top of page
Cover IBLG - 2026 (91).png
Contents of Company’s Articles of Association

Contents of Company’s Articles of Association

Source: Law No. 40/2007

The Name and Domicile of Limited Liability Company

​

Pursuant to Article 16 (1) Law No. 40/2007, companies shall not use names that:

​

  • have been legally used by another company or are essentially the same as the name of another company;

  • are contrary to public order and/or morality;

  • are the same or similar to the names of state institutions, government agencies, or international institutions, except with the permission of those concerned;

  • are not in accordance with the aims and objectives, as well as business activities, or only show the aims and objectives of the company without a personal name;

  • consist of numbers or series of numbers, letters or a series of letters that do not form a word; or

  • have the meaning of a company, legal entity, or civil partnership.

​

The name of the company must be preceded by the phrase “Perseroan Terbatas” or abbreviated as “PT”.  As for public companies, the name of the company shall end with “Tbk”.  If a company name does not include the abbreviation “Tbk”, the status of the company is a private (closed) company.  

​

A company shall have a domicile in a city or regency within the territory of the Republic of Indonesia as stipulated in the AoA. However, it is possible for the company to have a  domicile in a village or sub-district as long as the AoA includes the name of the relevant city or regency of the village or sub-district.  The said domicile is also the head office of the company. 


The Duration of a Limited Liability Company 

​

A company is incorporated for a limited or unlimited period as stipulated in the AoA.  If the company is incorporated for a limited period of time, the length of time shall be clearly stated. For instance, for a period of 10 (ten) years, 20 (twenty) years, or 35 (thirty-five) years. Likewise, if the company is incorporated for an indefinite period, this shall also be stated explicitly in the AoA.

 

However, in the event that the founders of a company intend to amend the duration of company’s establishment, an application for approval of amendments to the AoA regarding the extension of duration of the association shall be submitted to the MoLHR no later than 60 (sixty) days before the duration of the company lapses.  After submitting the application, the MoLHR will grant approval to the application for the extension no later than the last date of duration of the company.  

 

The Purposes and Objectives of Limited Liability Company

​

The company must state the purposes and objectives of the company as well as its business activities in the AoA.  Specifically, business activities are activities carried out by the company in order to achieve its purposes and objectives, which must be clearly detailed in the AoA and must not be in conflict with the AoA. 

​

The Amounts of Authorized, Issued, and Paid-Up Capitals of Limited Liability Company

​

There are 3 (three) types of capital which shall be elucidated in a company’s AoA – the authorized capital, issued capital, and paid-up capital.  Authorized capital is the total amount of shares that a company can issue to its shareholders. According to Article 32 (2) Law No. 40/2007, the amount of authorized capital is determined by the company’s founders. However, for companies that conduct certain business activities, the minimum amount of authorized capital shall be in compliance with the provisions of the relevant laws and regulations.   

​

Pursuant to Article 33 (1) Law No. 40/2007, at least 25% (twenty-five percent) of the authorized capital shall be subscribed and fully paid-up. The subscription and payment for capital shall be attested with legitimate proof of payment , and further issuance of shares which is made to increase the issued capital shall also be fully paid-up.  
 

Types of Shares and their Rights

​

Shares can give rights to its owner, which in this case, are the company’s shareholders. According to Law No. 40/2007, rights that can be granted to shareholders are as follows: 

 

  • the right to attend and cast a vote in the GMS;

  • the right to obtain dividend payments and the remaining company’s assets from a liquidation process; and

  • other rights as stipulated in Law No. 40/2007.

​

The provision mentioned above shall apply after the shares have been registered in the company’s shareholders list, on behalf of the relevant shareholders.  It should be noted that although shares can grant rights to its shareholder, there are certain types of shares stipulated in Law No. 40/2007 that only grant rights to obtain dividend payments and the remaining company’s assets from the liquidation process.  

​

A company’s AoA shall determine 1 (one) or more share classifications.  In the event that there are more than 1 (one) share classifications, the AoA shall determine one of which as the ordinary shares.  Law No. 40/2007 specifies the share classifications as follows: 
 

  • shares with or without voting rights;

  • shares with special rights to nominate members of the BoD and/or BoC;

  • shares which after a certain period, will be withdrawn or exchanged for other share classifications;

  • shares that give the shareholders priority to receive dividends before the shareholders with other share classifications on either cumulative or non-cumulative dividend distribution; or

  • shares that give the shareholders priority to receive the distribution of remaining company’s assets after the company’s liquidation before the shareholders with other shares classifications.

​

According to Article 54 (1) Law No. 40/2007, the AoA can also determine the fraction of a share’s nominal value. The holders of fractions of a share’s nominal value are not granted individual voting rights. This does not apply to the relevant shareholder(s), either individually or with other holder(s) of fractions of share’s nominal value whose shares classifications are the same, have a total nominal value amounting to 1 (one) nominal share of such classification. 

 

The Provisions on Place and Procedures to Hold the General Meeting of Shareholders

 

Convening the General Meeting of Shareholders

​

Pursuant to Law No. 40/2007, GMS are divided into annual GMS and extraordinary GMS.   The annual GMS shall be held at the latest 6 (six) months after the end of the fiscal year.  On the other hand, extraordinary GMS may be conducted whenever it deems necessary for the interest of the Company. 

​

The GMS shall be held at the company’s domicile or at the place where the company conducts its main business activities as provided in the AoA.  As for the publicly listed company, the GMS shall be held at the domicile of the stock exchange in which the shares of the company are registered.  The GMS can also be held through teleconference, video conference, or other electronic media facilities that allow all GMS participants to directly see and hear one another and participate in the meeting. 

 

Both annual GMS and extraordinary GMS can be conducted at the request of the following parties: 
 

  • 1 (one) or more shareholders who jointly represent 1/10 (one-tenth) or more of the total amount of shares with voting rights, unless the AoA provides for a lower amount; or

  • the BoC.

​

The request to conduct a GMS shall be submitted to the BoD by registered mail in conjunction with its reasons.  The BoD must convene the GMS no later than 15 (fifteen) days from the date of receiving the request to conduct the GMS.  If the BoD does not convene a GMS at such specified time: 

 

  • a request for holding a GMS by shareholder(s) shall be resubmitted to the BoC; or

  • the BoC shall summon the GMS.

​

Both annual and extraordinary GMS shall be preceded with summon of GMS by the BoD.  In certain circumstances, such as where the BoD does not conduct the GMS, the BoD cannot conduct the GMS, or there is conflict of interests between the BoD and the company, the summons for the GMS can be undertaken by the BoC or the shareholders by virtue of a stipulation by the chairman of the district court. 

​

The summons for the GMS shall be carried out within 14 (fourteen) days at the latest prior to the date on which the GMS is held, excluding the date of the summons and the date of the GMS.  For the public company’s GMS, there should be an announcement specifying that there will be a summons for GMS within 14 (fourteen) days at the latest before the GMS summons.  The information contained in the summons for the GMS shall include the date, time, venue, and agenda of the GMS, as well as notifications that the materials which will be discussed during the GMS are available at the company’s office from the date of summons until the date of the GMS.  In relation to the means of conveyance,  the summons for the GMS shall be conducted by registered mail and/or advertisements in  newspapers.  
​

The Quorum to Conduct the General Meeting of Shareholders

 

A GMS can be held if more than 1/2 (half) of the total shares with voting rights are present or represented in the GMS, except in circumstances where the laws and/or AoA specify larger quorum.  In the event that the quorum requirements have not been reached, the summons for a second GMS may be conducted. 

​

The summons for a second GMS shall mention that the first GMS has been held, but that the quorum requirement was not met.  The second GMS may adopt resolutions if more than 1/3 (one-third) of the total shares with voting rights are present or represented in the GMS, except in circumstances where the AoA determines larger quorum. 

​

If the quorum of the second GMS was also not satisfied, the company is entitled to propose an application to the chairman of the district court whose jurisdiction covers the domicile of the company, to determine the quorum of the third GMS.  The summons for third GMS shall mention that as the second GMS has been held but the quorum was not satisfied, and the third GMS shall be conducted with a quorum stipulated by the chairman of the district court. 
 

The Procedures for Utilization of Profit and Distribution of Dividends

 

Companies must set aside a certain amount of net profits every fiscal year as reserves if the company has a positive profit balance.  Such allocation for net profit shall be carried out until the reserves reach 20% (twenty percent) of the total issued and paid-up capital.  Reserves that have not reached 20% (twenty percent) of total issued and paid-up capital can only be used to cover losses which cannot be covered by other reserves. 

​

The use of net profit, including the determination of allocation amount for reserves, shall be decided by the GMS.  All net profits, after deductions for reserves, shall be distributed to shareholders as dividends (unless otherwise stipulated in the GMS) only if the company has a positive profit balance. 

​

A company may also distribute interim dividends before the end of the fiscal year of the company, provided that this is set out under the AoA of the company.  The distribution of interim dividends can be carried out if the amount of net assets of the company does not fall below the sum of the total of issued and paid-up capital and the statutory reserve.  Additionally, the distribution of interim dividends shall not disrupt or cause the company’s failure to fulfil obligations to creditors or disrupt the activities of the company.  

​

Furthermore, the distribution of interim dividends shall be determined based on the resolutions of the BoD after obtaining approval from the BoC with due regard to the provisions of Article 72 (2) and (3) Law No. 40/2007.  If it is discovered that the company suffered a loss at the end of the fiscal year, the shareholders must return the distributed interim dividends to the company. 

​

The Amendments to Articles of Association

 

The amendments to the AoA are determined by the GMS and shall be comprised or stated in a notarial deed written in the Indonesian language.  The following amendments to the AoA shall be approved by the MoL: 

​

  • the name of the company and/or the domicile of the company;

  • the purposes and objectives of the company as well as the company's business activities;

  • the duration of the company’s establishment;

  • the amount of authorized capital;

  • the reduction of issued and paid-up capital; and/or

  • the status of a non-publicly listed company to become a public company or vice versa.

 

Amendments not mentioned above only need to be notified to the MoL as well as mentioned or stated in a notarial deed written in Indonesian. 

​

In order to obtain the approval of amendments to the AoA, Article 21 (7) Law No. 40/2007 stipulates that the application for the approval on amendments to the AoA shall be submitted to the MoL no later than 30 (thirty) days as of the date of the notarial deed which comprises the AoA amendments. Such provision will also be applicable to the implementation of the notification of AoA amendments to the MoL. 

​

Amendments to the AoA that are required to be approved by the MoL shall be effective from the issuance date of the ministerial decree concerning the approval of amendments to the AoA.  On the other hand, the AoA amendments that  need to be notified solely to the MoL shall be effective from the issuance date of the acceptance letter on notification of amendments to the AoA by the MoL.  

​

The Organs of Limited Liability Company

​

A limited liability company has 3 (three) main organs – the GMS, the BoD, and the BoC. This section will briefly elaborate on their respective roles, obligations, and authorities as set out in Law No. 40/2007.

​

The General Meeting of Shareholders.


The GMS is a company organ that has authority not given to the BoD or the BoC, within limitations specified in Law No. 40/2007 and/or the AoA.  The GMS is given authority to make shareholders’ resolutions that bind the company and its organs to: 

                                                                                                     

  • stipulate amendments to the AoA;

  • increase or decrease the company’s capital;

  • approve the annual report and validate the financial and BOC report;

  • stipulate the usage of the company’s net profit for reserve and dividend allocation;

  • approve of mergers, consolidations, acquisitions or separations;

  • appoint and dismiss the BoD;

  • appoint and dismiss the BoC;

  • approve certain actions of the BoD (transferring company’s assets or providing company’s assets as collateral, up to more than 50% (fifty percent) of the company’s net assets in 1 (one) or more transaction(s), regardless of whether the transactions are related or not); and/or

  • stipulate the company’s liquidation or request to file for insolvency.

​​

The shareholders, whether individually or represented by a power of attorney, have the right to attend the GMS and exercise their voting rights in proportion to the number of shares they hold. However, during the voting process, members of the BoD, BoC, and employees of the company are prohibited from acting as proxies for the shareholders.

 

Additionally, the GMS’ resolutions are adopted based on an amicable consensus. In circumstances where an amicable consensus is not reached, the resolutions shall be valid if they are approved by more than 1/2 (half) of the casted vote, unless the laws and/or AoA require a higher number of approved votes.

 

Law 40/2007 regulates specific numbers of votes that shall be casted in the GMS to conduct certain legal actions:

Screenshot 2026-02-05 093812_edited.jpg

The Board of Directors

 

The BoD is a company organ that has full authority and responsibility over management of the company for the company’s interest and in accordance with the purposes and objectives of the company, both inside and outside of court in accordance with the provisions of AoA. The BoD of a company consists of 1 (one) or more members that are appointed by the GMS for a specified period and can be reappointed. Persons eligible to be nominated as directors are individuals who are capable of conducting legal actions and who, within 5 (five) years prior to their nominations, have not:

 

  • been declared bankrupt;

  • been the directors or commissioners who were declared guilty or incurred bankruptcy of a company; or

  • been penalized due to the conduct of criminal actions which harmed state finances and/or related to financial sectors.
     

Further, Article 100 (1) Law 40/2007 governs the obligations of a BoD, which comprise the following matters:

 

  • making the register of shareholders, special register, minutes of the GMS, and minutes of the BoD meetings;

  • making the company’s annual report and financial documents; and

  • maintaining the company’s registers, minutes, and financial documents amongst other company documents.

 

Every member of the BoD shall be fully and personally liable for the company’s losses resulting from their fault or negligence in fulfilling his or her duties, with exceptions:

 

  • the fault or negligence of the relevant director does not cause the loss;

  • the relevant director has conducted the management with good faith and prudently for the interests and in accordance with the purposes and objectives of the company;

  • the relevant director does not have any conflicts of interest either directly or indirectly in conducting the management which caused the loss; and

  • the relevant director has taken actions to prevent the occurrence or the continuance of loss.

 

The Board of Commissioners

​

The BoC is a company organ assigned to supervise the company in general and/or specifically in accordance with the AoA and to provide advice to the BoD. The BoC consists of 1 (one) or more members that shall act through BoC resolutions. The company’s AoA can also regulate 1 (one) or more independent commissioners and 1 (one) representative commissioner. Independent commissioners are nominated based on GMS resolutions from a party that is not affiliated to the main shareholders, the members of BoD and/or any other members of the BoC.

 

Persons eligible to be nominated as commissioners are individuals who are capable of conducting legal actions, and who, within 5 (five) years prior to their nominations, have not:

 

  • been declared bankrupt;

  • been the directors or commissioners who were declared guilty or incurred bankruptcy to a company; or

  • been penalized due to the conduct of criminal actions which harmed state finances and/or related to financial sectors.

 

The BoC is appointed by the GMS for certain periods and can be reappointed. In general, the BoC is responsible to supervise the company’s management. Every member of the BoC is personally responsible for loss endured by the company in the event that the relevant member of the BoC is found guilty or negligent in conducting his or her duties, with exceptions:

 

  • the relevant commissioners have conducted the supervision in good faith and prudently for the interests of the company and in accordance with the purposes and objectives of the company;

  • the relevant commissioners do not have personal interests, either directly and/or indirectly related to the management actions of the BoD which caused the loss; and

  • the relevant commissioners have provided advice to the BoD to prevent the occurrence or continuation of loss.

 

Further, Article 116 Law 40/2007 stipulates that members of the BoC are obliged to:

 

  • make minutes of the BoC meeting and to save its copies;

  • report to the company on shares that they and/or their families possess in the company and other companies; and

  • provide reports on supervisory tasks that have been conducted during the most recent financial year to the GMS.

 

The Authorization of a Limited Liability Company

​

In order to obtain the MoL’s decree on the authorization of a company’s legal entity status, the company’s founders shall jointly submit an application to the MoL through the information technology services for the administration of legal entities. Such application shall be submitted to the MoL no later than 60 (sixty) days after the execution of the deed of incorporation along with the following supporting documents:

​

  • electronic statement from the applicant regarding the completeness of the company’s establishment documents;

  • copy of the deed of incorporation of the company;

  • minutes of the deed of incorporation or minutes of the amended deed of company incorporation;

  • minutes of the deed of consolidation in the event that the incorporation of company was undertaken for consolidation matter;

  • proof of payment for company’s capital in the form of;

    1. copy of the deposit slip or a copy of the bank statement in the name of the company or a joint account in the name of the founders, or the original statement letter confirming that the company’s capital has been paid, signed by all members of the BoD together with all founders and all members of the BoC, if the capital contribution is in the form of cash;

    2. original appraisal certificate from an independent expert or proof of purchase of goods if the capital contribution is in a form other than cash, accompanied by proof of publication in a newspaper, if the contribution is in the form of immovable property;

    3. photocopy of the government regulation and/or MoF Decree for a state-owned company or a Regional Regulation in the event that the founder is a regional-owned enterprises or a provincial/regency/municipal regional government; or

    4. copy of the balance sheet of the merging company or the balance sheet of a non-legal entity company included as a capital contribution.

  • the statement letter of commitment from the founder to obtain decrees, approvals, or recommendations from the relevant technical agencies for companies engaged in specific business sectors, or a photocopy of such decrees, approvals, and recommendations from the relevant technical agencies for companies engaged in specific business sectors;

  • the statement letter of founder’s abilities to obtain NPWP and the receipt of report of annual tax notification letter; and

  • the copy of statement letter regarding company’s complete address from the building manager or authorized agency, or an original statement letter regarding the company’s complete address signed by all members of the BoD in conjunction with all founders and all members of the BoC; and

  • documents of the company’s beneficial owner, consisting of:

    1. a power of attorney from the BoD to the notary regarding the submission of beneficial owner information;

    2. a statement letter from the BoD declaring the name of the beneficial owner; and

    3. a consent letter as the beneficial owner of the company.
       

Afterwards, the applicant is obliged to pay a certain amount of money as the PNBP with the following conditions:

​

​

Screenshot 2026-02-05 095018.png

Table VII.1. Legalization Application and Its Rate

Source: MoLHR Reg. 49/2025 jo. Appendix GR 45/2024.

Financing a Company

 

Obtaining a mode of financing is critical throughout the life of a company, whether to start a business, to expand it, or to maintain it. Generally, there are 2 (two) types of financing, equity financing and debt financing.

 

Equity Financing

 

Equity financing is the process of raising capital through the sale of shares. Equity financing involves the sale of equity instruments such as preferred stock, convertible preferred stock, and equity units that include common shares and warrants.

 

Venture Capital

 

A VC company is a financing institution partaking in capital participation and/or the financing or a certain period of time in the context of business development for business partners or debtors. Every business actor that conducts their business in the form of a VC company shall obtain their business license from OJK. Aside from the conventional one, OJK also recognizes the Sharia VC that runs VC activities based on sharia principles. The VC and Sharia VC company could secure several types of funding from:

 

  • additional paid-up capital, through a public offering or non-public offering of shares;

  • loans;

  • issuance of debt securities, through a public offering or non-public offering of shares;

  • subordinated loans or funding;

  • waqf; and/or

  • grants.  

 

The abovementioned sources of funding could be given by the central government or regional government, BUMN or BUMD, financial services institutions, multilateral financial institutions, individuals, or other parties. However, it should be noted that VC activities are not intended to provide long-term funding. In a bigger picture, the idea of a VC is to invest in the investee’s balance sheet and infrastructure until it reaches the sufficient size and credibility to be sold to a corporation or so that institutional public-equity markets could step in and provide liquidity.

​

Initial Public Offering

​

As businesses grow and aim for sustainability, obtaining additional financing sources has become increasingly important. IPO opens the possibility of financing from public investors through the stock market. In IPO, the privately-owned company lists its shares on a stock exchange, making them available to be purchased by the general public. By going public, the company may receive a bundle of advantages where it could provide company access to long-term funding, increase company value, enhance the ability to maintain business sustainability, improves the image of the company, encouraging employee loyalty.

 

Further, the Government has made an undertaking to make going public become more appealing and favorable toward the business players. Such undertaking is demonstrated by providing a tax incentive to public listed companies by reducing the income tax rate by 3% (three percent) for listed companies and listed on the IDX that fulfill certain criteria. For company founders of public companies, the Government only imposes a final tax rate of 0.1% (zero point one percent) from gross amount of transaction value of the sale on the IDX, which is very competitive in comparison to the income tax rate on selling shares outside the stock exchange, which could reach to 35% (thirty five percent) for individuals.

 

In Indonesia, IPOs are now performed digitally through an E-IPO procedure. E-IPO is expected to increase public participation in public offerings by utilizing the development of information technology to improve efficiency, effectiveness, transparency, and accountability of public offerings. The distinctive feature between ordinary IPO and E-IPO is the incorporation of a digital system which handles the entire IPO process. There are several IPO processes and requirements to consider as demonstrated in the graph below:

​

Picture10.png

Graphic VII.2. IPO Process

Source: Bapepam Reg. IX.A.2, OJK Reg 51/2016, and OJK Reg. 41/2020

In order to become a public company, a company should submit their shares-listing application to the IDX accompanied by the required documents, including: (i) company profiles; (ii) legal opinion and due diligence reports from legal consultant; (iii) the audited financial statement from public accountant; (iv) the appraisal report (if applicable); (v) company’s AoA of Public Company which have been approved by MoL; (vi) prospectus; and (vii) financial projections.

 

The company should also submit the listing application to the KSEI. In this phase, the IDX could further require the company to present their company profile, IPO plan, and make a visit to the company. Along with the share-listing application process, the company should also submit the IPO registration statement to OJK. In accordance with Article 3 OJK Reg. 7/2017, the registration statement must be submitted along with the following supporting documents:

 

  • cover letter of the registration statement;

  • prospectus;

  • prospectus summary (short form); 

  • early prospectus (if any); and

  • any other documents part of the registration statement.

​

Furthermore, Article 2 paragraph (1) OJK Reg. 8/2017 stipulates that the prospectus and prospectus summary for the purpose of IPO must contain details of material information or facts regarding the IPO and information and/or explanation that may influence investors' decisions. In addition, the prospectus and prospectus summary are prohibited from containing incorrect explanation about material facts or not containing correct explanation about material facts that are necessary, thus the prospectus does not provide a misleading description.

 

During the review, OJK may request for changes or additional information from the applicant-company to ensure that all the material facts regarding share offering, financial condition, and business activities of the company disclosed to the public are on the prospectus. The company should also obtain OJK’s permission to publish their prospectus summary and conduct book-building or initial offering.

 

After the registration statement is made effective by the OJK, the company may disclose its summary prospectus in the newspaper, provide its prospectus to the public, and conduct an IPO. The company shall conduct the IPO no later than 2 (two) working days after the effectiveness of the registration statement, where the shortest IPO period is 3 (three) working days and the longest is 5 (five) working days. The newly listed company will then be available on the IDX board.

 

Debt Financing

 

When a company borrows money to be paid back at a future date with interest, it is known as debt financing. Debt financing itself could be in the form of a secured or an unsecured loan.

 

Loans

 

Loan is a form of debt incurred by an individual or other entity. The lender, usually a corporation, financial institution, or government, advances a sum of money to the borrower. In return, the borrower agrees to a certain set of terms including any finance charges, interest, repayment date, and other conditions. In loan arrangements, the lender is usually a corporation, financial institution, or government, which lends a sum of money to the borrower. 

 

A loan agreement is classified into 2 (two) types: (i) a loan agreement with a single lender or a bilateral loan; and (ii) a group of lenders or a syndicated loan.

 

  • Bilateral Loan

A bilateral loan is a form of loan business in which a lender provides loan for a borrower for working capital, capital expenditure or general corporate purpose. The major advantage of a bilateral loan is that lender offers a relatively independent, flexible and customized scheme for the borrower.

 

  • Syndicated Loan

In contrast to bilateral loan, syndicated loan involve 2 (two) or more lenders who jointly provide a loan to a borrower. Each syndication member has a separate claim on the borrower despite there being a single loan agreement contract. There are several parties involved in syndicated loan, such as:

 

  • Lenders

In a syndicated loan, 2 (two) or more lenders provide funds to a borrower or group of borrowers under the terms of a loan agreement.

 

  • Arranger

In syndicated loan, the borrower usually grants a mandate to an arranging bank for setting out the financial terms of the proposed loan and authorizing the bank to find other suitable lenders in the market and arrange the syndication. 

 

  • Facility/Security Agent

The facility agent is the representative of the syndicated lenders under the loan agreement and can be seen as the primary point of contact between the borrower and the lenders. It carries out an administrative role in relation to the facility. Furthermore, if a loan is to be secured, the agent will also usually act as a security agent. The security agent will hold the security on behalf of all lenders and should enforcement become necessary, will be responsible for negotiating with the borrower, taking any enforcement action on behalf of the lenders.

 

  • Borrower

The types of borrowers that might wish to borrow money include companies, limited liability partnerships, general partnerships, limited partnerships, individuals, unincorporated associations, and local authorities.  

​

The process of arranging a syndicated loan has two principal phases which are the pre-mandate phase and post-mandate phase. The pre-mandate phase is the phase in which the borrower discusses the proposed facility with potential arrangers and then appoints 1 (one) or more banks to act as an arranger. Meanwhile, the post-mandate phase is where the syndication of the loan takes place and loan agreements are negotiated.

 

In Indonesia, syndicated loans are subject to best practice in the banking and finance sector and regulated under OJK Reg. 32/2018, which stipulates that syndication is one of the control measures for banks in implementing prudential principles and risk management in providing funds. 

 

In this regard, syndication loans can be considered as an option for the company's financing source by considering that there are restrictions on the provision of funds provided by banks in Indonesia with the following conditions:

 

  • the overall portfolio of provision of funds to related parties with banks is set at a maximum of 10% (ten percent) of the bank capital. The related parties include, among others, (i) individuals or companies that are controllers of the bank; and (ii) legal entities in the event that the bank acts as a controller; and

  • provision of funds to (i) 1 (one) borrower other than a related parties as referred to in number (1) above; or (ii) 1 (one) group of borrowers other than related parties as referred to in number (1) above, shall be set at a maximum of 25% (twenty-five) percent of the core capital (tier 1) of the bank.

 

Bond Issuance

 

Bonds, which are known as debt securities, are financing instruments issued to a financier or lender for funds. Since bonds are essentially debts, the issuing entity has to pay the principal debt at a certain maturity date, while the interest of the debt can be spread in intervals or fully at the maturity date. Moreover, the amount of debt to be repaid by the issuing company is also predetermined when issuing bonds. From financiers’ perspective, considering that bonds will be repaid by the issuing entity with a predetermined repayment schedule and interest, investing in bonds is considerably safer and warrants a fixed income. Therefore, bonds are also referred to as fixed-income securities.

 

Under Indonesian capital market regulation, bonds can be issued either through a public offering in the primary market or directly to financiers without public offering. In a public offering setting, bonds are issued through an ordinary public offering mechanism. In contrast, the issuance of bonds without public offering is only allowed for certain types of bonds and only be issued directly to professional financiers.

 

Specifically, Article 3 OJK Reg. 30/2019 stipulates that the issuance of bonds without public offering includes the bonds that meet the following criteria:

 

  • have a maturity of more than 1 (one) year, the issuance value of which is at least Rp1,000,000,000,- (one billion Rupiah) or less than Rp1,000,000,000,- (one billion Rupiah) which shall be issued several times so that within a period of 1 (one) year it reaches a minimum value of Rp1,000,000,000,- (one billion Rupiah); or

  • have a maturity of no more than 1 (one) year and are not supervised by other authorities, the issuance value of which is at least Rp1,000,000,000,- (one billion Rupiah) or less than Rp1,000,000,000,- (one billion Rupiah) which is issued several times so that within a period of 1 (one) year it reaches a minimum value of Rp1,000,000,000,- (one billion Rupiah).
     

With regards to bonds issued without public offering, the entities which are able to issue such bonds are: (i) issuers or public companies; (ii) business or legal entities which are neither issuers nor public companies; (iii) supranational institutions; and (iv) collective investment funds which are allowed to issue bonds according to the prevailing regulations. Party that intends to issue bonds without public offering must submit documents for the issuance of bonds without public offering to OJK, which must at least contain:

 

  • a cover letter for the issuance of bonds without public offering in accordance with the format of cover letter for the submission of documents for the bonds without public offering as set out in OJK Reg. 30/2019; and

  • information memorandum, which must contain detailed information or material facts regarding the issuance of bonds without public offering and information and/or statement which may influence the decisions of investors.

​

Peer-to-Peer Lending

​

Another form of debt financing is peer-to-peer lending which, as under Indonesian financial services regulation is referred to as information technology-based co-funding services. For the purpose of this section, we will use the term “peer-to-peer lending” when referring to information technology-based co-funding services.

 

According to Article 1 (1) OJK Reg. 40/2024, peer-to-peer lending is defined as the provision of financial services to connect funders with fund recipients to carry out funding, either conventionally or based on sharia principles, directly through an electronic system using the internet. In a peer-to-peer lending arrangement, the relevant parties are:

 

  • the Organizer, which is an Indonesian legal entity in the form of limited liability company or cooperative that provides, manages, and operates the peer-to-peer lending system;

  • the Funders, which can be an individual, legal entity, business entity, whether Indonesian or foreign, and/or international organization; and

  • the Fund Recipient, which can be an Indonesian citizen, Indonesian legal entity, and/or Indonesian business entity, domiciled in Indonesia.

 

Furthermore, there will be a minimum of 2 (two) agreements signed in a peer-to-peer lending arrangement: (i) between the Organizers and the Funder; and (ii) between the Funder and the Fund Recipient, signed digitally with an electronic signature. These are the limits of the lending amount the Organizer has to set:

 

  • maximum limit for both consumptive and productive funding to each Fund Recipient is Rp2,000,000,000,- (two billion Rupiah); and

  • the Organizer may provide productive funding exceeding the above maximum limit up to Rp5,000,000,000,- (five billion Rupiah), provided that:

 

  1. the non-performing funding ratio does not exceed 5% (five percent) within the last 6 (six) months; and

  2. the Organizer is not subject to any business activity restriction or partial/total suspension imposed by the OJK.

​

​

Incorporation of Limited Liability Company in Indonesia

The Requirements for the Incorporation of Limited Liability Company

​

There are several types of business entities utilized to conduct business activities in Indonesia. For business purposes, an entity in the form of a limited liability company is preferable as its owners are not personally liable for the company’s losses.

​

The Incorporation of Limited Liability Company

 

According to Article 7 (1) Law No. 40/2007, a company shall be incorporated by 2 (two) or more persons by virtue of a notarial deed written in the Indonesian language.  The aforementioned “persons” comprises of individuals, either Indonesian or foreign citizens, as well as local or foreign legal entities.  Such founders are obliged to subscribe to the company’s shares, except in circumstances where the companies are incorporated by consolidation. 

​

However, after the enactment of Law No. 6/2023, the provision requiring a company to be incorporated by 2 (two) or more persons no longer applies to: 
 

  • companies whose shares are owned by the Government;

  • BUMD;

  • BUM Desa;

  • companies that manage stock exchange, clearing and securities institutions, depository and settlement institutions, or any other companies as stipulated under capital market laws; or

  • companies that satisfy the criteria of micro and small enterprises.
     

If a company has less than 2 (two) shareholders after the obtainment of its legal entity status, the relevant shareholder, no later than 6 (six) months since the obtainment shall transfer a portion of his or her shares to another party, or the company should issue new shares to other parties. If such timeframe has lapsed and there are still less than 2 (two) shareholders in the company:​

 

  • the relevant shareholder shall be personally liable for all of the engagements and losses endured by the company; and 

  • the relevant district Court may dissolve the company upon the request of interested parties.

​​

The Deed of Incorporation and the Incorporation Statement Letter

 

A company is incorporated by virtue of a notarial deed in the Indonesian language, which shall accommodate the company’s AoA and other information related to the incorporation of the company. Specifically, the information shall at least comprise the following matters:

 

  • full name, place and date of birth, occupation, address and nationality of the individual founder,  or name, address as well as the number and date of the MoL decree regarding the company’s legal entity of the founder;

  • full name, place and date of birth, occupation, address, and nationality of the first appointed members of the BoD and BoC; and

  • names of shareholders, details of the number of shares, and nominal value of the shares that have been issued and paid up.

​​

In terms of micro and small enterprises, GR No. 8/2021 stipulates that companies which satisfy the criteria of micro and small enterprises consist of (i) companies incorporated by 2 (two) persons or more; and (ii) individual companies incorporated by 1 (one) person.  Individual company (perseroan perorangan) shall be incorporated by Indonesian citizens (i) being at least 17 (seventeen) years old; and (ii) having the legal capacity , by filling out the statement of incorporation in Indonesian.  To obtain legal entity status for individual companies, the statement of incorporation of the individual company shall be registered electronically to the MoLHR by filling out a form which includes the following information: ​

 

  • name and domicile of individual company;

  • the duration of individual company;

  • the aims and objectives as well as the business activities of individual company;

  • the amount of authorized capital, issued capital, and paid-up capital;

  • nominal value and number of shares;

  • the address of the individual company; and

  • full name, place and date of birth, occupation, residence, resident registration number, and NPWP of the promoter, BoD, and shareholders of the individual company.

 

Mandatory Beneficial Owner Report

 

Under Article 2 (1) jo. Article 4 (1) MoL Reg. 15/2019, every corporation including the limited liability company is obliged to determine and report its beneficial owner. The beneficial owner shall be at least 1 (one) personnel who possesses each criterion in accordance with the form of the corporation. This mandatory obligation to report the beneficial owner shall be conducted on the application of establishment, registration, and/or authorization of the corporation; or during the corporation running its businesses or activities.

​

Articles of Association of a Limited Liability Company

 

In addition to the prevailing laws and regulations, the AoA is a legal document that provides information of the company, and the rules which shall be satisfied when managing the company.

 

The Contents of Limited Liability Company’s Articles of Association

 

According to Article 15 (1) Law 40/2007, the AoA must contain at least:

 

  • the name and domicile of the company;

  • the objectives and purposes, as well as the line of business of the company;

  • the duration of the company’s establishment;

  • the amount of authorized capital, issued capital, and paid-up capital;

  • the number of shares, classes of shares, together with the number of shares for each class (if any), the rights attached to each share, and the nominal value of each share;

  • the title and the number of members of the BoD and BoC;

  • the setting of place and procedures for holding a GMS;

  • the procedures for appointment, replacement, and dismissal of members of the BoD and BoC; and

  • the procedures for the use of profits and the distribution of dividends.

 

The AoA shall not contain: (i) provisions on the receipt of fixed interest on a share; and (ii) provisions on the grant of a personal benefit to a founder or other party. Pursuant to Article 15 (2) Law 40/2007, the AoA may also contain other provisions that are not contradictory to Law 40/2007.  

bottom of page