Indonesia Business Setup: Are Shareholders Required?

Does Every Company Setup in Indonesia Require Shareholders?

  • InCorp Editorial Team
  • 17 October 2023
  • 6 minute reading time

Not only should every entrepreneur have the grit and energy to start a new venture through a business setup in Indonesia, but they should also meticulously consider several factors and be constantly informed to pursue a business idea.

With the correct information, only you can spin your brilliant idea into an enterprise that will eventually bring sustainable profit through Indonesia business opportunities. You will first have to consider the type of legal entity for your business and the shareholder requirement for each entity.

Requirements When Shareholders Are Needed

How many shareholders do you need for company incorporation in Indonesia? It depends on the business structure that you choose. A foreign-owned company, or a PT PMA, is one of the legal entities in Indonesia that require shareholders.

So, if you plan to start a PT PMA in the country and start your Indonesia foreign investment, you will need at least two shareholders. Your PT PMA’s shareholders can be corporate entities, individuals (locals or foreigners), or a combination of both.

If foreign nationals fully own your PT PMA, the foreign owners must sell a minimum of 5% shares to an Indonesian citizen or legal entity in the country. Furthermore, a public company has the most rigorous requirement compared to the PT and PMA: it needs at least 300 shareholders.

What is the minimum capital to establish a foreign-owned company (PT PMA) in Indonesia?

To establish a foreign-owned company, known as a “Penanaman Modal Asing” (PT PMA) in Indonesia, there are specific capital requirements to be met:

1. Minimum Capital

The minimum capital requirement for a PT PMA varies depending on the business sector. Typically, it ranges from IDR 10 billion to IDR 2.5 billion, with some exceptions. It is essential to check the specific capital requirement for your chosen business sector.

2. Paid-up Capital

A significant portion of the minimum capital must be paid when registering the company. The exact amount will depend on the business sector and the regulations.

3. Proof of Capital

The capital must be proven through bank statements or other financial documentation during the company registration.

4. Investment Plan

Foreign investors must also submit an investment plan outlining how to use the capital in their business activities.

It’s important to note that these regulations and minimum capital requirements are subject to change, so it is advisable to consult with legal and financial experts or the Indonesia Investment Coordinating Board (BKPM) for the most up-to-date and sector-specific information before establishing a foreign-owned company in Indonesia.

Read more: A Comprehensive Guide to Starting a Hospitality Business in Indonesia

Requirements When Shareholders Are Not Needed

The shareholder requirement in terms of its number does not apply to every entity in Indonesia. You don’t need any shareholders if you are running a business with sole proprietorships or civil partnerships. Business owners set up a sole proprietorship to fully control the company and prevent others from owning the company’s shares. As a result, shareholders are not necessary for this type of structure.

Civil partnerships can be divided into limited blocks (CVs) and firms. Both of them do not need any shareholders either. Partners in a civil partnership have their own active or passive roles to play in the company, and that’s why shareholders are not required.

Business Setup in Indonesia: Differences between PT and PT PMA

Here are some essential distinctions between PT and PT PMA that you should be familiar with before deciding to incorporate your company in Indonesia.

Local-owned Company (PT)

Here are the main characteristics of a PT in Indonesia:

  • Only an Indonesian citizen can own a PT. A foreigner can only start a PT through a Special Purpose Agreement in Indonesia following Indonesia business laws and regulations
  • Local ownership: 100%
  • Foreigners choose PT when specific sectors are not open for foreign investments
  • Minimum capital investment: between IDR 600 million and IDR 10 billion (depending on the company size)
  • According to the latest changes laid out in  Job Creation Law, the classification of Local PT in Indonesia based on paid-up capital is as follows:
    1. A micro-enterprise: less than IDR 1 billion
    2. A small enterprise: IDR 1 – 5 billion
    3. A medium enterprise: IDR 5-10 billion
    4. A large enterprise: more than IDR 10 billion

Find out more: Top 5 Mistakes to Avoid When Forming a Business Partnership in Indonesia

Foreign-Owned Company (PT PMA)

A foreign-owned company in Indonesia has the following distinctions compared to a PT:

  • Permission for foreigners to be the shareholders, but it may require a local shareholder
  • Maximum foreign ownership: 100%
  • The percentage of foreign ownership allowance is based on the business classification under the latest BKPM’s Negative Investment List
  • Minimum investment plan: IDR 10 billion
  • Minimum paid-up capital: IDR 10 billion
  • It can sponsor foreign employees
  • Required to submit monthly investment activity reports and tax reports

Restrictions on foreign-owned company partnerships

Foreign-owned company partnerships in Indonesia are subject to specific limitations and regulations to protect national interests and encourage economic growth. Here are the key points you should know:

1. Business Sectors

Specific business sectors are reserved for Indonesian ownership. These are known as “Negative Investment List” sectors, and foreign investors may face limitations or require special permits to participate in them.

2. Investment Coordination

Foreign investors must coordinate their investments with the Indonesia Investment Coordinating Board (BKPM). This involves obtaining the necessary permits and licenses.

3. Minimum Ownership

The foreign ownership limit in most sectors is typically 67%, with the remaining 33% reserved for Indonesian ownership. However, this can vary depending on the industry and specific regulations.

4. Land Ownership

Foreign-owned companies may face restrictions on owning land. In some cases, they can only lease land, while Indonesian entities can own it.

5. Licensing and Permits

Foreign-owned companies must adhere to Indonesian regulations and acquire the necessary business licenses and permits to operate legally.

Read more: What Should You Discuss with Your Legal Consultant Regarding Your Business in Indonesia

How InCorp Can Assist with Business Setup in Indonesia

You must take several necessary steps if considering company incorporation in Indonesia. It is prudent to partner with a professional provider with local expertise to ensure your business complies with every step of your business venture.

InCorp offers tailored business solutions for your company incorporation in Indonesia, including legal and financial consultancy. Our highly qualified team provides expert support from global and local perspectives to ensure a smooth incorporation process.

Contact InCorp now, and we’ll help you construct the best strategy to capitalize on your market opportunities in Indonesia. Fill in the form below.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

Get in touch with us.

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Frequent Asked Questions

As their names suggest, the main differences between the three business kinds in Indonesia lie in the businesses and the purpose of their incorporation. Local company owners (PT) must be Indonesian citizens, as even 1 percent of foreign ownership is not allowed. This type of company is not limited to entering any business field, and restrictions on incorporation are not so tight. On the contrary, a foreign-owned company (PT PMA) is open to international investors, but the maximal percentage of foreign shares differs in various business sectors. Contact InCorp to get the most updated information on the Negative Investment List. International investors tend to open representative offices as a first step to understanding the Indonesian market before setting up a limited liability company. This type is used for marketing and promotion activities and needs the right to sell directly and receive income.

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.

Yes, this mainly applies to import and export businesses. Instead of establishing a company, you can use an under-name import service, an importer of record.

It should take between 30 to 45 days.