Foreign Owned Company:

Jatmiko Wirawan
Sep 2, 2018 · 3 min read

Ownership Limitations, Paid Up Capital, and Minimum Investment in Indonesia

Foreign owned company (“PMA”) is a legal entity which is a capital partnership based on an agreement and conducts business activities with authorized capital which is entirely divided into shares which are partly or wholly owned by foreign entities. Does not matter the shares are 100%, 50% or 1 % even, as long as any of the shares are owned by foreign entities, it is a PMA.

By establishing PT PMA, you will be able to start doing business in Indonesia as a legal entity with the same rights and responsibilities as any other local company or PT (Perseroan Terbatas).

Foreign Ownership Limitations

In Indonesia, there are limitations of foreign ownership. You need to access the Negative Investment List (Daftar Negatif Investasi) issued by the Indonesia Investment Coordinating Board (BKPM) to find out which business sectors are 100% open, partially open, or totally closed to foreign investment.

As an instance, Upstream Oil and Gas Production Installation at Land business sector is totally closed to foreigner and Distributorship is partially open (maximum 67%) to foreigners. In the event a sector is partially open, you will need to have an Indonesian partner in order to engage in business.

BKPM usually revise the Negative List Investment every three years, but it does not affect the companies that are already registered. Indonesia applies a grandfathering principle and you don’t have to sell your shares to a local shareholder, should your industry fall under stricter regulations in the future.

Paid Up Capital & Minimum Investment

We need to define the difference between paid up capital & minimum investment. Paid-up capital is the amount of money a company has received from shareholders in exchange for shares of stock. And Minimum investment is the amount or share quantity that an investor can purchase when investing in a specific security or fund.

As refer to Article 13 BKPM regulation 14/2005, minimum investment in Indonesia to start a PT PMA is in total IDR 10 billion excluding fixed capital such as Land and Buildings. This number is a plan to ensure local officials that the business is sustainable and will work as a sufficient proof to Indonesia when foreign investors are entering the market.

And minimum paid up capital amount when setting up a PT PMA company in Indonesia is IDR 2,5 billion. You can inject the paid up capital by signing a capital statement letter. This letter will state that the shareholders have sufficient funds to inject the capital after the incorporation. Or the other option is to transfer the money to your company’s bank account.

Ownership Limitations, Paid Up Capital, and Minimum Investment are a particular part of the procedure of establishing PT PMA in Indonesia. there are still other stages such as deed of establishment, shareholders and etcetera. Those and other aspects of commercial law will be explained in the next article.

Jatmiko Wirawan

Written by

Graduated from Faculty of Law, Universitas Gadjah Mada and currently working as a Corporate Legal Counsel in aCommerce Indonesia

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