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Company Restructuring in Indonesia: General Overview

Company Restructuring in Indonesia: General Overview Review by Michal Wasserbauer on 13. 10. 2015 Company Registration in Indonesia, Market Research in Indonesia, Work Permit in Indonesia, Product Registration in Indonesia, Local Partner Selection in Indonesia, Trade Mission in Indonesia, Company Formation in Indonesia, Company Establishment in Indonesia, Company Set Up in Indonesia, Payroll Outsourcing in Indonesia, Tax Reporting in Indonesia, Medical Product Registration in Indonesia, Medical Device Registration in Indonesia, Cosmetic Registration in Indonesia, Food Supplement Registration in Indonesia.
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There are many reasons why many companies want to do some restructuring in Indonesia. Because of the dynamic condition of the market as well as the industry, plus the advancement of information technology, change is something that is inevitable for every company.

The reasons vary from the company’s intention to change its business nature, products improvements or even changes, management restructuring, to financial issues. Among those reasons, some are triggered by inner intentions and some others are outer drivers. Apart from that, all company restructuring attempts are meant to improve and maximize the performance, effectiveness, and efficiency of the company.   However, performing company restructuring is not as easy as it sounds. Every country has its own law to regulate the way all companies in its jurisdiction run their business. Therefore, every small and minor change matters.

In Indonesia, there is a special regulation regarding to company restructuring, especially the one that is related to the legal affair. Below are some examples of company restructuring involving Foreign Direct Investments (known as PMA/Penanaman Modal Asing) that commonly occur in Indonesia.

 

Company Restructuring: Revisions to the Company Attributes

Revising the Shareholders

When it is about the changes of the shareholders, the basic rule for this is to discuss the problem in the General Meeting of Shareholders. In this meeting, all shareholders must be invited because they have the biggest authority to become the decision makers in the company. Their voice is at least 51% of the total company’s shares. Given that the percentage is not met, another meeting must be held by inviting all the shareholders once again and making sure that 1/3 of them come so that any issue about shareholder changes can be resolved and decided.

Revising the Company’s Name and Location

The company’s registry includes the name and domicile of the company. They are subjects to change. Especially for the company’s name, a PT PMA should follow the subsequent suggestions.

  1. The new name cannot be or sound similar to the present companies, Indonesian government institutions, as well as international organization.
  2. The name cannot solely be the field of industry your company is running. You have to at least add one word beforehand.
  3. The name must be in Latin alphabet letters. Avoid numbers or other kinds of letters to make the register process easier.
  4. Although it is not explicitly stated in the law, using Indonesian words as your new company name is advisable for smoother and easier process.

In addition, there is a new regulation issued by the Ministry of Law and Human Right, in which all companies must be named with at least 3 words. Not only the new name should be approved by the Ministry, but it should also be acknowledged by the Indonesia Investment Coordinating Board (BKPM) and the tax office.

On the other hand, when your company wants to change location, you need to know exactly whether or not your new company address is in the same district because different rules apply. When the new address is in the same district with the old one, all you have to do is to report your new address to the local tax office so that they can change your taxation data. However, when the new location is in a different district, your old taxation account must first be closed so that you can open a new one in the new address. Before that, some permits issued by the local authorities are needed, like the location permit signed by the district and sub-district heads where your new office is located.

Revising the Capital

When it comes to the capital revision, a company may decrease or increase its capital based on the rules that have been stated in the minimum capital requirements. Basically, all PT PMAs are obliged to have at least Rp. 10 billion (~USD1 million) capital, and the amount can be higher depending of the field of industries. When your company wants to revise the capital, you are not required to give the proof of company bank balance as what is requested when you first register your company. Instead, you need to show the proof of the paid up capital, which is at least 25% of your investment plan (no less than Rp. 2.5 billions). It is because as an operating company, it has already had a company bank account unlike the company that is in the progress of registration.

After that, you will need this document along with the copy of the company’s Article of Establishment and other documents to be sent to BKPM and The Ministry of Law and Human Right to get their approval letters.  

Revising the Management

Most PT PMAs in Indonesia appointed a local director to smoothen the company registration process. Meanwhile, the company can have time to prepare the documents needed for the “real” owner and/or director to have a legal working permit.

When the working permit is ready for a foreign new director to take over the PT PMA, the company, through the GMS meeting, makes a decision of his/her appointment. A public notary will then issue an amendment of Article of Association. The next process is to get Tax Registration Code Number (NPWP) for the new appointed director or commissioners. The copy of this NPWP and the copy of the amendment are submitted as a prerequisite to notify the Ministry of Law and Human Right.

Company Restructuring

Important Notes for the Legal Process

Before a PT PMA decides to do some restructuring, the company should bear in mind that strict regulations from Indonesian Law should be followed:

  1. The ownership of foreign investors should not violate the one that has been determined by Negative Investment List (locally known as DNI/Daftar Negatif Investasi).
  2. Because foreign party is involved in this matter, all the changes must be reported to Indonesia Investment Coordinating Board (locally known as BKPM/Badan Koordinasi Penanaman Modal).
  3. The next step is to send the company’s restructuring proposal to the Ministry of Law and Human Right (known as Kemenkumham/Kementrian Hukum dan Hak Asasi Manusia) to get final legal approval.
  4. Once the ministry issues the approval, a public notary assigned by the company has to issue the amendment of the Article of Association of the PMA company), and the whole process has finished.

The common documents needed to complete the restructuring process is basically all the company’s documents and permits, including a copy of Tax Registration Code Number (NPWP), a copy of Article of Establishment, a copy of Article of Association, and copy of a valid passport.