ESTABLISHMENT OF AN INDONESIAN LIMITED LIABILITY COMPANY FOR FOREIGN INVESTMENT

Foreign institutions or foreign individuals are allowed to carry out business in Indonesia (called as “PMA”) by establishing a Limited Liability Company (“LLC”). According to Indonesian Company Law, an LLC must be formed by 2 (two) or more shareholders. LLC for PMA can be wholly owned by foreign parties’ shareholders if the Standard Industrial Classification (“SIC”) (in Indonesia referred to as KBLI) is open 100% for foreign investment. Otherwise, PMA must be formed together with domestic partners.

The establishment of a LLC must be made in a notarial deed and each founding shareholders of the LLC must subscribe to a certain portion of the shares at the time the LLC is established. The LLC must meet the minimum capital requirement and for PMA is IDR 10,000,000,000 (ten billion Rupiah) per SIC number and must be fully paid in the LLC’s bank account in Indonesia. No later than 60 (sixty) days from the date that the deed of establishment was signed, the relevant public notary must have registered the establishment deed of LLC to the Ministry of Law and Human Rights and obtained legal entity status.

After legalization to the LLC deed of establishment is completed, the LLC must apply for business licenses via Online Single Submission system (“OSS”) maintained by the Ministry of Investment/Chairman Coordination Board of Investment “BKPM”). In Indonesia, business licensing falls into 4 (four) categories based on its SIC in accordance with Risk-Based Approach:

Category	Required License
Low Risk	Business Identification Number ( “NIB”).
Medium Low Risk	NIB + Standard Certificate (the holder shall be only required to provide a statement to BKPM).
Medium High Risk	NIB + Standard Certificate (the relevant governmental institution will conduct verification on the site).
High Risk	NIB + Relevant Business License issued by the relevant Ministry through OSS.
Further, LLC must also obtain basic requirements for business licensing which are: (a) conformity of spatial utilization activities (“KKPR”); (b) environmental approval; and (c) building approval (if applicable).

This newsletter is for informational purposes only and solely intended to provide general information and should not be treated as legal advice, nor shall it be relied upon by any circumstance or create any relationship. All summaries of the laws, regulation and practice in the contents are subject to change. Specific legal advice should be sought by interested parties to address their particular circumstances.

If you have any question and/or wish to discuss further about the above, please reach out to Cylvie at cylvie@sapartnerslaw.com and/or Dimas dimas@sapartnerslaw.com.