new regulation capital submission

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

  • InCorp Editorial Team
  • 27 September 2016
  • 3 minute reading time

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 Company Law No. 40 Year 2007.

The minimum of a foreign company’s authorized capital was IDR 10 billion, which is also the amount of paid-up capital. 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 of 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 of 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 authorized capital depends on the agreement stated by the company’s founders.  The company owners have the right to decide their capital in accordance with the company’s net worth criteria. The criteria decided for micro, small, medium, or large enterprises. It means that the authorized capital of the 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 companies should exceed IDR 10 billion. And the paid-up capital is now a minimum of IDR 10 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

According to the latest changes laid out in recently enacted Job Creation Law, the classification of Local PT in Indonesia based on paid-up capital as follows:

  • A micro-enterprise: less than IDR 1 billion
  • A small enterprise: IDR 1 – 5 billion
  • A medium enterprise: IDR 5-10 billion
  • A large enterprise: more than IDR 10 billion

Some business activities require a 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.

Post your comment in the form below or simply send your inquiries to sales@cekindo.com for a fast response.

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.

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Frequent Asked Questions

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.

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.