How to Set Up a Limited Liability Company in Indonesia
It is not mandatory for foreign investors looking to enter the Indonesian market to establish a new Limited Liability Company. Would-be investors may just invest their capital in an existing local company operating in their field of business by following standard acquisition procedures. However, for those looking to establish a new Limited Liability Company or Penanaman Modal Asing (PT PMA), the following are the key steps they would need to follow:
1. The first step is to determine the commodity would-be investors would want to trade in. The commodities to be traded should be adjusted to the Regulation of the Head of the Central Bureau of Statistics of the Republic of Indonesia no. 95 of 2015 on the Classification of Indonesian Business Sector Standards (KBLI). It is necessary, to determine the KBLI of the existing selected Business Sector.Potential investors must ascertain whether their planned business activities are open or closed to overseas investment or if there is any cap on the amount of foreign-held shares. Investors are advised to consult the President Regulation Number 44 of Year 2016 about Indonesia’s Negative Investment List. The regulation also details those sectors where foreign investment may be allowed only in collaboration with a local partner or entity.
2. The second step is to prepare the required documents as per the following procedures:
- If the shareholder is a foreign government entity, a letter from the government agency of the country concerned or a letter issued by its Embassy / representative office in Indonesia must be provided;
- If the shareholder is a foreign individual, a record of the passport that clearly states the name, signature of the passport holder and the validity period of the passport must be provided;
- If the shareholder is a foreign business entity, a record of the articles of association and / or amendment in English or its translation, supplemented by supporting documents that include the last board of directors or the like and the President Director / Legal Representative’s passport must be provided;
- If the shareholder is an Indonesian national, a valid national ID card or any other identity document and a record of the Tax Registration Number (Nomor Pokok Wajib Pajak – NPWP) must be provided;
- If the shareholder is an Indonesian legal entity, a record of the Deed of Establishment and its amendment complete with approval and approval / notification from the Ministry of Law and Human Rights, company NPWP and Business Licence must be provided;
- A Rental Agreement of a business location, or the location of the operational office and the location of the factory to be established by the investor must be provided. In Indonesia, it is necessary to consider several specific business locations promoted by the government. These include Special Economic Zones (SEZs), Bonded Zones, Industrial Estates, and others. In addition, if an investor plans to establish a company in Jakarta, attention must be paid to the Provincial Regulation of the Special Capital Region of Jakarta No. 1 of 2014 concerning Detailed Spatial Planning and Zoning Regulations.
3. Determine the name of the company to be established. This is regulated in Government Regulation Number 43 of 2011 concerning Procedures for Submission and Use of Limited Liability Companies. A company name consisting of a minimum of three syllables must be specified. The name of the company must be a word that has meaning, not a series of letters or symbols. Furthermore, the chosen name must be notified to the Notary, who in turn would advise the name to the Ministry of Justice and Human Rights.
4. Investors should contact Notaries who practice in Indonesia. The Notary would make a Company Establishment Deed and report to the Ministry of Law and Human Rights of the Republic of Indonesia. The Ministry of Law and Human Rights of the Republic of Indonesia will then issue a Decision to Ratify the Corporate Legal Entity (SK Kemenkumham).
5. Based on the OSS (the new online system), once the Ratified Corporate Legal Entity (SK Kemenkuham) is received, the new company will automatically be registered as taxpayer. The company will receive the NPWP. The company may wait until the NPWP is delivered to its registered address or it may request the Tax Office to print the NPWP.
6. Once the company receives the Deed of Establishment and Ratified Corporate Legal Entity, Investors can directly apply for Nomor Induk Berusaha (NIB) through the OSS system. NIB is a Company Number and valid as Company Register, Importer Identification Number and Customs Access Rights.
7. Also, investors can obtain the Company Business License through the OSS. This license can be a Trading Business Permit for Trading Business activities (Distributors, Importers and Exporters), Industrial Business Permits for Business Activities in the Industrial field and others. Parallel to this license, investors can apply for certificate of domicile of the company.
8. Once a company obtains these documents, it can then pursue its business activity in Indonesia. However, the newly established company will be required to submit the Business Licence and other documents obtained through OSS to the Local Government in order to complete all requirements. These include location permit, environmental permit and other permits related to the company.