaining assets post-liquidation ahead other class of shares.

What documentation is required for the transfer of ownership interests?

An agreement for the sale and purchase of shares and deed of assignment of shares. The deed can either be a private deed or a notarial one, depending on the type of transfer. If the transfer of shares constitutes an acquisition (change of control) then the deed of assignment of shares must be made in notarial form.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

BOD registers the transfer of ownership in the list of shareholders and/or special list (similar to the list of shareholders, but it only records ownership of shares by BOD, BOC and their respective family members).

If the transfer constitutes an acquisition (change of control), the deed of assignment of shares must be made in notarial form.

Are there any applicable stamp duties imposed when transferring ownership interests?

Yes, stamp duty is required for all contracts executed in Indonesia. The cost is the nominal sum of IDR10,000 (US$0.69).

How are shares issued? (including information on payment obligations, registration requirements)

Subject to the Article of Association, shares are issued on the decision of the GMS, made as a notarial deed. The notary must notify the share issuance to the MOLHR.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

Company Law allows non-cash payment on shares (inbreng) provided the non-cash payment has an economic value. The value is determined by the reasonable market value or by an independent appraiser.

The in-kind contribution in the form of fixed asset(s) must then be announced in 1 or more daily newspaper within 14 days after the Deed of Establishment is signed or after the GMS approved such in-kind contribution.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

The two methods of capital reduction are through share repurchase or decreasing the value of each share. The GMS must determine any capital reduction. If the capital reduction adversely affects a certain class of shares, the GMS must obtain the consent of all the shareholders of the adversely affected class of shares. The BOD must advertise the decision to the PT’s creditors by newspaper within 7 days of the decision. The creditors have 60 days to object to the decision by writing to the PT with a copy sent to the MOLHR. The PT must answer the objection in writing within 30 days of receiving it.

Any capital reduction of a PT is a modification of the PT’s Article of Association, so approval is needed from the MOLHR. Approval will be granted if (i) there is no written objection from a creditor within the 30-days period, (ii) or the objection is resolved, or (iii) the court refuses the creditor’s claim in a decision which has legally entered into force.

Repurchase of shares does not cause a capital reduction unless the shares are canceled. Requirements for share repurchase are:

• the repurchase cannot cause the PT’s net worth to drop below the total subscribed capital and necessary reserves; and
• total nominal value of the repurchased shares (together with pledged shares or shares under fiduciary security controlled by the PT itself and/or another PT) must not equal more than 10% of the PT’s total subscribed capital unless the capital market laws and regulations provide otherwise.
• The PT has obtained the approval of the GMS, unless capital market laws and regulations do not require it. The GMS must meet the procedure and requirements set out in the Article of Association or Law no 40 of 2007.

The PT can hold repurchased shares for a maximum of 3 (three) years.

Any requirements with respect to distributions to shareholders?

The PT can only distribute dividends if the PT has made a profit for the financial year and the GMS approves the distribution.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes, but it must not contradict the Company Law and/or the Article of Association.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

The PT has a business address and has at least one director as well as one commissioner. The shareholders must each year hold their annual general meeting. In addition, annual accounts must be prepared and adopted each year and the applicable tax filings must be made.

There are no fees for filing the annual report with MOLHR nor any annual fees.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

The corporate tax rate is 25%. However, as part of the Government’s COVID-19 economic policy the Income Tax Rate for domestic corporate taxpayers and permanent establishment is 22% for the 2020 and 2021 Fiscal Year. This is a temporary reduction for the 2020 and 2021 Fiscal Year only.

Summary of any specific matters, e.g. recent or prospective major legal developments

Law No. 11 Year 2020 regarding Job Creation (commonly known as Omnibus Law)amended several existing laws, including company law and investment law, as well as business licensing aspects:

For company law, the main changes introduce a new licensing process for the UMK sector, the Online Single Submission (“OSS”), intended to make it easier to submit a New Business permit, and allow the establishment of a one-person PT, being a PT with only one shareholder.
• For investment law, the Law abolishes the Negative Investment List, which prevented foreign investment in certain industries, and introduces a priority list, which offers incentives or tax breaks on investments in certain industries. The aim is to attract greater foreign & domestic investment; and
• For business licensing, the Law introduces a risk-based approach to issuing business licences, categorising new businesses as low, medium, or high risk, based on the hazards that the new business could potentially create. Medium and high-risk PTs will require additional licenses, such as a certification to operate, in addition to the Nomor Induk Berusaha (Single Business Number) issued by OSS system.