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Update from Ministry of Law and Human Rights: New Regulation on Capital Submission Proof

Having a sufficient amount of capital is one of the requirements if you want to establish a PMA (a foreign company). You must have the minimum authorized capital as stated in the Company Law No. 40 Year 2007.

In the past, the minimum of a foreign company’s authorized capital was IDR 10 billion, which means that, the company’s paid up capital should be IDR 2.5 billion. This condition often hindered new foreign companies or start-up businesses to invest in Indonesia. Therefore, the government tried to formulate a new regulation to attract more investors in Indonesia.

Most recently, the Government Regulation No. 7 Year 2016 on Authorized Capital if Limited Liability Companies, which was effective from 21 March 2016, has been amended by the Government Regulation No. 29 Year 2016 (PP No. 29/2016) on Authorized Capital if Limited Liability Companies Amendment, which is valid from August 2016. The newest regulation is issued for better and easier bureaucracies that finally can increase foreign investments, which will bring benefits for the development of micro, small, medium, and large enterprises in Indonesia.

PP No. 29/2016

Law CekindoUnder this new regulation, the company has to state its capital in its article of association. This is based on the statement stated in the company’s deed of establishment. The amount of the authorize capital depends on the agreement stated by the company’s founders.  The company owners have the rights to decide their capital in accordance to the company’s net worth criteria. The criteria decided for micro, small, medium, or large enterprises. It means that the authorize capital of company depends on the size of the business and the field of expertise it is running.

Based on recent BKPM regulation, the authorized capital for foreign company should exceed IDR 10 billion. And the paid-up capital is 25% of authorized capital or more than IDR 2,5 billion. The new government regulation regulates that the paid up capital must have legal proof and the legal proof must be submitted to the Minister of Law and Human Rights to be authorized. This step is to make sure about the quality and the ability of the company to run its operations in this country based on the prevailing laws and regulations in Indonesia.

The deadline to submit the capital submission proof is 60 (sixty) days after the signing of the company’s deed of establishment. The completion can do via online.

The Classification of Micro, Small, Medium and Large Enterprises

Types of company a micro, small, medium or large enterprises if they have the net worth of the following:

  • A micro enterprise has the net worth up to IDR 50 million.
  • A small enterprise has the net worth between IDR 50 million and IDR 500 million.
  • A medium enterprise has the net worth between IDR 500 million and IDR 10 billion.
  • A large enterprise has the net worth above IDR 10 billion.

Some business activities require minimum amount of authorized capital. These are regulated in the current laws and government regulation (e.g. businesses stated in the negative investment list).

Due to the changing nature of laws and regulations in Indonesia, we understand that this new regulation may trigger you to have some questions. We are willing to help you and answer all of your questions briefly and correctly so that you can run your business legally in Indonesia.

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