One of crucial things when setting up a Foreign Investment Company (the “PMA Company”) in Indonesia is deciding the shareholders, director and commissioners of the PMA Company. This steps can be very frustrating for the foreign investor especially if they do not know the prevailing laws in Indonesia regulating this matters.
Principally, arrangement regarding shareholders, commissioners and directors in a company is regulated under the Law No 40 of 2007 on Limited Liability Companies (“Company Law”). The shareholders (through General Meeting of Shareholders), Commissioners and Directors are referred to as “Company Organs” which have specific role and responsibilities. Under the Company Law, every company at least must have 2 (two) shareholders, 1 (one) director and 1 (one) commissioner. This writing we will gives a brief explanation about Company Organs in PMA Company.
A. GENERAL MEETING OF SHAREHOLDERS
Every company should have at least 2 (two) shareholders so they can form an organ in a company named General Meeting of Shareholders (“GMS”).
The GMS is the highest organ in the company which has authority to resolve any plan that should or should not conducted by company and that such of resolutions should be executed by the Director of the company.
The shareholders can be individuals and/or legal entities of Indonesia or foreign countries. However, when it comes to a PMA Company, the shareholders arrangement should follow Indonesia Investment Negative List (“DNI” – Daftar Negatif Investasi). Based on the DNI, some business are open, closed or limited to foreign investor, so the foreign investor should pay attention on the business they want to establish if they want to be shareholders at the PMA Company.
For example, if foreign investor wants to set up a Distributorship Company and based on the DNI this kind of business is just open 33% for foreign investor, then at the least the PMA Company should have 1 (one) another Indonesian shareholders on that Distributor Company.
Please be informed that if after the company obtains its legal status from the Ministry of Law and Human Rights and the number of shareholders become less than 2 (two) persons, then within 6 (six) months as from the situation arises the shareholder must assign part of the shares to some other person or the company must issue new shares to some other person.
However, if the time has exceeded (more than 6 months) and the number of shareholders are still less than 2 (two), so the remaining shareholder is personally responsible for all agreements/legal relationship as well as the company’s loss and at the request of others party, the company can be winded up or terminated (under district court decision).
Commissioner through the Board of Commissioners has responsibility to supervise, and give advices to the Director of a PMA Company in accordance with the Articles of Associations of the Company. A commissioner in PMA Company can be a foreigner or Indonesian individual. The appointment of commissioners should be based on GMS resolutions.
If the PMA Company decides to have more than one commissioners, one of them must be appointed as the President Commissioner whose duty is to lead the Board of Commissioners.
In addition, if the foreign individual who act as a commissioner does not need to secure Expatriate Work Permit (“IMTA“- Izin Mempekerjakan Tenaga Kerja Asing) or Limited Residence Permit (“KITAS” – Kartu Izin Tinggal Sementara), however the PMA Company still need to apply for the Foreign Worker Utilization Plan (“RPTKA”- Rancangan Penggunaan Tenaga Kerja Asing).
Moreover, the Company Law does not give any limitation regarding the number of commissioners and the period of their services in the company. Therefore the PMA Company can regulate that matters on its Articles of Association.
Director through the Board of Directors (“BoD”) has an obligation to run daily activities of the company. The BoD has full authority and responsibility for the management of the Company in the interests of the company in accordance with the company’s purposes and objectives and to represent the company in and out of court in accordance with the provisions of the Articles of Associations of the company.
The Director in the PMA Company can be foreigner or Indonesian individual and they must be appointmented by the GMS. Further, if the GMS resolves to appoint more than 1 (one) directors, then one of directors should be appointed as the President of Director who will lead the BoD.
In addition, if the PMA Company appoints foreign individual as a director, the foreign director does not need to apply for the IMTA as well as the KITAS, however the PMA Company still should apply for the Foreign Worker Utilization Plan (“RPTKA”-Rancangan Penggunaan Tenaga Kerja Asing).
Please be informed that it is strongly recommended to appoint 1 (one) Indonesian in BoD composition. This appointment will make license submissions process in upcoming days easier because when the foreign director does not apply for the KITAS, this means the foreign director will not have domicile in Indonesia whereas one of requirements which is requested by governmental institutions to secure any licenses is the domicile of the director must be in Indonesia.
HOW CAN SMART LEGAL CONSULTING HELP?
SMART Legal Consulting is an Indonesian Corporate Legal Services firm. We assist investors in establishing their business in Indonesia through various forms of investment. Our knowledge, experience, and connection will help you in managing your investment in Indonesia.
If you have any question about PMA Company or want to book a consultation for assistance, you can arrange a meeting with our SMART Legal Consulting at: