This article is intended for informational purposes only and does not constitute any legal advice.
Perseroan Terbatas (“PT”) is a limited liability company that is established under Indonesian law. The capital of a limited liability company is divided into shares and the responsibility of shareholders is based on the number of shares that he or she has.
Under Indonesian Company Law No. 40 of 2007 on Company Law as last amended by Law 11 of 2020 on Job Creation (“Company Law“), a company must be established by at least two shareholders. Its establishment takes place after a deed of establishment is issued by the notary which is followed by the approval of the Minister of Law and Human Rights; only then a PT obtain status as a “legal entity”.
To form a PT Indonesian company, here are 5 key points.
Name of the Indonesian Company
Under Government Regulation N. 43 of 2011 on the Procedures of Submission and Using Company Name, the company’s name should meet the following requirements:
1. Written in Latin letters;
2. Has not been used legally by another company or is not essentially the same as the name of another company;
3. Does not conflict with public order and/or decency;
4. Not the same or essentially the same as the name of a state institution, government institution, or international institution, unless it has obtained a permit from the institution concerned;
5. Does not consist of numbers or series of numbers, letters or series of letters which is not forming word;
6. Does not mean as the company/corporate, legal entity, or civil partnership, incorporation, limited liability company, or any other similar words;
7. The company which is wholly owned by an Indonesian citizen or an Indonesian entity has to use the Indonesian language as the company name. So that, the English or foreign words can only be used if it is a foreign-owned company.
In addition to the above, as required by the system of the Ministry of Law and Human Rights, the company name should be consisted of at least 3 (three) words. For example PT Anugerah Abadi Dunia, PT Nine World Champion.
Organs of the Indonesian Company
|Board of Directors||Lead the company’s daily business. A company can appoint a single director, but a public company, it must appoint at least two directors.|
|Board of Commissioners||Supervises and advises the Board of Directors of the Company. A company can appoint a single commissioner, but for a public company it must appoint at least two commissioners, one of whom must be an independent commissioner|
|General Meeting of Shareholders (GMS)||It is the highest organ in the company. GMS has the authority to decide the matters that cannot be conducted by the Board of Directors or Board of Commissioners, among others, such as the approval of the transfer of shares, declaring a dividend, or the amendment of the articles of association.|
Shareholders and Capital Structure
A company must be established by at least 2 (two) shareholders (it can be an individual or a business entity). The Capital structure of a company is divided into three categories:
|Authorized capital||this capital is determined based upon mutual consent from the founders/shareholders|
|Issued capital||the Company Law mandates that a minimum of 25% of the authorized capital must be paid by the shareholders to the Company|
|Paid-up capital||must be paid in an amount equal to 100% of the issued capital. It is also important to note that a specific business sector may require a minimum amount of authorized capital and issued capital|
Capital Structure on Foreign Ownership
Shares in an Indonesian company may be held by an Indonesian citizen/company and a foreign citizen/company. An Indonesian company whose shares are partly or entirely owned by a foreign citizen/company is known as a foreign investment company (“PT PMA”). Based on Investment Coordination Board Regulation No. 4 of 2021 on Guidelines and Procedures for Risk-Based Licensing and Investment Facilities, the minimum issued a capital requirement for PT PMA is Rp10,000,000,000 (ten billion Rupiah).
Other than the minimum capital requirement as mentioned above, Indonesian law also governs the maximum foreign shareholding threshold is regulated under Presidential Regulation No. 10 of 2021 as last amended by President Regulation No. 49 of 2021 on the Investment Business Sectors (“Positive List Investment“). Under the Positive List, it divides the business activities that are (i) open for 100% foreign shareholding; (ii) partly owned by foreign shareholders, or; (iii) 100% closed for foreign shareholding.
Objectives and Purposes of the Company
A company must have objectives and purposes as well as business activities that are not contrary to provisions of laws and regulations, public order, and/or morality. The objectives and purposes of the company must be based on the Regulation of Central Bureau of Statistics (Badan Pusat Statistik) No. 2 of 2020 on the Indonesian Standard Industrial Classification (“KBLI”). The list of KBLI can be found in the link here https://oss.go.id/informasi/kbli-berbasis-risiko