Business

Setting Up a Business

Legal Entities
There is a collection of recognised legal entities for setting up a business in Indonesia:

• Persekutuan Perdata (PP) is a partnership between two or more people in one agreement to make a profit.
• Firma (Fa) is a partnership between two or more people in one agreement to make a collective name to deal with third parties in making a profit.
• Persekutuan Komanditer (Commanditaire Vennootschap ? CV) is a partnership between two or more people in one agreement to make a profit. One partner is allowed to invest money into the partnership without having to manage the company.

However, the above business types apply only to local citizens.The types of legal entities that apply to foreign investors are:

Representative office A representative office can be established depending upon the line of business and the necessary licenses issued by the relevant government department. However these offices are not allowed to conduct direct sales and cannot issue commercial invoices. They are primarily set up for marketing, market research or as buying or selling agents.

Limited Liability Company or Perusahaan Terbatas (PT) Indonesia recognises three types of PT. The first is the local limited liability company as stipulated in the Limited Liability Company Law No 1 of 1995. The second is a foreign?owned capital investment company, most often referred to by its Indonesian abbreviation ? PMA, which is governed primarily by the Foreign Capital Investment Law No. 1 of 1967, amended by Law No. 11 of 1970. As a legal basis, the law has been fairly accommodative about various deregulatory policies and measures to date, and those that will be taken by the government in the foreseeable future. The third type of PT is local direct investment which is most often referred to by its Indonesian abbreviation – PMDN.
Establishing A Company
Articles of Incorporation
On obtaining approval from the BKPM, investors should incorporate a limited liability company or PT (Perseroan Terbatas). Articles of Association should be prepared, notarised and submitted to the Ministry of Justice and Human Rights for approval. The Law on Limited Liability Companies, 1995, requires a company to have a minimum of two shareholders and a board of commissioners comprising at least one member. Share capital should be for a minimum of IDR 20 million, of which 25% should be issued and paid up at the time of incorporation. The share capital details should be consistent with the BKPM investment licence. In practice, a company can commence operations once the Articles of Association are notarised and submitted to the Ministry of Justice and Human Rights. Pending approval of the Articles of Association, the company will be trading on the unlimited liability of the shareholders. A company should also obtain a certificate of corporate registration (TDP) and a tax registration number (NPWP).

The roles of directors and commissioners The Company Law of 1995 details the responsibilities of directors. The potential liabilities attaching to the office of a director should be understood. Directors manage the company, while commissioners have a non?executive role representing the shareholders. Both boards are appointed by the shareholders. As the directors are expected to manage the company, they are normally expected to be resident in Indonesia. Directors are employees of the company.

Other business forms
Other business forms that may be used by foreigners include representative offices variously licensed by different government departments. The BKPM licensed regional representative offices generally cannot trade within Indonesia. An exception is the Public Works Representative Office now licensed by the Department of Resettlement and Regional Infrastructure. Branch offices of foreign companies are generally not permitted. Some long established foreign banks operate as branches. Production sharing contractors in the upstream oil and natural gas sector also in effect operate as branches. Foreigners may not participate in unincorporated business partnerships. In almost all cases foreigners doing business in Indonesia must have a registered business presence. The only exception would be through a technical service agreement or management agreement made with an Indonesian entity.