Indonesia has been gaining popularity as a promising destination for foreign investors looking to establish or expand their businesses in Southeast Asia. As one of the largest economies in the region, Indonesia offers a sizable market, abundant natural resources, and a growing middle class. However, many foreign entrepreneurs ask the same question before diving into the Indonesian market: Can a foreigner be a company director or shareholder in Indonesia?
This article provides a comprehensive explanation of the legal framework, limitations, and opportunities for foreigners who wish to become company directors or shareholders in Indonesia. We will also outline the types of companies available, the relevant regulations, and how foreign involvement can be structured legally.
Legal Framework for Foreign Participation
Company Structures in Indonesia
In Indonesia, the most common types of legal entities are:
- PT (Perseroan Terbatas) – a local limited liability company
- PT PMA (Penanaman Modal Asing) – a foreign investment company
While a regular PT is designated for local ownership, a PT PMA is designed to accommodate foreign ownership. Any company with even 1% foreign ownership is considered a PT PMA.
Foreign Shareholding Rights
Under Indonesian law, foreigners can own shares in a PT PMA. However, the amount of ownership permitted depends on the business sector, which is governed by the Positive Investment List issued by the Indonesian government. The list specifies:
- Sectors that are fully open to foreign ownership
- Sectors with a maximum percentage of foreign ownership (e.g., 67%, 70%, etc.)
- Sectors that are closed to foreign investment entirely
Foreigners need to review this list carefully or consult with local advisors to understand how much of a company they can own in their desired industry.
Can a Foreigner Be a Company Director in Indonesia?
Yes, foreigners can serve as directors in a company in Indonesia, but with certain conditions.
Key Roles in a Company
Every Indonesian company must have at least one director and one commissioner:
- Director: Responsible for the day-to-day management of the company
- Commissioner: Supervises the board of directors and advises on management
There is no restriction on foreigners being appointed as directors or commissioners in a PT PMA. However, in practice, immigration and employment regulations come into play.
Work Permits for Foreign Directors
To legally work in Indonesia, foreign directors must obtain:
- A valid work permit (IMTA)
- A limited stay visa (KITAS)
This applies even if the foreign director resides outside Indonesia but performs duties remotely. Authorities may still require compliance depending on the scope of involvement.
In contrast, passive directors or shareholders who do not work actively in Indonesia may not need a work permit but should still consult legal advisors to ensure full compliance.
Shareholding Requirements and Capital
When setting up a PT PMA, the government imposes minimum capital requirements:
- Minimum paid-up capital: IDR 10 billion (approximately USD 650,000), although this can vary by industry, contact us for more info on this.
- Foreign shareholders must inject capital into the business and may need to show proof of the transfer
In practice, the capital requirement can be fulfilled gradually, but it must be clearly stated in the company’s Articles of Association and reported to BKPM (Indonesia Investment Coordinating Board).
Local Partner Requirement: Is It Necessary?
In certain industries, foreign investors are required to partner with local Indonesian shareholders. This is due to sector-specific foreign ownership caps as stipulated in the Positive Investment List.
Where 100% ownership is not allowed, the company must allocate a certain percentage of shares to a local party. However, in sectors that are fully open, a foreigner can own 100% of the company through a PT PMA.
Some foreign investors choose to work with nominee shareholders to bypass restrictions, but this practice is legally risky and not recommended as it can lead to disputes or regulatory issues.
Common Challenges Faced by Foreign Directors or Shareholders
Foreign nationals may face the following challenges:
- Complex bureaucracy: Company registration and license acquisition can be time-consuming without local support.
- Regulatory updates: Indonesia’s investment and immigration policies are subject to change, which can impact operations.
- Cultural and language barriers: Business practices and communication styles can differ significantly.
Engaging with a professional corporate service provider can help minimize these risks and ensure smooth operations.
Recommendations for Foreign Investors
If you are a foreign investor considering becoming a director or shareholder in Indonesia, here are some practical tips:
- Always check the Positive Investment List for your sector
- Choose the correct business structure (e.g., PT PMA)
- Understand the minimum capital and ownership requirements
- Secure proper work permits and visas if acting as a director
- Partner with trusted legal and corporate advisors to ensure compliance
Conclusion
Yes, a foreigner can be a company director or shareholder in Indonesia, particularly through a PT PMA structure. While the country is open to foreign investment, there are specific regulations and sector-based limitations that need to be understood. With proper guidance, foreigners can successfully set up and manage businesses in Indonesia.
The process may be more complex than in other jurisdictions, but Indonesia’s market potential makes it a worthwhile venture for global entrepreneurs.
At CPT Corporate, we specialize in assisting foreign investors to navigate the legal and administrative landscape of doing business in Indonesia. Our Directorship Services provide foreigners with a legal, trusted, and professional local representative to fulfill mandatory directorship roles when needed. Whether you require assistance with PT PMA setup, nominee directorship, or ongoing compliance, our team is ready to help. Contact us today to simplify your investment journey in Indonesia.
