The Prohibition to Conclude a Nominee Arrangement

       

A nominee agreement is defined as an arrangement where a person holds shares in a company for another person’s benefit. This arrangement is strictly prohibited by Law No. 25/2007. Consequently, such arrangements are declared null and void by law.

 

The Obligation to Perform Divestment

       

Share divestment is defined as the number of foreign shares that must be offered for sale to Indonesian participants. In accordance with previous foreign investment law, namely Law No. 1/1967 as further implemented by GR No. 20/1994, a PT PMA whose capital is wholly owned by foreign citizens and/or legal entities, are required to sell part of their shares to Indonesian citizens and/or Indonesian legal entities after 15 (fifteen) years from commercial operation. However, enactment of Law No. 25/2007 removed the general divestment obligation for a PT PMA. Presently, the divestment obligation is not applicable to all PT PMAs but only to:

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• PT PMA whose existing approvals or business licenses are explicitly stated the divestment obligation prior to the enactment of BKPM Reg. No. 4/2021; or

• PT PMA who carries out business activities in specific business sectors according to the prevailing laws and regulations.

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The fulfilment of divestment obligation by PT PMA which meets the criteria above is done through a deed that states the agreement of the involved parties concerning the implementation of divestment obligation.  In addition, divestment of shares may be conducted in 2 (two) ways, namely through (i) direct ownership of Indonesian citizens or Indonesian business entity whose share capital is wholly owned by Indonesian citizens through direct ownership in accordance with the agreement of the parties; and (ii) the domestic capital market.  Direct ownership as referred before for Indonesian citizens or Indonesian business entity is at least Rp10,000,000,- (ten million Rupiah) for each shareholder. 

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After the divestment obligation has been met, the relevant PT PMA is required to make data changes through the OSS system.  Moreover, the shares ownership of the Indonesian parties as a result of the implementation of divestment of shares, after obtaining approval from the MoLHR, can be resold to individual Indonesia individuals/foreign individuals/Indonesia business entities. 

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Furthermore, BKPM provides exemptions where divestment obligation does not need to be satisfied if the shareholders agree on the following conditions in the corporate deed of the company:

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• if the PT PMA is not 100% (one hundred percent) wholly foreign-owned company, the Indonesian shareholder(s) state that they do not wish to hold or demand for the ownership of the shares from the foreign shareholders in accordance with the provisions of the divestment of shares stated in the approval letter and/or business permit; or

• if the PT PMA is a 100% (one hundred percent) wholly foreign-owned company, the shareholder(s) state that they do not have any commitment/agreement with any Indonesian party to sell their shares.

       

Lastly, the consequences of not implementing the divestment obligation in the deed should be noted.  According to Article 14 (9) BKPM Reg. No. 4/2021, the shareholders/companies are responsible if there are Indonesian parties who demand the implementation of the divestment obligation in the future.

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Opening a Bank Account

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Owning a bank account is an important aspect when someone wants to engage in business activities. Especially for foreign companies or foreigners who want to conduct transactions in Indonesia, there are many obstacles and additional charges if they do not have a bank account that can accommodate their business needs. This will eventually hinder the future cooperation between foreign companies or foreigners and their partners in Indonesia. However, Indonesia has many banks that have several different requirements when opening a bank account. Thus, it is essential to know the possible required documents needed to smoothen the process of doing business in Indonesia.

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Bank Account for Indonesian and Non-Indonesian Citizens 

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Based on several internal banks’ regulation, to open a bank account for citizens, the following documents needs to be prepared and provided to facilitate the formation of the bank account:

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• Identity Card

1. For Indonesian citizens: KTP

2. For Non-Indonesian citizens: passport and ITAS

• NPWP

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Furthermore, in the opening bank account process, several things need to be considered: (i) the bank will asked  for the above required documents and fill out the bank application form; (ii) submit an initial deposit of at least Rp500.000,- (five hundred thousand Rupiah) or Rp250.000,- (two hundred fifty thousand Rupiah) (for outside of Jabodetabek is Greater Jakarta region); and (iii) after the bank account is active, the bank will charge an administration fee every month. Most practices for banks in Indonesia would take only 15 - 30 minutes for the bank account to be active, depending on the busy period of the bank branch office.

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Bank Account for Companies and Foreign Entities

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If a company wants to open a bank account, some banks in Indonesia has special accounts for companies with their own benefits. Further, regarding the documents required, it is confirmed that the requirements to establish bank account for Indonesian or foreign companies are the same. The required documents are as follows:

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• AoA & deed of incorporation that have received ratification or a cover note from a notary for deeds that have not received ratification; 

• Deed of amendment (if any, especially concerning the company structure);

• Company’s NPWP;

• Business license;

• Business registration number;

• Identity card (KTP for Indonesian citizens and passport for non-Indonesian citizens) and NPWP of all BoD; and

• Identity card (KTP for Indonesian citizens and passport for non-Indonesian citizens) and NPWP of shareholders.

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Furthermore, in the process of opening a bank account, several things need to be considered: (i) the bank will ask for the above required documents and fill out the bank application form; and (ii) it is required to submit an initial deposit of at least Rp1,000,000,- (one million Rupiah). There is no standard practice of how long it takes for the company’s account to be active. In relation to the company’s bank account, the verification process will depend on documents compliance. However, most banks have stated that it only took them one day to verified if all required documents were complete.

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​Representative Offices

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To expand their enterprises, foreign companies usually open representative offices in various countries. In Indonesia, there are 4 (four) types of representative office of foreign business entity which are regulated by the prevailing laws, namely:

 

• KPPA;

• KP3A;

• the representative office of BUJKA; and

• the representative office of foreign electric power support services.

 

In addition to having its own characteristics, each of such representative offices also has its own activities that can only be conducted after obtaining permits and complying with particular limitations. Consequently, the establishment of KPPA, KP3A, and the representative office of BUJKA in Indonesia, including permits which should be obtained by such representative offices before undertaking their activities, will be explained in turn below.

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KPPA

       

The Establishment of KPPA

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KPPA constitutes an office led by an Indonesian citizen or foreigner who is appointed by a foreign company or an alliance of foreign companies overseas as their representative in Indonesia. The person who leads the KPPA is called the head of KPPA and must satisfy certain obligation, namely:

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• he/she shall reside in Indonesia;

• he/she shall fully be responsible for the continuity of the KPPA;

• he/she shall not be justified to carry out activities beyond the activities of KPPA; and

• he/she shall not hold concurrent positions as the head of a company and/or more than 1 (one) KPPA.

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Subsequently, if the person appointed as the head of KPPA is a foreigner and/or such person employs foreign workers, the KPPA shall employ Indonesian workers. Additionally, it should be noted that the activities that KPPA can conduct are limited to the following matters: