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There’s no specific legislation recognizing or governing the establishment of JVs in the Republic of Indonesia. That said, it’s permissible for unincorporated JVs to function in some industries, such as gas, oil & construction ones. As regards the third one, foreign firms can set up JVs in the Republic of Indonesia on the basis of JV agreements concluded with Indonesian construction firms.

Companies in Indonesia are to have no fewer than 2 stakeholders, which means that all of them can qualify as JVs. FDI in Indonesian firms is allowed in any sector, providing it isn't on the FDI-prohibited list.

Creating an Indinesian JV necessitates getting consent of the Justice Ministry & registration in the OSS database. JVs aren’t permitted to conduct activities which aren’t specified in their license.

Foreign government agencies, individuals & legal entities can own JVs’ shares, provided they’re not included in the aforementioned list of sectors. If a JV intends to engage in business activities that aren’t on the list, it can be incorporated by 2 or more foreign shareholders.

Beneficial Ownership

Those planning to create a JV in the Republic of Indonesia will be required to disclose the identities of their beneficial owners (at least one of them). JV partners must also provide information on changes in beneficial ownership (normally, within a 3-day period). By listing a JV on the ISE, its founders agree to abide by the requirements of the OJK, Indonesia’s number one financial regulator.

Taxation

Foreign shareholders are required to pay income tax on all dividends derived from the JVs’ activities. A different tax regime may be applied to foreign stakeholders holding a significant or portfolio stake in a JV. No income tax is paid on dividends if related dividends are paid out of JVs’ retained earnings & if JVs’ partners own no less than twenty five percent of paid-up capital owned by JVs.

Asset Contribution

Those interested in registering a JV in the Republic of Indonesia should keep in mind that they make contributions in the form of assets. Value of share capital formed due to asset contribution is determined as per market prices. If real estate contributions are made, an announcement must be published in an Indonesian publication (at least one of them) within fourteen days since a share issue.

In-kind contributions in the form of intangible assets (e.g. registered IP or contract receivables) can be made. That said, contractual rights (which are also intangible assets) can’t qualify as such.

Indonesia: JV Management

Decision-making powers in JVs are vested in a BoD & JVs’ authorized representatives. JV partners include a special clause on the appointment of BoD members in a JV agreement. JVs can also be controlled & managed via reserved matters contained in a JV charter. Normally, those represent important decisions related to management of JVs which require getting approval of each & every BoD member.

Transfer of Personnel

Transferring employees is a concept that is non-existent in Indonesian legislation, so if you’re interested in establishing a JV in the Republic of Indonesia, you should keep that in mind. Transferring employees from Indonesian companies to JVs is impossible without  getting consent of each and every one of them. If they don’t give their consent, they must be paid compensation by Indonesian companies.

IP Rights

Maximum protection of IP rights in the Republic of Indonesia is only possible if JV partners register IPR in the Republic of Indonesia on their own behalf & obtain a license issued in a JV’s name. If a dispute occurs or a JV is terminated, JV partners can exercise their rights on the basis of a license .

Financing a JV

Equity contributions (in-kind ones included) must be used to partially fund JVs. An investment of no less than three billion dollars must be made in all recently created entities with foreign participation. Other permissible investments include credits (normally obtained via 3rd party funding).

Indonesia: Settlement of JV Disputes

In their agreements, JV partners can include any applicable law or suitable method of resolving JV disputes in the Republic of Indonesia. If they fail to do that, there’s a risk that courts in Indonesia may decline to recognize such a law.

Awards rendered abroad aren’t applicable in the Republic of Indonesia; hence, JV agreements normally contain no clauses pertaining to resolving disputes abroad. However, because the Republic of Indonesia signed NYC, awards rendered in NYC countries are enforceable in it.

Conclusion

Looking to register a JV in the Republic of Indonesia? Need professional advice? Why not sign up for an individual consultation with IQ Decision UK? You can also request us for assistance with drawing up a JV agreement in Indonesia.