“There are at least 4 (four) fundamental things you should know before establishing a local PT in Indonesia. These are determining name of company, a participation of a capital, choosing the domicile, and getting a business license..”
A Limited Liability Company (Perseroan Terbatas/PT) is one of the popular legal entity in Indonesia. There are 2 (two) types of PT in Indonesia. Firstly, a domestic or local company means all the shareholders must be Indonesian citizen, conduct the business in the territory of the Indonesia by use of domestic capital. As for the other type is a Foreign Direct Investment Company or known as PT PMA/Penanaman Modal Asing, it is eligible for foreigners or foreign entity to become a shareholder of the company or by engagement in a joint venture with a domestic shareholder.
In this section, we describe the important things that you should know about the local PT as your guidance in preparing to establish it.
- Company Name
According to Government Regulation No. 43 Year 2011 on Procedures for Submission and Use of Limited Company Name explains that the filing of the Company name must be submitted to the Minister of Law and Human Rights before the Company is established by applying through the Legal Entity of Administration System (Sistem Administrasi Badan Hukum/ SABH) electronically with the following requirements :
- written in Latin letters;
- has not been legitimately used by any other Company or not in essence by any other Company Name;
- not contrary to public order and / or morality;
- not the same as or not similar to the name of a state institution, government agency or international institution, unless authorized by the agency concerned;
- does not consist of numbers or series of numbers, letters or letters that do not form words;
- has no meaning as a Company, a legal entity, or a civil partnership;
- not only using the intent and purpose and business activities as the Company’s Name; and
- in accordance with the purposes and objectives and business activities of the Company, in the case of intent and purpose and business activities shall be used as part of the Company Name.
According to Law Number 40 Year 2007 regarding Limited Liability Company in Article 32 paragraph 1 there is a minimum Authorized Capital Requirement for PT company which is Rp50,000,000 (fifty million Rupiah) and 25% (twenty five percent) of Authorized Capital need to be deposited as Paid-Up capital.
However, Government Regulation No. 29 of 2016 concerning the Amendment of Authorized Capital of Limited Liability Company has revoked the authorized capital and paid up capital of Limited Liability Company as stipulated in Law Number 40 Year 2007 stating in article 1 sub-article 3 that “the amount of authorized capital of Limited Liability Company shall be determined by agreement the founders of the Limited Liability Company and article 2 states that the authorized capital of a Limited Liability Company must be placed and fully paid at least 25% (twenty five percent) as evidenced by valid proof of deposit”.
Please note that the nominal of the capital will affect the classification of the business license for example Trade Business License, according to the Regulation of the Minister of Trade on Amendment to Regulation of the Minister of Trade No. 36 / M-Dag / Per / 9/2007, classified Trade Business License into 3 classifications, as follows:
- Small Trade Business License
Small Trade Business License must be owned by a trading company whose the net worth (paid up capital) is more than Rp. 50,000,000,- (fifty million Rupiah) up to Rp.500.000.000,- (five hundred million Rupiah) excluding land and building of business premises.
- Medium Trade Business License
Medium Trade Business License must be owned by a trading company whose the net worth (paid up capital) is more than Rp. 500.000.000,- (five hundred million Rupiah) up to Rp. 10.000.000.000,- (ten billion Rupiah) excluding land and building of business place.
- Large Trade Business LicenseLarge Trade Business License shall be owned by a trading company whose net worth (paid up capital) is more than Rp.10,000,000,000 (ten billion Rupiah) excluding land and building of business premises.
- Micro Trade Business LicenseAn individual business or partnership whose business activities are managed, run, or managed by the owner or a member of the family / nearest relative and has a net worth of at most Rp. 50.000.000, – (fifty million Rupiah) excluding land and building of business place.
- Domicile of Company
In case the Company wishes to recruit expatriate, the Company must have a minimum paid up capital of Rp 1,000,000,000 (one billion Rupiah).
Referring to Article 5 of Law Number 40 Year 2007 regarding Limited Liability Company regulates the Company’s domicile as follows:
- The Company has the name and place of domicile within the territory of the Republic of Indonesia as determined in the Articles of Association;
- The Company has complete address in accordance with its position;
- In correspondence, announcements issued by the Company, printed matter and deeds in the event that the Company becomes party shall state the name and complete address of the company.
Based on the provisions contained in the Company Law above, the Company may choose to use the Company’s domicile by buying, renting or virtual office. Regarding the use of virtual office for local Company there is no prohibition because in the explanation of Article 5 Company Law only explains that “the Company shall have an address in accordance with its domicile which shall be mentioned, inter alia in correspondence and through such address the Company may be contacted”.
However, if the company is a company issuing tax invoice Taxable Entrepreneur already has a turnover of IDR 4,800,000,000 (Four billion and eight hundred million Rupiah) per year, the use of virtual office is not permitted because the Director General of Tax officer will do survey to the company’s office.
- Business License
License Requirement is different for each industry because it is according to the business scope. A local PT in the trading business sector needs SIUP (Surat Izin Usaha Perdagangan or Business License). Meanwhile, a local PT company in the construction business sector needs SIUJK (Surat Izin Usaha Jasa Konstruksi or Construction Permit).
For a local PT may choose to have a Principle License issued by BKPM (Badan Koordinasi Penanaman Modal Indonesia/ Indonesia’s Investment Coordinating Board) or to have a Business License in accordance with the Company’s business field.
Local companies may elect to have Principle License in accordance with Article 12 paragraph (1) of Perka BKPM 14/2015 regarding Guidelines and Procedures of Permit The Capital Investment Principle explains that the Principle License in the framework of Local PT Company may be granted to:
- Limited Liability Company (PT) wholly owned by Indonesian citizens; or
- Commanditaire Vennootschap (CV), or Firm (Fa), or individual business; or
- Cooperatives or foundations established by Indonesian citizens; or
- State-Owned Enterprises (SOEs) or Regional Owned Enterprises (BUMD).
Further, for Local PT Company in the framework of obtaining the Principle License is not determined the amount of investment value and capital.
Local PT can also have its offices throughout Indonesia. The requirement may vary from each region since the administration and license submissions for PT company are performed in each regional government office.
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Author : Belle Risca Junia & Latifah Kusumawardani