Providing all the licensing requirements are met, a foreign company can be granted a license of one of the following types: IKO, IU & NIB. Licenses issued via the OSS can be revoked if a PMA company (an LLC with foreign investors) fails to fulfill its obligations under IKO or IU licenses. The BKPM (local regulator) issues licenses no later than 72 hours after receipt of an application. Normally, obtaining permission to set up an LLC in Indonesia with the MOLHR (Justice & Human Rights Ministry) takes no more than seven days.
All foreign investors are encouraged to seek advice on obtaining an investment license in Indonesia by way of direct consultations. Consultations are informal & shouldn’t be construed as an endorsement of any particular action. Investors can also hire legal or business advisors to apply for an investment license in Indonesia.
Licenses are issued by the OSS (an automated system responsible for overseeing compliance with the requirements for starting a business in Indonesia) & the BKPM (a regulator responsible for overseeing compliance with OSS-issued licenses). Before granting a license, they pay attention to the following:
- prospective field of activity;
- percentage of foreign investment;
- partnership with microbusinesses & SMEs;
- restrictions on foreign ownership;
- compliance with technical requirements;
- compliance with the rules for owning shares.
If investors fail to comply with one of the above criteria, their application will be rejected.
Foreign investment in Indonesia falls into the ‘large-scale business’ category & must, therefore, be carried out via a PT (Local LLC). PTs must meet the following requirements:
- have no less than 2 shareholders;
- total investment must be in excess of thirteen billion dollars;
- debt to equity ratio must be three to one (exceptions are made for investments in mining & infrastructure projects);
- each of the shareholders must hold shares worth USD 13.3 each.
Indonesia: M&A Transactions
Conducting an M&A transaction in Indonesia requires getting the MOLHR’s approval of any changes to the AoA of companies involved in such transactions.
Can a Negative Decision be Contested or Appealed?
Negative decisions can’t be contested or appealed; however, an applicant is allowed to reapply for approval.
Information pertaining to FDI in Indonesia is confidential & can be obtained if a company is a PLC.
Refusal to Issue a License
If the BKPM rejects an application, a letter is sent to the investor stating the reasons for the rejection.
Considering registering an Indonesian company for investment activities? Looking for advice on FDI regulation in Indonesia? Why not contact IQ Decision UK?