One of the most important thing to prepare when establishing a limited liability company (“PT”) in Indonesia is how much capital the shareholders need to pay up. In its efforts to ease entrepreneurs to start their business, the Indonesian Government enacted a Government Regulation which regulates further regarding the minimum authorized capital for PT.
As part of the effort to increase the ease of doing business in Indonesia, the Indonesian Government enacted Government Regulation Number 29 Year 2016 concerning the Amendement to Authorized Capital of Limited Liability Companies (“GR 29/2016”). With the new regulation, the Government hopes to make establishment of limited liability companies (Perseroan Terbatas or “PT”) easier for start-up entrepreneurs with more flexibility to determine the amount of authorized capital, therefore making it easier for micro, small, and medium enterprises (MSMEs) to incorporate in the form of PT.
GR 29/2016 replaces Article 32 number (1) of the Law No. 40 of 2007 concerning Limited Liability Company (“Company Law”) which previously stipulates the obligation of minimum authorized capital for PT in the amount of IDR 50,000,000 (fifty billion Rupiah). After the enactment of GR 29/2016, founders of PT have the full rights at their sole discretion by mutual agreement to determine the amount of authorized capital of their PT.
IMPACT TO THE MSMEs
Law No. 20 of 2008 concerning Micro, Small, Medium Enterprises (“Law 20/2008”) classifies the following criteria to determine in which type of enterprise a PT is classified under:
- The criteria of Micro Enterprises:
- Having maximum net assets of IDR 50,000,000 (fifty million rupiah), exclusive of land and building of their place of business; or
- Having maximum annual sales proceeds of IDR 300,000,000 (three hundred million Rupiah).
- The criteria of Small Enterprises:
- Having net assets of more than IDR 50,000,000 (fifty million Rupiah) up to maximum amount of IDR 500,000,000 (five hundred million Rupiah), exclusive of land and building of their place of business;
- Having annual sales proceeds of more than IDR 300,000,000 (three hundred million rupiah) up to a maximum amount of IDR 2,500,000,000 (two billion and five hundred million Rupiah).
- The criteria for Medium Enterprises:
- Having net assets of more than IDR 500,000,000 (five hundred million Rupiah) up to a maximum amount of IDR 10,000,000,000 (ten billion Rupiah), exclusive land and building of their place of business;
- Having maximum annual sales proceeds if more than IDR 2,500,000,000 (two billion and five hundred million Rupiah) up to a maximum amount of IDR 50,000,000,000 (fifty billion Rupiah).
Pursuant to the above criteria and GR 29/2016, it is possible for micro enterprises to have net assets in the form of paid-up capital not more than IDR 12,500,000 (twelve and five hundred million rupiah) and authorized capital under IDR 50,000,000 (fifty million rupiah); and it is very possible for them to set the authorized capital at the amount of, for example, IDR 15,000,000 (fifteen million rupiah) if all of the PT founders agree on that matter.
IMPACT ON DEPOSIT OF PAID-UP CAPITAL
Subsequently, according to Article 2 Paragraph (1) of GR 29/2016, founders of the PT must subscribed and fully paid at least 25% of the agreed authorized capital, proven by legitimate evidence of deposit (Deposit Receipt or Bank Statement). The evidence must be submitted electronically, to minister whose tasks and responsibilities are in the field of law and human rights at the latest 60 (sixty) days after the deed of establishment has been signed.
Before the obligation on submitting the evidence of deposit exists, there are a lot of companies who have not fully paid 25% of authorized capital to their own account, because they were using thestatement letter claiming that they have fully deposit the capital. The provision on article 2 number (2) of GR 29/2016 is an additional binding responsibility for company founders so that they are genuinely paid up authorized capital to their account.
IMPACT ON FOREIGN INVESTMENT COMPANY (PT PMA)
The new requirement of the Authorized Capital does not apply to foreign investment company (Perseroan Terbatas Penanaman Modal Asing or “PT PMA”). This is because, pursuant to Chairman of BKPM Regulation No. 14 of 2015 (“BKPM Regulation 14/2015”), the minimum paid-up capital of PT PMA is IDR 2,500,000,000 (two billion five hundred thousand Rupiah).
HOW CAN SMART CONSULTING HELP YOU?
To ensure a smooth investment and business operation from the legal perspective, but also still focus on maintaining your business in Indonesia and reach your revenue target, it is advised for you to find capable and trusted lawyers or legal consultants for advice and assistance in ensuring your legal compliance with prevailing laws and regulations.
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