Frequently Asked Questions: #foreignownershiprestrictions

The key responsibilities of a Company Secretary in Indonesia include:

• Ensuring compliance with statutory and regulatory requirements
• Maintaining company records and statutory registers
• Organizing and attending board meetings and shareholder meetings
• Preparing meeting minutes and resolutions
• Liaising with government authorities and regulatory bodies
• Assisting with corporate governance matters
• Managing corporate communications
• Coordinating the preparation and filing of annual reports

Key differences from other countries:

• Indonesian language requirement: Most official documents and communications must be in Bahasa Indonesia
• Specific local regulations: Familiarity with Indonesian corporate law and regulations is crucial
• Dual language proficiency: Often need to work in both Indonesian and English
• Cultural understanding: Important to navigate Indonesian business culture and etiquette
• Government liaison: More frequent interaction with various government agencies
• Shareholder structure considerations: May need to manage complexities related to foreign ownership restrictions
• Regulatory updates: Must stay current with rapidly evolving Indonesian business regulations
• Corporate domicile services: May be involved in maintaining the company's registered address
• Notary involvement: Coordinating with notaries for various corporate actions is more common

It's important to note that while the core duties are similar, the specific legal and regulatory environment in Indonesia requires specialized knowledge and skills from a Company Secretary.

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The minimum capital requirements for establishing a PMA (Penanaman Modal Asing) company in Indonesia are as follows:

• Total Investment Value: The minimum total investment value for a PMA company is IDR 10 billion (approximately USD 670,000), excluding land and buildings.

• Issued and Paid-up Capital: The minimum issued and paid-up capital is IDR 2.5 billion (approximately USD 167,000).

• Foreign Ownership: If the company is 100% foreign-owned, the entire IDR 2.5 billion must be paid up.

• Joint Venture: In case of a joint venture with local partners, the foreign share must be at least IDR 10 million (approximately USD 670) per shareholder.

• Proof of Capital: The paid-up capital must be deposited in an Indonesian bank account under the company's name and proven with a bank statement.

• Capital Increase: The remaining IDR 7.5 billion of the total investment value can be gradually injected over time, typically within 1-3 years, depending on the business plan submitted to BKPM (Investment Coordinating Board).

• Exceptions: Some business sectors may have higher minimum capital requirements. It's essential to check the specific regulations for your intended business activity.

• KBLI Codes: The capital requirements may vary depending on the KBLI (Indonesian Standard Industrial Classification) codes of your business activities.

Remember that these figures are subject to change, and it's always advisable to consult with a professional or check the latest regulations from BKPM for the most up-to-date information on capital requirements for PMA companies in Indonesia.

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Yes, there are restrictions on foreign ownership in certain business sectors in Indonesia. These restrictions are outlined in the Negative Investment List (DNI), which is a key regulation that foreign investors must consider when establishing a PMA company. Here are the main points to understand:

• The DNI categorizes business sectors into three main groups:

  • Open sectors: Fully open to foreign investment
  • Restricted sectors: Open to foreign investment with certain conditions or limitations
  • Closed sectors: Not open to foreign investment

• Restricted sectors may have limitations such as:

  • Maximum percentage of foreign ownership allowed
  • Requirements for partnerships with local companies
  • Specific location restrictions
  • Special licensing requirements

• Some examples of restrictions include:

  • Certain retail trade sectors: Limited to 67% foreign ownership
  • Construction services: Various ownership limits depending on the specific service
  • Tourism-related businesses: Some subsectors have ownership limits

• The DNI is periodically updated by the Indonesian government, so it's crucial to check the most recent version when planning your investment

• Even in open sectors, there may be additional regulations or requirements that affect foreign investors

• Some sectors considered strategic or vital to national interests may have more stringent restrictions or be completely closed to foreign investment

• It's highly recommended to consult with legal experts or investment advisors familiar with the current DNI and related regulations before proceeding with your investment plans

• The full DNI list and detailed explanations can be found on the BKPM (Indonesian Investment Coordinating Board) website or through authorized investment consultants

Always verify the current status of your intended business sector in the DNI before proceeding with PMA company establishment to ensure compliance with Indonesian foreign investment regulations.

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A PMA (Penanaman Modal Asing) company is a type of limited liability company in Indonesia that allows foreign ownership and investment. Key features include:

• It is an Indonesian legal entity that can have any amount of foreign share ownership, from partial to 100% foreign-owned.

• PMA companies are established based on a defined business activity and require approval from the Indonesian Investment Coordination Board (BKPM).

• They allow foreign investors to legally conduct business, generate income, and own assets in Indonesia.

• The percentage of foreign ownership allowed depends on the business sector, as regulated by the Negative Investment List (DNI).

• PMA companies must comply with Indonesian laws and regulations, including obtaining necessary licenses and permits to operate.

• There are minimum capital requirements, generally IDR 10 billion (around USD 700,000) in total investment.

• They can sponsor work permits (KITAS) for foreign employees.

• PMA companies provide foreign investors with legal protection under Indonesian law.

• They allow access to Indonesia's large consumer market of over 270 million people.

• PMA status is required for foreign entities to legally enter many regulated business sectors in Indonesia.

Overall, a PMA company is the primary vehicle for foreign direct investment in Indonesia, allowing foreign investors to establish a legal presence and conduct business activities in the country.

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The minimum capital requirements for a PMA (Penanaman Modal Asing) company in Indonesia are as follows:

• Total Investment Value: The minimum total investment value for a PMA company is IDR 10 billion (approximately USD 670,000), excluding land and buildings.

• Issued and Paid-up Capital: The minimum issued and paid-up capital is IDR 2.5 billion (approximately USD 167,000).

• Foreign Ownership: If the company is 100% foreign-owned, the entire IDR 2.5 billion must be paid up.

• Joint Ventures: For joint ventures with Indonesian partners, the foreign portion of the IDR 2.5 billion must be paid up in proportion to the foreign ownership percentage.

• Exceptions: Some business sectors may have higher minimum capital requirements. It's essential to check the specific regulations for your industry.

• Proof of Capital: The paid-up capital must be deposited in an Indonesian bank account under the company's name and verified by a public accountant.

• Gradual Investment: The total investment of IDR 10 billion can be realized gradually over time, typically within 1-3 years, depending on the business plan submitted to BKPM (Investment Coordinating Board).

• Capital Increases: Companies can start with the minimum required capital and increase it later as needed.

It's important to note that these requirements may be subject to change, and certain business sectors or special economic zones might have different capital requirements. Always consult with a qualified professional or the relevant Indonesian authorities for the most up-to-date information regarding your specific business case.

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Foreign investment restrictions in Indonesia are governed by the Negative Investment List (DNI), which outlines sectors that are closed or have limitations for foreign ownership. Key points to consider:

• The DNI is periodically updated by the Indonesian government to reflect changes in investment policies.

• Sectors are categorized as:

  • Fully closed to foreign investment
  • Open with certain restrictions (e.g., maximum foreign ownership percentage)
  • Open with specific requirements (e.g., partnerships with local SMEs)
  • Fully open to foreign investment

• Some commonly restricted sectors include:

  • Media and broadcasting
  • Certain retail and distribution activities
  • Some transportation services
  • Specific agricultural products

• Restrictions can vary based on:

  • Percentage of allowed foreign ownership
  • Minimum capital requirements
  • Location (e.g., special economic zones may have different rules)
  • Specific licensing or partnership requirements

• It's crucial to consult the most recent version of the DNI before planning any foreign investment in Indonesia.

• Some sectors may require a combination of foreign and local ownership, promoting partnerships with Indonesian entities.

• Certain strategic industries (e.g., defense, natural resources) often have more stringent restrictions or are entirely closed to foreign investment.

• The Indonesian Investment Coordinating Board (BKPM) can provide guidance on interpreting the DNI for specific business activities.

• Even in open sectors, there may be additional licensing or operational requirements for foreign-owned companies.

• The government occasionally introduces new policies or incentives to attract foreign investment in priority sectors, which may override some DNI restrictions.

Always consult with legal experts or investment advisors familiar with the latest Indonesian regulations to ensure compliance with current foreign investment restrictions.

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